In December 2023, President Biden signed the Fiscal Year 2024 National Defense Authorization Act (NDAA). This act brought about significant changes in procurement practices and will impact all government contractors doing business with the Department of Defense (DoD). Understanding the implications of this act throughout each year and how it affects your business is important. In this blog, I will explain what the National Defense Agency Act means and how it impacts all GSA Schedule contractors.
What Is the National Defense Authorization Act (NDAA)?
The National Defense Authorization Act (NDAA) is a crucial piece of legislation that has been passed by Congress annually over the past six decades. The primary objective of this act is to ensure that U.S. defense agencies are appropriately structured and adequately funded to effectively meet all security objectives. The NDAA introduces annual policy changes, organizes defense agencies within the country, and establishes guidelines for the allocation of military funding.
As such, the NDAA is a fundamental component of the government's efforts to guarantee the nation's security and defense. Its role in the country's defense system is significant, and every year contractors and industry alike await the bill’s parameters for the upcoming Fiscal Year.
Why is the NDAA Important for Government Contractors?
Once the NDAA is passed by the Senate and House annually, it sets up the funding and provisions for the defense budget. This is an important insight into any upcoming trends, contracts, and initiatives that will impact the DoD’s buying habits. Some provisions initiate changes in government contract regulations or modifications in existing contracts, so contractors should pay attention to what may affect their current contracts and future business.
NDAA Provisions Relevant to Government Contractors
The 2024 National Defense Authorization Act (NDAA) has brought significant changes that affect how government contractors engage in business with the Department of Defense (DoD). The act mandates that the DoD must create comprehensive plans, strategies, and procedures to reduce supply chain risks.
Contractors must comply with the updated policies to ensure adherence to the new regulations.
Notable updates in the FY 2024 NDAA bill include:
- Removing self-certifications for Veteran-Owned Small Businesses (VOSBs) and Service-Disabled Veteran-Owned Small Businesses (SDVOSBs)
- Increasing dollar contract goal for Veteran small businesses from 3% to 5%
- 2% pay increase for military service members and DoD civilian employees
- Institutionalizes a sea-launched cruise missile nuclear program at the Defense Department and National Nuclear Security Administration.
Additionally, we included some key revisions within the NDAA that closely impact government contractors:
Section 804
The NDAA prohibits the DoD from entering into contracts with government contractors that maintain fossil fuel operations with the Russian government or the Russian energy sector. Disaster relief deemed necessary by the Secretaries of Defense and State, as well as all other life-saving measures, are the only exceptions to the rule.
Section 812
Another crucial provision of the 2024 NDAA prohibits government contractors who sell to the DoD from providing consulting services if they have provided consulting services to certain covered entities. This update to the NDAA also requires consulting companies that provide services to the federal agencies to obtain certifications and meet additional requirements.
The NDAA prohibits contractors who provide consulting services under North American Industry Classification System (NAICS) Code 5416 to foreign adversaries from entering a contract with the DOD.
Foreign adversaries include the Chinese Government, the Chinese Communist Party, and the Government of the Russian Federation. To comply with regulatory requirements, contractors are obligated to verify that their company and affiliated entities have no active consulting services contract with entities. This prohibition will be incorporated into the Defense Federal Acquisition Regulation Supplement (DFARS) by June 2026.
Section 805 and 825
These sections of NDAA include more restrictions in China. Section 805 is part of a plan to gradually remove goods, services, or technology produced or developed by a prohibited Chinese entity. Section 825 prohibits DoD from contracting with PORT using a Chinese national transportation logistics platform. Government contractors doing business with the DoD should make sure their goods and services do not breach these restrictions.
Section 864
This portion of the regulations states that contractors who identify themselves as a VOSB are no longer permitted to self-certify. Any contractor that claims to be a VOSB must follow the SBA Veteran Small Business Certification (VetCert) process to request re-certification. Presently, contractors can still self-certify as SDVOSBs for non-SDVOSB set-aside prime contracts and for subcontracts.
Section 1522
This section of the NDAA requires the Secretary of Defense to test new cyber technologies, specifically security tools that use artificial intelligence (AI), to see if they are effective and applicable to DoD requirements. The goal is to improve cybersecurity for the processes used to design and make semiconductors. This presents an opportunity for government contractors who offer cybersecurity-related goods or services to support the DoD in this effort.
Section 1544
Contractors involved in the development and provision of AI products and services will be pleased to learn about this recent provision outlined in the NDAA. This section mandates the Secretary of Defense to create strategies for recognizing commercially accessible large language models of AI and protocols to safeguard the intellectual property of businesses that provide AI algorithms. As a result of this legislation, contractors with advanced AI capabilities or those offering services that support AI technology will have access to a range of new opportunities.
Meeting GSA Schedule Requirements
In navigating the implications of the Fiscal Year 2024 NDAA, GSA Schedule contract holders should proactively assess their capabilities, update their business strategies, and align their operations with these evolving requirements. To stay informed about these and other evolving regulations, subscribe to our blog post or monthly newsletters. If you need assistance understanding how to adjust your contract to meet requirements, our team of qualified consultants are happy to help.
