SEC. 866. LIMITATIONS ON TIERING OF
(a) Regulations- Not later than one year after the date of the
enactment of this Act, the Federal Acquisition Regulation shall
be amended, for executive agencies other than the Department of
Defense, to minimize the excessive use by contractors of
subcontractors, or of tiers of subcontractors, that add no or
negligible value, and to ensure that neither a contractor nor a
subcontractor receives indirect costs or profit on work
performed by a lower-tier subcontractor to which the higher-tier
contractor or subcontractor adds no, or negligible, value (but
not to limit charges for indirect costs and profit based on the
direct costs of managing lower-tier subcontracts).
(b) Covered Contracts- This section applies to any
cost-reimbursement type contract or task or delivery order in an
amount greater than the simplified acquisition threshold (as
defined by section 4 of the Office of Federal Procurement Policy
Act (41 U.S.C. 403)).
(c) Rule of Construction- Nothing in this section shall be
construed as limiting the ability of the Department of Defense
to implement more restrictive limitations on the tiering of
(d) Applicability- The Department of Defense shall continue to
be subject to guidance on limitations on tiering of
subcontractors issued by the Department pursuant to section 852
of the John Warner National Defense Authorization Act for Fiscal
Year 2007 (Public Law 109-364; 120 Stat. 2340).
(e) Executive Agency Defined- In this section, the term
`executive agency' has the meaning given such term in section
4(1) of the Office of Federal Procurement Policy Act (41 U.S.C.
Prohibiting excessive tiering of
subcontractors. Section 866 requires regulations to prevent
contractors from billing taxpayers for work that is done by
subcontractors and for which the contractor provides no