Multiyear Procurement (MYP) and Block Buy
Contracting in Defense Acquisition:
Background and Issues for Congress
Ronald O'Rourke
Specialist in Naval Affairs
Moshe Schwartz
Specialist in Defense Acquisition
April 25, 2013
Congressional Research Service
7-5700
www.crs.gov
R41909
CRS Report for Congress
Pr
epared for Members and Committees of Congress

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Multiyear Procurement and Block Buy Contracting in Defense Acquisition

Summary
Multiyear procurement (MYP) and block buy contracting (BBC) are special contracting
mechanisms that Congress permits the Department of Defense (DOD) to use for a limited number
of defense acquisition programs. Compared to the standard or default approach of annual
contracting, MYP and BBC have the potential for reducing weapon procurement costs by several
percent.
Under annual contracting, DOD uses one or more contracts for each year’s worth of procurement
of a given kind of item. Under MYP, DOD instead uses a single contract for two to five years’
worth of procurement of a given kind of item without having to exercise a contract option for
each year after the first year. DOD needs congressional approval for each use of MYP. There is a
permanent statute governing MYP contracting—10 U.S.C. 2306b. Under this statute, a program
must meet several criteria to qualify for MYP.
Compared with estimated costs under annual contracting, estimated savings for programs being
proposed for MYP have ranged from less than 5% to more than 15%, depending on the
particulars of the program in question, with many estimates falling in the range of 5% to 10%. In
practice, actual savings from using MYP rather than annual contracting can be difficult to observe
or verify because of cost growth during the execution of the contract due to changes in the
program independent of the use of MYP rather than annual contracting.
BBC is similar to MYP in that it permits DOD to use a single contract for more than one year’s
worth of procurement of a given kind of item without having to exercise a contract option for
each year after the first year. BBC is also similar to MYP in that DOD needs congressional
approval for each use of BBC. BBC differs from MYP in the following ways:
• There is no permanent statute governing the use of BBC.
• There is no requirement that BBC be approved in both a DOD appropriations act
and an act other than a DOD appropriations act.
• Programs being considered for BBC do not need to meet any legal criteria to
qualify for BBC, because there is no permanent statute governing the use of BBC
that establishes such criteria.
• A BBC contract can cover more than five years of planned procurements.
• Economic order quantity (EOQ) authority—the authority to bring forward
selected key components of the items to be procured under the contract and
purchase the components in batch form during the first year or two of the
contract—does not come automatically as part of BBC authority because there is
no permanent statute governing the use of BBC that includes EOQ authority as
an automatic feature.
• BBC contracts are less likely to include cancellation penalties.
Potential issues for Congress concerning MYP and BBC include whether to use MYP and BBC in
the future more frequently, less frequently, or about as frequently as they are currently used, and
whether to create a permanent statute to govern the use of BBC, analogous to the permanent
statute that governs the use of MYP.
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Contents
Introduction ...................................................................................................................................... 1
Issues for Congress .................................................................................................................... 1
Terminology and Scope of Report ............................................................................................. 1
Block Buy Contracting vs. Air Force’s Block Buy of Two AEHF Satellites ...................... 1
Funding Approaches vs. Contracting Mechanisms ............................................................. 1
Scope of Report ................................................................................................................... 2
Background ...................................................................................................................................... 2
Multiyear Procurement (MYP) .................................................................................................. 2
MYP in Brief ....................................................................................................................... 2
Potential Savings Under MYP ............................................................................................ 3
Permanent Statute Governing MYP .................................................................................... 5
Potential Consequences of Not Fully Funding an MYP Contract ....................................... 7
Effect on Flexibility for Making Procurement Changes ..................................................... 7
Congressional Approval ...................................................................................................... 7
Block Buy Contracting (BBC) .................................................................................................. 8
BBC in Brief ....................................................................................................................... 8
Terminology Alert: Block Buy Contracting vs. Block Buys ............................................... 9
Potential Savings Under BBC ........................................................................................... 10
Frequency of Use of BBC ................................................................................................. 10
Using BBC Rather than MYP ........................................................................................... 10
MYP and BBC vs. Contracts with Options ............................................................................. 11
Issues for Congress ........................................................................................................................ 11
Frequency of Using MYP and BBC ........................................................................................ 11
Permanent Statute for BBC ..................................................................................................... 12
Legislative Activity for FY2014 .................................................................................................... 13
MYP Proposals in DOD’s FY2014 Budget ............................................................................. 13

Tables
Table A-1. Programs Approved for MYP in Annual DOD Appropriations Acts Since
FY1990 ....................................................................................................................................... 14

Appendixes
Appendix. Programs Approved for MYP in Annual DOD Appropriations Acts Since
FY1990 ....................................................................................................................................... 14

Contacts
Author Contact Information........................................................................................................... 17

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Introduction
Issues for Congress
This report provides background information and issues for Congress on multiyear procurement
(MYP) and block buy contracting (BBC),1 which are special contracting mechanisms that
Congress permits the Department of Defense (DOD) to use for a limited number of defense
acquisition programs. Compared to the standard or default approach of annual contracting, MYP
and BBC have the potential for reducing weapon procurement costs by several percent.
Potential issues for Congress concerning MYP and BBC include whether to use MYP and BBC in
the future more frequently, less frequently, or about as frequently as they are currently used, and
whether to create a permanent statute to govern the use of BBC, analogous to the permanent
statute (10 U.S.C. 2306b) that governs the use of MYP. Congress’s decisions on these issues
could affect defense acquisition practices, defense funding requirements, and the defense
industrial base.
Terminology and Scope of Report
Block Buy Contracting vs. Air Force’s Block Buy of Two AEHF Satellites
For FY2013, the Air Force is requesting continued procurement funding for two Advanced
Extremely High Frequency (AEHF) satellites that were procured and partially funded in FY2012.
Although the Air Force refers to this two-satellite procurement as a block buy, it is not an
example of block buy contracting as discussed in this report. The Air Force in this instance is
using the term block buy to mean something different. For further discussion of this different use
of the term block buy, see “Terminology Alert: Block Buy Contracting vs. Block Buys” below.
Funding Approaches vs. Contracting Mechanisms
In discussing MYP and BBC, it can be helpful to distinguish funding approaches from contracting
mechanisms. The two are often mixed together in discussions of DOD acquisition, sometimes
leading to confusion. Stated briefly:
• Funding approaches are ways that Congress can appropriate funding for
weapon procurement programs, so that DOD can then put them under contract.
Examples of funding approaches include traditional full funding (the standard or
default approach), incremental funding, and advance appropriations.2 Any of

1 MYP is an established acronym for multiyear procurement. BBC is not an established acronym for block buy
contracting, but is used in this CRS report for purposes of convenience.
2 For more on these three funding approaches, see CRS Report RL31404, Defense Procurement: Full Funding Policy—
Background, Issues, and Options for Congress, by Ronald O'Rourke and Stephen Daggett, and CRS Report RL32776,
Navy Ship Procurement: Alternative Funding Approaches—Background and Options for Congress, by Ronald
O'Rourke. Advance appropriations, which are not to be confused with advance procurement (AP) funding (see footnote
3), are essentially a legislatively locked-in form of incremental funding. Unlike incremental funding, advance
appropriations qualify under budgeting regulations as a form of full funding.
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these funding approaches might make use of advance procurement (AP)
funding.3
• Contracting mechanisms are ways for DOD to contract for the procurement of
weapons systems, once funding for those systems has been appropriated by
Congress. Examples of contracting mechanisms include annual contracting (the
standard or default approach), MYP, and BBC.
The use of a particular funding approach in a defense acquisition program does not dictate the use
of a particular contracting mechanism. Defense acquisition programs consequently can be
implemented using various combinations of funding approaches and contracting mechanisms.
Most DOD weapon acquisition programs use a combination of traditional full funding and annual
contracting. A few programs, particularly certain Navy shipbuilding programs, use incremental
funding as their funding approach. A limited number of DOD programs use MYP as their
contracting approach, and to date at least two defense acquisition programs (both Navy
shipbuilding programs) use or have used BBC as their contracting approach.
Scope of Report
This report focuses on the contracting approaches of MYP and BBC and how they compare to
annual contracting. Other CRS reports discuss the funding approaches of traditional full funding,
incremental funding, and advance appropriations.4
This report does not discuss the Air Force’s proposed procurement of two Advanced Extremely
High Frequency (AEHF) satellites in FY2012, except, as noted above, to explain why it is not an
example of block buy contracting as discussed in this report.
Background
Multiyear Procurement (MYP)
MYP in Brief
What is MYP, and how does it differ from annual contracting? MYP, also known as multiyear
contracting, is an alternative to the standard or default DOD approach of annual contracting.
Under annual contracting, DOD uses one or more contracts for each year’s worth of procurement
of a given kind of item. Under MYP, DOD instead uses a single contract for two to five years’

3 AP funding is provided in one or more years prior to the year of procurement of a weapon system for the procurement
of long-leadtime components—components with long construction times. Such components must be funded prior to the
procurement of the remainder of the weapon system if they are to be ready for installation in the weapon system at the
appropriate point in the construction process. AP funding is a permitted exception to the full funding provision. AP
funding is not to be confused with advance appropriations (see footnote 2).
4 See footnote 2 for citations to these reports. Appropriating funding for a program and placing a program under
contract are steps in a larger sequence of budget-related events that includes authorization, appropriation, obligation,
and outlays. For a general discussion of this sequence, see CRS Report 98-721, Introduction to the Federal Budget
Process, coordinated by Bill Heniff Jr.
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worth of procurement of a given kind of item, without having to exercise a contract option for
each year after the first year. DOD needs congressional approval for each use of MYP.
To illustrate the basic difference between MYP and annual contracting, consider a hypothetical
DOD program to procure 20 single-engine aircraft of a certain kind over the five-year period
FY2013-FY2017, at a rate of four aircraft per year:
• Under annual contracting, DOD would issue one or more contracts for each
year’s procurement of four aircraft. After Congress funds the procurement of the
first four aircraft in FY2013, DOD would issue one or more contracts (or
exercise a contract option) for those four aircraft. The next year, after Congress
funds the procurement of the next four aircraft in FY2013, DOD would issue one
or more contracts (or exercise a contract option) for those four aircraft, and so on.
• Under MYP, DOD would issue one contract covering all 20 aircraft to be
procured during the five-year period FY2013-FY2017. DOD would award this
contract in FY2013, at the beginning of the five-year period, following
congressional approval to use MYP for the program, and congressional
appropriation of the FY2013 funding for the program. To continue the
implementation of the contract over the next four years, DOD would request the
FY2014 funding for the program as part of DOD’s proposed FY2014 budget, the
FY2015 funding as part of DOD’s proposed FY2015 budget, and so on.
Potential Savings Under MYP
How much can MYP save? Compared with estimated costs under annual contracting, estimated
savings for programs being proposed for MYP have ranged from less than 5% to more than 15%,
depending on the particulars of the program in question, with many estimates falling in the range
of 5% to 10%. In practice, actual savings from using MYP rather than annual contracting can be
difficult to observe or verify because of cost growth during the execution of the contract that was
caused by developments independent of the use of MYP rather than annual contracting.
A February 2012 briefing by the Cost Assessment and Program Evaluation (CAPE) office within
the Office of the Secretary of Defense (OSD) states that “MYP savings analysis is difficult due to
the lack of actual costs on the alternative acquisition path, i.e., the path not taken.”5 The briefing
states that CAPE up to that point had assessed MYP savings for four aircraft procurement
programs—F/A-18E/F strike fighters, H-60 helicopters, V-22 tilt-rotor aircraft, and CH-47F
helicopters—and that CAPE’s assessed savings ranged from 2% to 8%.6
A 2008 Government Accountability Office (GAO) report stated that
DOD does not have a formal mechanism for tracking multiyear results against original
expectations and makes few efforts to validate whether actual savings were achieved by

5 Slide 10 from briefing entitled “Multiyear Procurement: A CAPE Perspective,” given at DOD cost analysis
symposium, February 15-17, 2012, posted at InsideDefense.com (subscription required) May 14, 2012.
6 Slide 12 from briefing entitled “Multiyear Procurement: A CAPE Perspective,” given at DOD cost analysis
symposium, February 15-17, 2012, posted at InsideDefense.com (subscription required) May 14, 2012. Slide 12 also
stated that these assessed savings were based on comparing CAPE’s estimate of what the programs would cost under
annual contracting (which the briefing refers to as single-year procurement or SYP) to the contractor’s MYP proposal.
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multiyear procurement. It does not maintain comprehensive central records and historical
information that could be used to enhance oversight and knowledge about multiyear
performance to inform and improve future multiyear procurement (MYP) candidates. DOD
and defense research centers officials said it is difficult to assess results because of the lack
of historical information on multiyear contracts, comparable annual costs, and the dynamic
acquisition environment.7
How does MYP potentially save money? Compared to annual contracting, using MYP can in
principle reduce the cost of the weapons being procured in two primary ways:
• Contractor optimization of workforce and production facilities. An MYP
contract gives the contractor (e.g., an airplane manufacturer or shipbuilder)
confidence that a multiyear stream of business of a known volume will very
likely materialize. This confidence can permit the contractor to make investments
in the firm’s workforce and production facilities that are intended to optimize the
facility for the production of the items being procured under the contract. Such
investments can include payments for retaining or training workers, or for
building, expanding, or modernizing production facilities. Under annual
contracting, the manufacturer might not have enough confidence about its future
stream of business to make these kinds of investments, or might be unable to
convince its parent firm to finance them.
• Economic order quantity (EOQ) purchases of selected long-leadtime
components. Under an MYP contract, DOD is permitted to bring forward
selected key components of the items to be procured under the contract and to
purchase the components in batch form during the first year or two of the
contract. In the hypothetical example introduced earlier, using MYP could permit
DOD to purchase, say, the 20 engines for the 20 aircraft in the first year or two of
the five-year contract. Procuring selected components in this manner under an
MYP contract is called an economic order quantity (EOQ) purchase.8 EOQ
purchases can reduce the procurement cost of the weapons being procured under
the MYP contract by allowing the manufacturers of components to take
maximum advantage of production economies of scale that are possible with
batch orders.9

7 Government Accountability Office, Defense Acquisitions[:] DOD’s Practices and Processes for Multiyear
Procurement Should Be Improved, GAO-08-298, February 2008, p. 3.
8 The term EOQ is occasionally used in discussions of defense acquisition, somewhat loosely, to refer to any high-
quantity or batch order of items, even those that do not take place under MYP or BBC. As a general matter, however,
EOQs as described here occur only within MYP and block buy contracts.
9 A 2008 Government Accountability Office (GAO) report on multiyear contracting lists five areas of savings, most of
which are covered in the two general areas of savings outlined above. One of GAO’s five areas of savings—limited
engineering changes due to design stability—can also occur in programs that use annual contracting. The GAO report
states:
Multiyear procurement can potentially save money and improve the defense industrial base by
permitting the more efficient use of a contractor’s resources. Multiyear contracts are expected to
achieve lower unit costs compared to annual contracts through one or more of the following
sources: (1) purchase of parts and materials in economic order quantities (EOQ), (2) improved
production processes and efficiencies, (3) better utilized industrial facilities, (4) limited engineering
changes due to design stability during the multiyear period, and (5) cost avoidance by reducing the
burden of placing and administering annual contracts. Multiyear procurement also offers
opportunities to enhance the industrial base by providing defense contractors a longer and more
(continued...)
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What gives the contractor confidence that the multiyear stream of business will materialize? At
least two things give the contractor confidence that DOD will not terminate an MYP contract and
that the multiyear stream of business consequently will materialize:
• For a program to qualify for MYP, DOD must certify, among other things, that
the minimum need for the items to be purchased is expected to remain
substantially unchanged during the contract in terms of production rate,
procurement rate, and total quantities.
• Perhaps more important to the contractor, MYP contracts include a cancellation
penalty intended to reimburse a contractor for costs that the contractor has
incurred (i.e., investments the contractor has made) in anticipation of the work
covered under the MYP contract. The undesirability of paying a cancellation
penalty acts as a disincentive for the government against canceling the contract.
(And if the contract is canceled, the cancellation penalty helps to make the
contractor whole.)10
Permanent Statute Governing MYP
Is there a permanent statute governing MYP contracting? There is a permanent statute
governing MYP contracting—10 U.S.C. 2306b. The statute was created by Section 909 of the
FY1982 Department of Defense Authorization Act (S. 815/P.L. 97-86 of December 1, 1981),
revised and reorganized by Section 1022 of the Federal Acquisition Streamlining Act of 1994 (S.
1587/P.L. 103-355 of October 13, 1994), and further amended on several occasions since. DOD’s
use of MYP contracting is further governed by DOD acquisition regulations.
Under this statute, what criteria must a program meet to qualify for MYP? 10 U.S.C. 2306b(a)
states that to qualify for MYP, a program must meet several criteria, including the following.
• Substantial savings. DOD must estimate that using an MYP contract would
result in “substantial savings” compared with using annual contracting.
• Realistic cost estimates. DOD’s estimates of the cost of the MYP contract and
the anticipated savings must be realistic.
• Stable need for the items. DOD must expect that its minimum need for the
items will remain substantially unchanged during the contract in terms of
production rate, procurement rate, and total quantities.

(...continued)
stable time horizon for planning and investing in production and by attracting subcontractors,
vendors, and suppliers. However, multiyear procurement also entails certain risks that must be
balanced against potential benefits, such as the increased costs to the government should the
multiyear contract be changed or canceled and decreased annual budget flexibility for the program
and across DOD’s portfolio of weapon systems. Additionally, multiyear contracts often require
greater budgetary authority in the earlier years of the procurement to economically buy parts and
materials for multiple years of production than under a series of annual buys.
Government Accountability Office, Defense Acquisitions[:] DOD’s Practices and Processes for Multiyear
Procurement Should Be Improved, GAO-08-298, February 2008, pp. 4-5.
10 Annual contracts can also include cancellation penalties.
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• Stable design for the items. The design for the items to be acquired must be
stable, and the technical risks associated with the items must not be excessive.
Section 811 of the FY2008 National Defense Authorization Act (H.R. 4986/P.L. 110-181 of
January 28, 2008) amended 10 U.S.C. 2306b to require the Secretary of Defense to certify in
writing, by no later than March 1 of the year in which DOD requests MYP authority for a
program, that these and certain other criteria have been met. It also requires that the Secretary
provide the congressional defense committees with the basis for this determination, as well as a
cost analysis performed by DOD’s office of Cost Assessment and Program Evaluation (CAPE)
that supports the findings.11 Section 811 further amended 10 U.S.C. 2306b to require the
following:
• Sufficient prior deliveries to determine whether estimated unit costs are
realistic. A sufficient number of the type of item to be acquired under the
proposed MYP contract must have been delivered under previous contracts at or
within the most current estimates of the program acquisition unit cost or
procurement unit cost to determine whether current estimates of such unit costs
are realistic.
• No Nunn-McCurdy critical cost growth breaches within the last five years.
The system being proposed for an MYP contract must not have experienced
within five years of the anticipated award date of the MYP contract a critical cost
growth breach as defined under the Nunn-McCurdy act (10 U.S.C. 2433).12
• Fixed-price type contract. The proposed MYP contract must be a fixed-price
type contract.
What is meant by “substantial savings”? The meaning of “substantial savings” is open to
interpretation and might depend on the circumstances of the program in question. In practice,
estimated savings of at least 5% might be judged substantial, and estimated savings in the range
of 10% (or more) are more likely to be judged substantial. The amount of savings required under
10 U.S.C. 2306b to qualify has changed over time; the requirement for “substantial savings” was
established by Section 808(a)(2) of the FY1991 National Defense Authorization Act (H.R.
4739/P.L. 101-510 of November 5, 1990), which amended 10 U.S.C. 2306b in this regard.13
What is meant by “stable design”? The term “stable design” is generally understood to mean that
the design for the items to be procured is not expected to change substantially during the period
of the contract. Having a stable design is generally demonstrated by having already built at least a
few items to that design (or in the case of a shipbuilding program, at least one ship to that design)
and concluding, through testing and operation of those items, that the design does not require any
substantial changes during the period of the contract.

11 §811 states that the cost analysis is to be performed by DOD’s Cost Analysis Improvement Group (CAIG). In a
subsequent DOD reorganization, CAIG was made part of CAPE.
12 For more on the Nunn-McCurdy provision, see CRS Report R41293, The Nunn-McCurdy Act: Background,
Analysis, and Issues for Congress, by Moshe Schwartz.
13 For a discussion of the evolution of the savings requirement under 10 U.S.C. 2306b, including a figure graphically
summarizing the legislative history of the requirement, see Government Accountability Office, Defense Acquisitions[:]
DOD’s Practices and Processes for Multiyear Procurement Should Be Improved, GAO-08-298, February 2008, pp. 21-
22, including Figure 3 on p. 22.
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Potential Consequences of Not Fully Funding an MYP Contract
What happens if Congress does not provide the annual funding requested by DOD to continue
the implementation of the contract? If Congress does not provide the funding requested by DOD
to continue the implementation of an MYP contract, DOD would be required to renegotiate,
suspend, or terminate the contract. Terminating the contract could require the government to pay
a cancellation penalty to the contractor. Renegotiating or suspending the contract could also have
a financial impact.
Effect on Flexibility for Making Procurement Changes
What effect does using MYP have on flexibility for making procurement changes? A principal
potential disadvantage of using MYP is that it can reduce Congress’s and DOD’s flexibility for
making changes (especially reductions) in procurement programs in future years in response to
changing strategic or budgetary circumstances, at least without incurring cancellation penalties.
In general, the greater the portion of DOD’s procurement account that is executed under MYP
contracts, the greater the potential loss of flexibility. The use of MYP for executing some portion
of the DOD procurement account means that if policymakers in future years decide to reduce
procurement spending below previously planned levels, the spending reduction might fall more
heavily on procurement programs that do not use MYP, which in turn might result in a less-than-
optimally balanced DOD procurement effort.
Congressional Approval
How does Congress approve the use of MYP? Congress approves the use of MYP on a case-by-
case basis, typically in response to requests by DOD.14 Congressional approval for MYP contracts
with a value of more than $500 million must occur in two places: an annual DOD appropriations
act15 and an act other than the annual DOD appropriations act.16
In annual DOD appropriations acts, the provision permitting the use of MYP for one or more
defense acquisition programs is typically included in the title containing general provisions,
which typically is Title VIII.
An annual defense authorization act is usually the act other than an appropriations act in which
provisions granting authority for using MYP contracting on individual defense acquisition
programs are included. Such provisions typically occur in Title I of the defense authorization act,
the title covering procurement programs.

14 The Anti-Deficiency Act (31 U.S.C. 1341) prohibits the making of contracts in advance of appropriations. A
multiple-year commitment may be made when authorized by Congress by entering into a firm commitment for one
year and making the government’s liability for future years contingent on funds becoming available.
15 Paragraph (3) of subsection (l) of 10 U.S.C. 2306b states, “The head of an agency may not initiate a multiyear
procurement contract for any system (or component thereof) if the value of the multiyear contract would exceed
$500,000,000 unless authority for the contract is specifically provided in an appropriations Act.”
16 Paragraph (3) of subsection (i) of 10 U.S.C. 2306b states, “In the case of the Department of Defense, a multiyear
contract in an amount equal to or greater than $500,000,000 may not be entered into for any fiscal year under this
section unless the contract is specifically authorized by law in an Act other than an appropriations Act.”
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Provisions in which Congress approves the use of MYP for a particular defense acquisition
program may include specific conditions for that program in addition to the requirements and
conditions of 10 U.S.C. 2306b.
How often is MYP used? MYP is used for a limited number of DOD acquisition programs. As
shown in the Appendix, annual DOD appropriations acts since FY1990 typically have approved
the use of MYP for one or a few DOD programs each year.
A February 2012 briefing by the Cost Assessment and Program Evaluation (CAPE) office within
the Office of the Secretary of Defense (OSD) shows that the total dollar value of DOD MYP
contracts has remained more or less stable between FY2000 and FY2012 at roughly $7 billion to
$13 billion per year. The briefing shows that since the total size of DOD’s procurement budget
has increased during this period, the portion of DOD’s total procurement budget accounted for by
programs using MYP contracts has declined from about 17% in FY2000 to less than 8% in
FY2012.17 The briefing also shows that the Navy makes more use of MYP contracts than does the
Army or Air Force, and that the Air Force made very little use of MYP in FY2010-FY2012.18
A 2008 Government Accountability Office (GAO) report stated:
Although DOD had been entering into multiyear contracts on a limited basis prior to the
1980s, the Department of Defense Authorization Act, [for fiscal year] 1982,19 codified the
authority for DOD to procure on a multiyear basis major weapon systems that meet certain
criteria. Since that time, DOD has annually submitted various weapon systems as multiyear
procurement candidates for congressional authorization. Over the past 25 years, Congress
has authorized the use of multiyear procurement for approximately 140 acquisition
programs, including some systems approved more than once.20
Block Buy Contracting (BBC)
BBC in Brief
What is BBC, and how does it compare to MYP? BBC is similar to MYP in that it permits DOD
to use a single contract for more than one year’s worth of procurement of a given kind of item
without having to exercise a contract option for each year after the first year.21 BBC is also
similar to MYP in that DOD needs congressional approval for each use of BBC.

17 Slide 4 from briefing entitled “Multiyear Procurement: A CAPE Perspective,” given at DOD cost analysis
symposium, February 15-17, 2012, posted at InsideDefense.com (subscription required) May 14, 2012.
18 Slide 5 from briefing entitled “Multiyear Procurement: A CAPE Perspective,” given at DOD cost analysis
symposium, February 15-17, 2012, posted at InsideDefense.com (subscription required) May 14, 2012.
19 S. 815/P.L. 97-86 of December 1, 1981, §909.
20 Government Accountability Office, Defense Acquisitions[:] DOD’s Practices and Processes for Multiyear
Procurement Should Be Improved, GAO-08-298, February 2008, p. 5.
21 Using the hypothetical example introduced earlier involving the procurement of 20 aircraft over the five-year period
FY2013-FY2017, DOD would follow the same general path as it would under MYP: DOD would issue one contract
covering all 20 aircraft in FY2013, at the beginning of the five-year period, following congressional approval to use
BBC for the program, and congressional appropriation of the FY2013 funding for the program. To continue the
implementation of the contract over the next four years, DOD would request the FY2014 funding for the program as
part of DOD’s proposed FY2014 budget, the FY2015 funding as part of DOD’s proposed FY2015 budget, and so on.
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BBC differs from MYP in the following ways:
• There is no permanent statute governing the use of BBC.
• There is no requirement that BBC be approved in both a DOD appropriations act
and an act other than a DOD appropriations act.
• Programs being considered for BBC do not need to meet any legal criteria to
qualify for BBC because there is no permanent statute governing the use of BBC
that establishes such criteria.
• A BBC contract can cover more than five years of planned procurements. The
BBC contracts currently being used by the Navy for procuring Littoral Combat
Ships (LCSs), for example, cover a period of six years (FY2011-FY2016).
• Economic order quantity (EOQ) authority does not come automatically as part of
BBC authority because there is no permanent statute governing the use of BBC
that includes EOQ authority as an automatic feature. To provide EOQ authority
as part of a BBC contract, the provision granting authority for using BBC in a
program may need to state explicitly that the authority to use BBC includes the
authority to use EOQ.
• BBC contracts are less likely to include cancellation penalties.
Given the one key similarity between BBC and MYP (the use of a single contract for more than
one year’s worth of procurement), and the various differences between BBC and MYP, BBC
might be thought of as a less formal stepchild of MYP.
When and why was BBC invented? BBC was invented by Section 121(b) of the FY1998
National Defense Authorization Act (H.R. 1119/P.L. 105-85 of November 18, 1997), which
granted the Navy the authority to use a single contract for the procurement of the first four
Virginia (SSN-774) class attack submarines. The four boats were scheduled to be procured during
the five-year period FY1998-FY2002 in annual quantities of 1-1-0-1-1. Congress provided the
authority granted in Section 121(b) at least in part to reduce the combined procurement cost of the
four submarines. Using MYP was not an option for the Virginia-class program at that time
because the Navy had not even begun, let alone finished, construction of the first Virginia-class
submarine, and consequently could not demonstrate that it had a stable design for the program.
When Section 121(b) was enacted, there was no name for the contracting authority it provided.
The term block buy contracting came into use later, when observers needed a term to refer to the
kind of contracting authority that Congress authorized in Section 121(b). As discussed in the next
section, this can cause confusion, because the term block buy was already being used in
discussions of DOD acquisition to refer to something else.
Terminology Alert: Block Buy Contracting vs. Block Buys
What’s the difference between block buy contacting and block buys? In discussions of defense
procurement, the term “block buy” by itself (without “contracting” at the end) is sometimes used
to refer to something quite different from block buy contracting—namely, the simple act of
funding the procurement of more than one copy of an item in a single year, particularly when no
more than one item of that kind might normally be funded in a single year. For example, when
Congress funded the procurement of two aircraft carriers in FY1983, and another two in FY1988,
these acts were each referred to as block buys, because aircraft carriers are normally procured one
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at a time, several years apart from one another. This alternate meaning of the term block buy
predates by many years the emergence of the term block buy contracting.
The term block buy is still used in this alternate manner, which can lead to confusion in
discussions of defense procurement. For example, for FY2013, the Air Force is requesting
continued procurement funding for two Advanced Extremely High Frequency (AEHF) satellites
that were procured and partially funded in FY2012. (An alternative approach would have been to
procure one of the satellites in FY2012 and another in a subsequent year.) The Air Force is
referring to this two-satellite procurement as a block buy—which it is, under the older use of the
term. But it is not an example of block buy contracting.
At the same time, Navy officials sometimes refer to the use of block buy contracts for the first
four Virginia-class submarines, and currently in the LCS program, as block buys, when they
might be more specifically referred to as instances of block buy contracting.
Potential Savings Under BBC
How much can BBC save, compared with MYP? Potential savings under BBC can be less than
those under MYP, for at least two reasons:
• The authority to use BBC might not include authority to use EOQ purchasing,
which, as discussed earlier (see “Potential Savings Under MYP”), is one of the
two principal sources of savings under an MYP contract. The block buy contract
for the first four Virginia-class boats and the current block buy contracts for the
LCS program do not include authority for EOQ purchasing.
• A BBC contract might not include a cancellation penalty (or might include a
more limited one). This can give the contractor less confidence than would be the
case under an MYP contract that the future stream of business will materialize as
planned, which in turn might reduce the amount of money the contractor invests
to optimize its workforce and production facilities for producing the items to be
procured under the contract.
Frequency of Use of BBC
How frequently has BBC been used? Since its use at the start of the Virginia-class program,
BBC has been used very rarely. The Navy did not use it again in a shipbuilding program until
December 2010, when it awarded two block buy contracts, each covering 10 LCSs to be procured
over the six-year period FY2010-FY2015, to the two LCS builders.22
Using BBC Rather than MYP
When might BBC be suitable as an alternative to MYP? BBC might be particularly suitable as
an alternative to MYP in cases where using a multiyear contract can reduce costs, but the program
in question cannot meet all the statutory criteria needed to qualify for MYP. As shown in the case
of the first four Virginia-class boats, this can occur at or near the start of a procurement program,

22 For further discussion, see CRS Report RL33741, Navy Littoral Combat Ship (LCS) Program: Background and
Issues for Congress, by Ronald O'Rourke.
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when design stability has not been demonstrated through the production of at least a few of the
items to be procured (or, for a shipbuilding program, at least one ship).
MYP and BBC vs. Contracts with Options
What’s the difference between an MYP or block buy contract and a contract with options? The
military services sometimes use contracts with options to procure multiple copies of an item that
are procured over a period of several years. The Navy, for example, used a contract with options
to procure Lewis and Clark (TAKE-1) class dry cargo ships that were procured over a period of
several years. A contract with options can be viewed as somewhat similar to an MYP or block
buy contract in that a single contract is used to procure several years’ worth of procurement of a
given kind of item.
There is, however, a key difference between an MYP or block buy contract and a contract with
options: In a contract with options, the service is under no obligation to exercise any of the
options, and a service can choose to not exercise an option without having to make a penalty
payment to the contractor. In contrast, in an MYP or block buy contract, the service is under an
obligation to continue implementing the contract beyond the first year, provided that Congress
appropriates the necessary funds. If the service chooses to terminate an MYP or block buy
contract, and does so as a termination for government convenience rather than as a termination
for contractor default, then the contractor can, under the contract’s termination for convenience
clause, seek a payment from the government for cost incurred for work that is complete or in
process at the time of termination, and may include the cost of some of the investments made in
anticipation of the MYP or block buy contract being fully implemented. The contractor can do
this even if the MYP or block buy contract does not elsewhere include a provision for a
cancellation penalty.23
Issues for Congress
Potential issues for Congress concerning MYP and BBC include whether to use MYP and BBC in
the future more frequently, less frequently, or about as frequently as they are currently used, and
whether to create a permanent statute to govern the use of BBC, analogous to the permanent
statute that governs the use of MYP.
Frequency of Using MYP and BBC
Should MYP and BBC in the future be used more frequently, less frequently, or about as
frequently as they are currently used? Supporters of using MYP and BBC more frequently in the
future might argue the following:
• Since MYP and BBC can reduce procurement costs, making greater use of MYP
and BBC can help DOD get more value out of its available procurement funding.

23 Source: Telephone discussion with Elliott Branch, Deputy Assistant Secretary of the Navy for Acquisition &
Procurement, October 3, 2011, and email from Navy Office of legislative Affairs, October 11, 2011. Under the
termination for convenience clause, the contractor can submit a settlement proposal to the service, which would
become the basis for a negotiation between the contractor and the service on the amount of the payment.
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This can be particularly important if DOD’s budget in real (i.e., inflation-
adjusted) terms remains flat or declines in coming years, as many observers
anticipate.
• The risks of using MYP have been reduced by Section 811 of the FY2008
National Defense Authorization Act (H.R. 4986/P.L. 110-181 of January 28,
2008), which amended 10 U.S.C. 2306b to strengthen the process for ensuring
that programs proposed for MYP meet certain criteria (see “Permanent Statute
Governing MYP”). Since the value of MYP contracts equated to less than 8% of
DOD’s procurement budget in FY2012, compared to about 17% of DOD’s
procurement budget in FY2000, MYP likely could be used more frequently
without exceeding past experience regarding the share of DOD’s procurement
budget accounted for by MYP contracts.
Supporters of using MYP and BBC less frequently in the future, or at least no more frequently
than now, might argue the following:
• Using MYP and BBC more frequently would further reduce Congress’s and
DOD’s flexibility for making changes in DOD procurement programs in future
years in response to changing strategic or budgetary circumstances. The risks of
reducing flexibility in this regard are increased now because of uncertainties in
the current strategic environment and because efforts to reduce federal budget
deficits could include reducing DOD spending, which could lead to a
reassessment of U.S. defense strategy and associated DOD acquisition programs.
• Since actual savings from using MYP and BBC rather than annual contracting
can be difficult to observe or verify, it is not clear that the financial benefits of
using MYP or BBC more frequently in the future would be worth the resulting
further reduction in Congress’s and DOD’s flexibility for making changes in
procurement programs in future years in response to changing strategic or
budgetary circumstances.
Permanent Statute for BBC
Should Congress create a permanent statute to govern the use of BBC, analogous to the
permanent statute (10 U.S.C. 2306b) that governs the use of MYP? Supporters of creating a
permanent statute to govern the use of BBC might argue the following:
• Such a statute could encourage greater use of BBC, and thereby increase savings
in DOD procurement programs by giving BBC contracting a formal legal
standing and by establishing a clear process for DOD program managers to use in
assessing whether their programs might be considered suitable for BBC.
• Such a statute could make BBC more advantageous by including a provision that
automatically grants EOQ authority to programs using BBC, as well as
provisions establishing qualifying criteria and other conditions intended to reduce
the risks of using BBC.
Opponents of creating a permanent statute to govern the use of BBC might argue the following:
• A key advantage of BBC is that it is not governed by a permanent statute. The
lack of such a statute gives DOD and Congress full flexibility in determining
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when and how to use BBC for programs that may not qualify for MYP, but for
which a multiyear contract of some kind might produce substantial savings.
• Such a statute could encourage DOD program managers to pursue their programs
using BBC rather than MYP. This could reduce discipline in DOD multiyear
contracting if the qualifying criteria in the BBC statute are less demanding than
the qualifying criteria in 10 U.S.C. 2306b.
Legislative Activity for FY2014
MYP Proposals in DOD’s FY2014 Budget
DOD for FY2014 is requesting congressional approval for the following MYP arrangements:
• C-130J cargo aircraft variants to be procured in FY2014-FY2018 through the
Aircraft Procurement, Air Force (APAF) appropriation account; and
• E-2D Advanced Hawkeye (AHE) carrier-based airborne early warning aircraft to
be procured in FY2014-FY2018 through the Aircraft Procurement, Navy (APN)
appropriation account.24


24 Source: Exhibit MYP-1, Multiyear Procurement Criteria, April 13, 38 pp., accessed April 25, 2013, at
http://comptroller.defense.gov/defbudget/fy2014/PB14_MYPs_and_Revised_MYPs.pdf.
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Appendix. Programs Approved for MYP in Annual
DOD Appropriations Acts Since FY1990
Table A-1. Programs Approved for MYP in Annual DOD Appropriations Acts
Since FY1990
Fiscal
Year
Bill/Law
Section on MYP
Program(s) Approved for MYP
2013
H.R. 933/P.L. 113-6
Section 8010 of Division C
F/A-18E, F/A-18F, and EA-18G aircraft
Up to 10 DDG-51 destroyers, as wel as the AEGIS
Weapon Systems, MK 41 Vertical Launching Systems,
and Commercial Broadband Satellite Systems
associated with those ships
Virginia class submarines and government-furnished
equipment
CH-47 Chinook helicopters
V-22 Osprey aircraft variants
2012
H.R. 2055/P.L. 112-74
Section 8010 of Division A
UH–60M/HH–60M and MH–60R/MH–60S Helicopter
Airframes
MH–60R/S Mission Avionics and Common Cockpits
2011
H.R. 1473/P.L. 112-10
Section 8010 of Division A
Navy MH-60R/S helicopter systems
2010
H.R. 3326/P.L. 111-118
Section 8011 of Division A
F-18 aircraft variants
2009
H.R. 2638/P.L. 110-329
Section 8011 of Division C
SSN Virginia class submarine
2008
H.R. 3222/P.L. 110-116
Section 8010 of Division A
Army CH-47 Chinook helicopter
M1A2 Abrams System Enhancement Package
upgrades
M2A3/M3A3 Bradley upgrades
SSN Virginia Class submarine
2007
H.R. 5631/P.L. 109-289
Section 8008 of Division A
C-17 Globemaster
F-22A
MH-60R Helicopters
MH-60R Helicopter mission equipment
V-22 Osprey
2006
H.R. 2863/P.L. 109-148
Section 8008 of Division A
UH-60/MH-60 helicopters
C-17 Globemaster
Apache Block II Conversion
Modernized Target Acquisition Designation
Sight/Pilot Night Vision Sensor (MTADS/PNVS)
2005
H.R. 4613/P.L. 108-287
Section 8008
Lightweight 155mm Howitzer
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Fiscal
Year
Bill/Law
Section on MYP
Program(s) Approved for MYP
2004
H.R. 2658/P.L. 108-87
Section 8008
F/A-18 aircraft
E-2C aircraft
Tactical Tomahawk missile
Virginia Class submarine
2003
H.R. 5010/P.L. 107-248
Section 8008
C-130 aircraft
FMTV
F/A-18E and F engine
2002
H.R. 3338/P.L. 107-117
Section 8008 of Division A
UH-60/CH-60 aircraft
C-17
F/A-18E and F engine
2001
H.R. 4576/P.L. 106-259
Section 8008
Javelin missile
M2A3 Bradley fighting vehicle
DDG-51 destroyer
UH-60/CH-60 aircraft
2000
H.R. 2561/P.L. 106-79
Section 8008
Longbow Apache helicopter
Javelin missile
Abrams M1A2 Upgrade
F/A-18E/F aircraft
C-17 aircraft
F-16 aircraft
1999
H.R. 4103/P.L. 105-262
Section 8008
E-2C aircraft
Longbow Hellfire missile
Medium Tactical Vehicle Replacement (MTVR)
1998
H.R. 2266/P.L. 105-56
Section 8008
Apache Longbow radar
AV-8B aircraft
Family of Medium Tactical Vehicles
1997
H.R. 3610/P.L. 104-208
Section 8009 of Section
Javelin missiles
101(b) of Title I of Division A Army Tactical Missile System (ATACMS)
Mk19-3 grenade machine guns
M16A2 rifles
M249 Squad Automatic Weapons
M4 carbine rifles
M240B machine guns
Arleigh Burke (DDG-15 [sic:51] class destroyers
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Fiscal
Year
Bill/Law
Section on MYP
Program(s) Approved for MYP
1996
H.R. 2126/P.L. 104-61
Section 8010
UH-60 Blackhawk helicopter
Apache Longbow helicopter
M1A2 tank upgrade
1995
H.R. 4650/P.L. 103-335
Section 8010
MK19-3 grenade machine guns
M16A2 rifles
M249 Squad Automatic Weapons
M4 carbine rifles
1994
H.R. 3116/P.L. 103-139
Section 8011
[none]
1993
H.R. 5504/P.L. 102-396
Section 9013a
Defense Support Satellites 23, 24 and 25
Enhanced Modular Signal Processor
1992
H.R. 2521/P.L. 102-172
Section 8013
MK-48 ADCAP Torpedo
UH-60 Black Hawk helicopter
Army Tactical missile
1991
H.R. 5803/P.L. 101-511
Section 8014
Line of Sight-Rear (Avenger)—Pedestal Mounted
Stinger
Family of Medium Tactical Vehicles (FMTV)
LCAC Landing Craft
LHD Amphibious Ship
MK-45 Gun Mount/MK-6 Ammo Hoist
NAVSTAR Global Positioning Satellite (GPS)
Defense Support Program Satellites 22 and 23
1990
H.R. 3072/P.L. 101-165
Section 9021a
M-1 tank engines
M-1 tank fire control
Bradley Fighting Vehicle
Family of Heavy Tactical Vehicles
Maverick Missile (AGM-65D)
SH-60B/F helicopter
DDG-51 destroyer (two years)
Source: Table prepared by CRS based on text of bills.
a. In H.R. 5504/P.L. 102-396 and H.R. 3072/P.L. 101-165, the general provisions title was Title IX.

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Author Contact Information

Ronald O'Rourke
Moshe Schwartz
Specialist in Naval Affairs
Specialist in Defense Acquisition
rorourke@crs.loc.gov, 7-7610
mschwartz@crs.loc.gov, 7-1463


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