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
November 6, 2015
Congressional Research Service
7-5700
www.crs.gov
R41909


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.
Congressional Research Service

Multiyear Procurement and Block Buy Contracting in Defense Acquisition

Contents
Introduction ..................................................................................................................................... 1
Issues for Congress ................................................................................................................... 1
Terminology and Scope of Report ............................................................................................ 1
Two Air Force “Block Buys” That Are Not Discussed in This Report ............................... 1
Funding Approaches vs. Contracting Mechanisms ............................................................. 1
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 ...................................... 6
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
Potential Impact of Continuing Resolution (CR) for FY2016 ................................................. 11
Overview ............................................................................................................................ 11
Prohibition on Signing New MYP Contracts .................................................................... 12
Air Force KC-46 Aerial Refueling Tanker Program ......................................................... 12
Frequency of Using MYP and BBC ........................................................................................ 13
Permanent Statute for BBC ..................................................................................................... 14
Legislative Activity for FY2016 .................................................................................................... 15
FY2016 National Defense Authorization Act (H.R. 1735/S. 1376) ........................................ 15
House ................................................................................................................................ 15
Senate ................................................................................................................................ 19
Conference (Version Vetoed) ............................................................................................ 19
FY2016 DOD Appropriations Act (H.R. 2685/S. 1558) ......................................................... 20
House ................................................................................................................................ 20
Senate ................................................................................................................................ 21

Appendixes
Appendix. Programs Approved for MYP in Annual DOD Appropriations Acts Since
FY1990 ....................................................................................................................................... 23

Congressional Research Service

Multiyear Procurement and Block Buy Contracting in Defense Acquisition

Contacts
Author Contact Information .......................................................................................................... 25

Congressional Research Service

link to page 13 Multiyear Procurement and Block Buy Contracting in Defense Acquisition

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
Two Air Force “Block Buys” That Are Not Discussed in This Report
Evolved Expendable Launch Vehicle (EELV) Launch Services (ELS) Contract
A contract that the Air Force has for the procurement of Evolved Expendable Launch Vehicle
(EELV) Launch Services (ELS) is sometimes referred to as a block buy, but 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. This report does not discuss the ELS contract.
Procurement of Two AEHF Satellites
For FY2016, the Air Force is requesting continued procurement funding for two Advanced
Extremely High Frequency (AEHF) satellites that were procured in FY2012 and partially funded
in FY2012-FY2015. 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, 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

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.
Congressional Research Service
1

link to page 6 link to page 6 link to page 6 Multiyear Procurement and Block Buy Contracting in Defense Acquisition

default approach), incremental funding, and advance appropriations.2 Any of
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.
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
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’
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.

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.
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.
Congressional Research Service
2

Multiyear Procurement and Block Buy Contracting in Defense Acquisition

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
FY2015-FY2019, 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 FY2015, 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 FY2015, 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 FY2015-FY2019. DOD would award this
contract in FY2015, at the beginning of the five-year period, following
congressional approval to use MYP for the program, and congressional
appropriation of the FY2015 funding for the program. To continue the
implementation of the contract over the next four years, DOD would request the
FY2016 funding for the program as part of DOD’s proposed FY2016 budget, the
FY2017 funding as part of DOD’s proposed FY2017 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
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

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.
Congressional Research Service
3

Multiyear Procurement and Block Buy Contracting in Defense Acquisition

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
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
(continued...)
Congressional Research Service
4

Multiyear Procurement and Block Buy Contracting in Defense Acquisition

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.
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)

(...continued)
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.
Congressional Research Service
5

Multiyear Procurement and Block Buy Contracting in Defense Acquisition

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.
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.

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.
Congressional Research Service
6

link to page 27 Multiyear Procurement and Block Buy Contracting in Defense Acquisition

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.
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

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.”
Congressional Research Service
7

Multiyear Procurement and Block Buy Contracting in Defense Acquisition

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
In an interview published on January 13, 2014, Sean Stackley, the Assistant Secretary of the Navy
for Research, Development, and Acquisition (i.e., the Navy’s acquisition executive), stated:
What the industrial base clamors for is stability, so they can plan, invest, train their work
force. It gives them the ability in working with say, the Street [Wall Street], to better
predict their own performance, then meet expectations in the same fashion we try to meet
our expectations with the Hill.
It’s emblematic of stability that we’ve got more multiyear programs in the Department of
the Navy than the rest of the Department of Defense combined. We’ve been able to
harvest from that significant savings, and that has been key to solving some of our budget
problems. It’s allowed us in certain cases to put the savings right back into other
programs tied to requirements.21
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.22 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.

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 “Interview: Sean Stackley, US Navy’s Acquisition Chief,” Defense News, January 13, 2014: 22.
22 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.
Congressional Research Service
8

Multiyear Procurement and Block Buy Contracting in Defense Acquisition

 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 (FY2010-FY2015).
 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
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 FY2014, the Air Force is requesting
continued procurement funding for two Advanced Extremely High Frequency (AEHF) satellites
Congressional Research Service
9

link to page 7 Multiyear Procurement and Block Buy Contracting in Defense Acquisition

that were procured in FY2012 and partially funded in FY2012 and FY2013. (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.23 A third example, arguably,
is the Air Force’s KC-46 aerial refueling tanker program, which is employing a fixed price
incentive fee (FPIF) development contract that includes a “back end” commitment to procure
certain minimum numbers of KC-46s in certain fiscal years.24
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,
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).

23 For further discussion, see CRS Report RL33741, Navy Littoral Combat Ship (LCS)/Frigate Program: Background
and Issues for Congress
, by Ronald O'Rourke.
24 For more on the KC-46 program, see CRS Report RL34398, Air Force KC-46A Tanker Aircraft Program, by
Jeremiah Gertler.
Congressional Research Service
10

Multiyear Procurement and Block Buy Contracting in Defense Acquisition

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.25
Issues for Congress
Potential issues for Congress concerning MYP and BBC include the potential impact on MYP
and block buy contracts of an extended or full-year continuing resolution (CR) for FY2016;
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.
Potential Impact of Continuing Resolution (CR) for FY2016
Overview
One issue for Congress concerns the potential impact on MYP and block buy contracts of an
extended or full-year CR for FY2016. Extended or full-year CRs typically prohibit the following:
 new program starts (“new starts”), meaning the initiation of new program efforts
that did not exist in the prior year;
 an increase in procurement quantity for a program compared to that program’s
procurement quantity in the prior year; and
 the signing of new MYP contracts.

25 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.
Congressional Research Service
11

link to page 14 Multiyear Procurement and Block Buy Contracting in Defense Acquisition

In addition, the Navy’s shipbuilding account, known formally as the Shipbuilding and
Conversion, Navy (SCN) appropriation account, is written in the annual DOD appropriation act
not just with a total appropriated amount for the entire account (like other DOD acquisition
accounts), but also with specific appropriated amounts at the line-item level. As a consequence,
under a CR (which is typically based on the prior year’s appropriations act), SCN funding is
managed not at the account level (like it is under a CR for other DOD acquisition accounts), but
at the line-item level. For the SCN account—uniquely among DOD acquisition accounts—this
can lead to line-by-line misalignments (excesses and shortfalls) in funding for SCN-funded
programs, compared to the amounts those programs received in the prior year. The shortfalls in
particular can lead to program-execution challenges under an extended or full-year CR.26
The potential impacts described above can be avoided or mitigated if the CR includes special
provisions (called anomalies) for exempting individual programs or groups of programs from
certain provisions of the CR, or if the CR includes expanded authorities for DOD for
reprogramming and transferring funds.
Prohibition on Signing New MYP Contracts
As noted above, a CR typically prohibits the signing of new MYP contracts during the time
period covered by the CR.
Air Force KC-46 Aerial Refueling Tanker Program
As mentioned earlier (see “Frequency of Use of BBC”), the Air Force’s KC-46 aerial refueling
tanker program is employing a fixed price incentive fee (FPIF) development contract that
includes a “back end” commitment to procure certain minimum numbers of KC-46s in certain
fiscal years. Under the contract, Air Force has a commitment to procure a minimum of eight KC-
46s in FY2016 (the Air Force’s proposed FY2016 budget requests 12 KC-46s). The minimum
figure of eight for FY2016 is one more than the seven that were procured in FY2015. A CR’s
typical prohibition on year-to-year procurement quantity increases would prevent the Air Force
from procuring more than seven KC-46s in FY2016.
If the Air Force, due to an extended or full-year CR for FY2016, were not able to procure more
than seven KC-46s in FY2016, it could seek to renegotiate the terms of the contract with the
contractor, Boeing. If that renegotiation were not to result in changes to the contract’s provisions
that accommodate the consequences of the CR, the Air Force might then need to terminate the
contract, which could make the Air Force liable for development costs potentially in the hundreds
of millions of dollars that the contractor, Boeing, agreed under the contract to absorb in return for
the back-end procurement commitment. A September 24, 2015, press report states:
If the Pentagon is forced to operate under a long-term continuing resolution next year, the
Air Force will likely ask Congress for an exemption for the KC-46 tanker program,
according to one top service official.
The Air Force has not yet asked Congress for any relief from the CR because leadership
is still hoping for a short-term measure, Lt. Gen. Arnie Bunch, the service’s deputy
assistant secretary for acquisition, said Thursday. However, KC-46 will likely be a top
priority if the Air Force has to face down a year-long CR, he said.

26 In addition, a CR might also require DOD to divide a contract action into multiple actions, which can increase the
total cost of the effort by reducing economies of scale and increasing administrative costs.
Congressional Research Service
12

Multiyear Procurement and Block Buy Contracting in Defense Acquisition

“Right now we haven’t done that because we’re hoping it’s a short-term continuing
resolution, but it will probably be one of the ones that we go back in and look for a
waiver to,” Bunch said after a breakfast hosted by the Air Force Association....
Should a long-term CR take effect at the beginning of the fiscal year, the Air Force’s
most pressing concern is arguably the impact to the KC-46 tanker recapitalization
program. If the Air Force is restricted to prior year funding levels for KC-46, the service
may be forced to break the contract with Boeing.
According to Brig. Gen. Duke Richardson, KC-46 program executive office, the contract
requires the Air Force to award eight aircraft at minimum in the second low rate initial
production lot, planned for fiscal 2016. But in FY-15, the Air Force only budgeted for
seven aircraft in LRIP 1. If the service is only allowed to buy seven aircraft in FY-16 due
to a year-long CR, that would breach the terms of the contract, Richardson said.27
A September 15, 2015, press report states:
Brig. Gen. Duke Richardson, the program executive on the Air Force’s next-gen tanker
program, told an audience at the Air Force Association annual convention that a
continuing resolution (CR) would create a “very large problem” for the program.
But how big a problem wasn’t clear until after his speech, when he told a reporter that the
CR could potentially break the contract with Boeing, one which is notable for the
financial protection it affords the service.
Under the contract, the Air Force's liability for the engineering and manufacturing
development phase of the tanker program is capped at $4.9 billion; anything over is paid
for directly by Boeing. So far, technical issues have cost Boeing $1.2 billion in pre-tax
overages on the program.
That protection has been cited by Richardson and others whenever concerns about the
tanker program, which has suffered several technical issues in the last 18 months, have
occurred.
But that could go away under the CR, Richardson noted, if the Air Force is unable to
reach a requirement to award two low-rate initial production (LRIP) contracts to Boeing
once the program reaches Milestone C in April of 2016.
According to Richardson, the contract requires the Air Force to award eight aircraft at
minimum in the first two LRIP contracts. However, only the first LRIP contract, covering
seven aircraft, has funding under fiscal 2016’s budget plan.
The second LRIP contract, covering planes eight through 12, would then be unable to be
awarded under a CR, breaking the contract with Boeing unless the service can get a
waiver from Congress.28
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.

27 Lara Seligman, “USAF Will Likely Request CR Exemption for KC-46,” Defense News, September 24, 2015.
28 Aaron Mehta and Lara Seligman, “USAF General: CR Could Break KC-46 Contract,” Defense News, September 15,
2015.
Congressional Research Service
13

link to page 9 link to page 9 Multiyear Procurement and Block Buy Contracting in Defense Acquisition

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
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.
Congressional Research Service
14

Multiyear Procurement and Block Buy Contracting in Defense Acquisition

 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 FY2016
As part of DOD’s proposed FY2016 budget, the Missile Defense Agency (MDA) is requesting
authority for using an MYP contract to acquire SM-3 Block IB ballistic missile defense (BMD)
interceptors (a type of missile used on Navy ships) that MDA plans to procure in FY2016-
FY2019.
FY2016 National Defense Authorization Act (H.R. 1735/S. 1376)
House
Section 806 of H.R. 1735 as reported by the House Armed Services Committee (H.Rept. 114-102
of May 5, 2015) states:
SEC. 806. Amendment relating to multiyear contract authority for acquisition of
property.
Paragraph (1) of section 2306b(a) of title 10, United States Code, is amended to read as
follows:
“(1) That there is a reasonable expectation that the use of such a contract will result in
lower total anticipated costs of carrying out the program than if the program were carried
out through annual contracts.”.
Paragraph (1) of Section 2306(b) of Title 10 currently states:
§2306b. Multiyear contracts: acquisition of property
(a) In General.-To the extent that funds are otherwise available for obligation, the head of
an agency may enter into multiyear contracts for the purchase of property whenever the
head of that agency finds each of the following:
(1) That the use of such a contract will result in substantial savings of the total anticipated
costs of carrying out the program through annual contracts.
Regarding Section 806, H.Rept. 114-102 states:
Section 806—Amendment Relating to Multiyear Contract Authority for Acquisition of
Property
This section would amend section 2306b(a) of title 10, United States Code, to allow the
head of an agency to enter into multiyear contracts for the acquisition of property if there
is a reasonable expectation that the use of a multiyear contract would result in lower total
anticipated costs of carrying out the program than if the program were carried out through
annual contracts. This section would strike the existing requirement that the head of an
agency must determine that substantial savings would be achieved before entering into a
multiyear contract. (Pages 192-193)29

29 An April 6, 2015, press report states:
The Pentagon is pushing back against congressional moves to ease requirements for multiyear
(continued...)
Congressional Research Service
15

Multiyear Procurement and Block Buy Contracting in Defense Acquisition

Section 121 of H.R. 1735 as reported by the committee states:
SEC. 121. Modification to multiyear procurement authority for Arleigh Burke class
destroyers and associated systems.
Section 123(a) of the National Defense Authorization Act for Fiscal Year 2013 (Public
Law 112–239; 126 Stat. 1655) is amended by inserting “or Flight III” after “Flight IIA”.
Section 123(a) of the FY2013 National Defense Authorization Act (P.L. 112-239 of Janunary 2,
2013) currently states:
SEC. 123. MULTIYEAR PROCUREMENT AUTHORITY FOR ARLEIGH BURKE
CLASS DESTROYERS AND ASSOCIATED SYSTEMS.
(a) Authority for Multiyear Procurement.--Subject to section 2306b of title 10, United
States Code, the Secretary of the Navy may enter into one or more multiyear contracts,
beginning with the fiscal year 2013 program year, for the procurement of up to 10
Arleigh Burke class Flight IIA guided missile destroyers, as well as the Aegis weapon
systems, MK 41 vertical launching systems, and commercial broadband satellite systems
associated with such vessels.
Regarding Section 121, H.Rept. 114-102 states:
Section 121—Modification to Multiyear Procurement Authority for Arleigh Burke Class
Destroyers and Associated Systems
This section would amend section 123(a) of the National Defense Authorization Act for
Fiscal Year 2013 (Public Law 112–239) and provide authority to the Secretary of the
Navy to enter into a multiyear contract for a Flight III destroyer, in addition to the
existing multiyear authority for a Flight IIA destroyer.
The committee supports the changes proposed by the Secretary of the Navy to integrate
the Air and Missile Defense Radar in the Arleigh Burke class destroyer and the inclusion
of the Flight III guided missile destroyer into the current multiyear authority. However,
the committee is concerned about the Secretary of the Navy’s strategy to implement an
Engineering Change Proposal to fundamentally change integral elements of the Arleigh
Burke class destroyer multiyear procurement without congressional authorization. When
the initial multiyear procurement was authorized by section 123 of Public Law 112–239,
the authorization was limited to an ‘‘Arleigh Burke class Flight IIA guided missile
destroyer.’’ The committee includes this provision because it believes that
implementation of a Flight III destroyer without an explicit congressional authorization

(...continued)
weapons procurements, saying it will continue to insist that such deals generate significant savings
for the government before relinquishing yearly control.
Even if Congress changes the law, U.S. Defense Undersecretary Frank Kendall said program
managers would still need to show savings of "pretty darn close to 10 percent or better" to get
approval to sign a contract of up to five years.
"Whether the law says 'significant' or not, we're going to require significant savings to do a
multiyear," Kendall said in an interview on Friday [April 3]. "If that change goes through, I don't
think it will affect our behavior. Not while I'm here."...
Officials generally target savings of 10 percent or more for such deals, although the goal is not
strictly required, and some deals have been approved with less savings.
Kendall said savings of 10 percent were required by an earlier version of the law, and remained the
department's benchmark.
(Andrea Shalal, “Pentagon Balks at Congressional Bid to Ease Multiyear Deal Terms,” Reuters,
April 6, 2015.)
Congressional Research Service
16

Multiyear Procurement and Block Buy Contracting in Defense Acquisition

would violate section 123 of Public Law 112–239, by constituting a cardinal change in
the scope of the initial authorization. (Page 47)
H.Rept. 114-102 also states:
Procurement of Standard Missile-3 block IB interceptors
The budget request included $548.9 million for procurement of Standard Missile-3, block
IB interceptors (including canisters and advanced procurement funding).
The committee is aware of the significant demand amongst the combatant commanders
for inventory of the Standard Missile-3 block IB missile interceptor. The committee is
also aware that because of recent flight and ground test challenges, the Department of
Defense has decided to focus on continuing initial lot procurement of block IB missiles in
fiscal year 2016 and focusing on multiyear procurement, advanced procurement, and full
rate production in subsequent years.30
The committee has concerns about continuing procurement of block IB interceptors
before resolution of the current technical uncertainties, though the committee notes that
the planned flight tests of the block IB missile to prove out the technical fix will occur
before any missiles procured in fiscal year 2016 would actually be delivered to the
Missile Defense Agency. The committee has also been assured that the Missile Defense
Agency will not take delivery of fiscal year 2015 procurement block IB interceptors until
the fix has been proved out by flight test.
The committee is also troubled that the technical challenges in the block IB program are
leading to a higher price per unit for missiles the combatant commanders need. The
committee expects the Director of the Missile Defense Agency to negotiate for the lowest
possible per unit price, and to ensure all appropriate contractual remedies are used to
offset the costs of these challenges.
The committee recommends $521.6 million, a decrease of $27.3 million, for procurement
of Standard Missile-3, block IB interceptors (including canisters). The committee notes
that elsewhere in this Act, additional funding is recommended for Aegis BMD testing
related to the block IB proof of concept. (Pages 45-46)
H.Rept. 114-102 also states:
AH–64 Apache helicopter multi-year production contract
The budget request contained $1.4 billion in aircraft procurement, Army, for the AH–64
Apache Block IIIA program.
The committee notes that the AH–64 Apache Block IIIA program is increasing
production to 64 aircraft in fiscal year 2016, and that the Army plans to maintain a
production rate between 52 and 68 aircraft per year in fiscal years 2017–20. The
committee believes that the production line is now stable enough for the Army to pursue
a multi-year contract for the program, and that such a multiyear contract could potentially
save over a hundred million dollars over a 5-year period. Therefore, the committee
encourages the Army to seek congressional approval of such a multi-year contract award
in the fiscal year 2017 budget request.

30 A July 20, 2015, press report states that “the Missile Defense Agency is deferring plans to negotiate a potential $1.8
billion multiyear procurement deal with Raytheon for Standard Missile-3 Block IB ballistic missile interceptors until
fiscal year 2017—a one-year delay—after the Pentagon's acquisition executive turned away a proposal this spring to
transition the program from low- to full-rate production.” The report states that “in February [2015], MDA provided
Congress FY-16 budget justification materials that implied—falsely—that the Pentagon's acquisition executive had
approved Raytheon's Standard-Missile 3 Block IB program for full-rate production....” (Jason Sherman, “MDA
Deferring Until FY-17 Plans For $1.8B Raytheon SM-3 Block Buy,” Inside the Navy, July 20, 2017.)
Congressional Research Service
17

Multiyear Procurement and Block Buy Contracting in Defense Acquisition

The committee recommends $1.4 billion, the full amount requested, in aircraft
procurement, Army, for the AH–64 Apache Block IIIA program. (Page 10)
H.Rept. 114-102 also states:
Shipbuilding and industrial base
The committee remains concerned about the health of the nonnuclear surface combatant
industrial base. While the Navy public shipyards are expanding to meet significant
workload increases associated with the growth of unplanned Nimitz-class carrier work
and the nuclear undersea warfare industrial base is programmed to increase their capacity
with the introduction of the Ohio-class ballistic missile submarine replacement program
beginning in fiscal year 2019, the committee notes that a limited shipbuilding and
conversion Navy account may disproportionately and irrevocably impact the non-nuclear
surface combatant industrial base. Some of these non-nuclear surface combatant
industrial base partners are reviewing significant reductions in the workload unless a
concurrent increase in their work effort is programmed. The committee notes that the
continued ship design and construction of LPD–28, continued construction of two
Arleigh Burke-class destroyers and three Littoral Combat Ships, and the advance
procurement associated with Afloat Forward Staging Base and the replacement
amphibious warship (LX(R)), will serve to partially mitigate the dearth of workload
programmed at the non-nuclear surface combatant shipyards; but the committee believes
that a significant infusion of additional naval focus in ship construction is necessary to
sustain the current industrial base.
The committee notes that the administration has offered a number of initiatives to help
mitigate this shortfall including an innovative contracting method that places certain
amphibious and auxiliary ships under a contract to better sustain the industrial base.
The committee believes that continued long-term, multiyear procurement and block buy
contracts are integral to sustaining the overall industrial base. The committee has
provided a multitude of such authorities for a variety of these ship classes to sustain this
effort and provide a stable industrial base. The committee encourages the Department of
the Navy to continue innovative contracting efforts and workload agreements that focus
on the non-nuclear surface combatant industrial base to ensure its long-term health and
viability as a national security asset. (Page 31)
H.Rept. 114-102 also states:
Improving Contract Cost Data Collection and Analysis at the Missile Defense Agency
through Evaluation of Terminal High Altitude Area Defense Multiyear Procurement
The committee is aware that the Missile Defense Agency (MDA) briefly evaluated
multiyear procurement of Terminal High Altitude Area Defense (THAAD) interceptors
in the process of developing the fiscal year 2016 budget request. Multiyear procurement
of THAAD interceptors could have helped to arrest a significant decline in such
interceptor production across the past several fiscal years by reducing per unit interceptor
cost. However, such evaluation was hindered by the lack of high fidelity and detailed cost
information of the parts and components of THAAD interceptors.
The committee believes that effective cost analysis depends on the availability and
quality of historical program cost data. The committee is aware that the Director of Cost
Assessment and Program Evaluation (CAPE) currently manages the Department of
Defense’s primary weapon system cost data collection system. The components of the
system include defining cost data requirements, development of cost collection plans to
meet these requirements, insuring these plans are included in acquisition contracts,
performing quality control on the contractor data submissions, archiving and organizing
the cost data to facilitate analysis, and protecting access to the data.
Congressional Research Service
18

link to page 21 Multiyear Procurement and Block Buy Contracting in Defense Acquisition

The committee believes CAPE could assist MDA in developing practices and policies,
including contract requirements, to improve contract cost data collection at MDA.
Therefore, the committee directs the Director of Cost Assessment and Program
Evaluation, in coordination with the Director of the Missile Defense Agency, to evaluate
the potential per unit cost savings of THAAD interceptors if acquired through multiyear
procurement as compared to recent MDA procurement contracts. In conducting the
evaluation, the Director of Cost Assessment and Program Evaluation should also assess
and make recommendations for (1) reducing the barriers to collect adequate contract cost
data for THAAD interceptors specifically; and (2) what contract cost data collection
policies, practices, and requirements MDA should adopt to achieve identified Department
of Defense best practices more broadly. The committee further directs the Director of
Cost Assessment and Program Evaluation to brief the results of the evaluation to the
House Committee on Armed Services not later than February 15, 2016.
In addition, the committee directs the Director of the Missile Defense Agency to provide
a briefing to the House Committee on Armed Services not later than March 31, 2016, on
its plan to implement the assessment and recommendations for cost data collection
improvements made by the Director of Cost Assessment and Program Evaluation. (Pages
296-297)
Senate
The Senate Armed Services, in its report (S.Rept. 114-49 of May 19, 2015) on S. 1376, states:
Standard Missile-3 block IB
The budget request included $147.8 million in Procurement, Defense-wide, line 25, for
the Missile Defense Agency for advanced procurement of the Standard Missile-3 IB
(SM–3 IB) missile. The committee is concerned that this funding, in support of multi-
year procurement, is early to need.31 The committee recommends a decrease of $147.8
million in Procurement, Defense-wide, line 25, for the Standard Missile-3 IB missile
program. The committee recommends an increase of $147.8 million in Procurement,
Defense-wide, line 24, for the Aegis Ballistic Missile Defense program distributed as
follows: $117.9 million to increase SM–3 IB quantities from 40 to 49 missiles; $2.6
million to increase SM–3 IB canisters from 41 to 50; and $27.3 million for missile test
participation costs. (Page 282)
Conference (Version Vetoed)
The conference report (H.Rept. 114-270 of September 29, 2015) on H.R. 1735 was agreed to by
the House and Senate on October 1 and 7, 2015, respectively, and vetoed by the President on
October 22, 2015.
Section 124 of H.R. 1735 states:
SEC. 124. Modification to multiyear procurement authority for Arleigh Burke class
destroyers and associated systems.
Section 123(a) of the National Defense Authorization Act for Fiscal Year 2013 (Public
Law 112–239; 126 Stat. 1655) is amended by inserting “or Flight III” after “Flight IIA”.
Regarding Section 124, H.Rept. 114-270 states:
Modification to multiyear procurement authority for Arleigh Burke-class destroyers and
associated systems (sec. 124)


31 See footnote 30.
Congressional Research Service
19

Multiyear Procurement and Block Buy Contracting in Defense Acquisition

The House bill contained a provision (sec. 121) that would amend section 123(a) of the
National Defense Authorization Act for Fiscal Year 2013 (Public Law 112–239) to
clarify that the Secretary of the Navy has the authority to procure Flight III destroyers as
part of the existing Arleigh Burke-class multiyear procurement authority.
The Senate amendment contained no similar provision.
The Senate recedes.
The Senate report accompanying S. 3254 (S. Rept. 112–173) of the National Defense
Authorization Act for Fiscal Year 2013 described Senate intent regarding the current
multiyear procurement authority for Arleigh Burke-class destroyers and associated
systems. The Senate report supported the change to buying Flight III destroyers through
an engineering change proposal and the inclusion of such ships in the multiyear
procurement authority, following submission of a specified report. The House report
accompanying H.R. 1960 (H. Rept. 113–102) of the National Defense Authorization Act
for Fiscal Year 2014 expressed concern about the physical limitations associated with the
integration of the Air and Missile Defense Radar on the Flight III version of the Arleigh
Burke-class destroyer and requested a report to assess this integration process. Having
received the required reports, the conferees support the changes proposed by the
Secretary of the Navy to integrate the Air and Missile Defense Radar into the Arleigh
Burke-class destroyers and the addition of these Flight III ships to the current Arleigh
Burke-class multiyear procurement contract. (Pages 608-609)
FY2016 DOD Appropriations Act (H.R. 2685/S. 1558)
House
Section 8010 of H.R. 2685 as reported by the House Appropriations Committee (H.Rept. 114-139
of June 5, 2015) states:
Sec. 8010. None of the funds provided in this Act shall be available to initiate: (1) a
multiyear contract that employs economic order quantity procurement in excess of
$20,000,000 in any one year of the contract or that includes an unfunded contingent
liability in excess of $20,000,000; or (2) a contract for advance procurement leading to a
multiyear contract that employs economic order quantity procurement in excess of
$20,000,000 in any one year, unless the congressional defense committees have been
notified at least 30 days in advance of the proposed contract award: Provided, That no
part of any appropriation contained in this Act shall be available to initiate a multiyear
contract for which the economic order quantity advance procurement is not funded at
least to the limits of the Government's liability: Provided further, That no part of any
appropriation contained in this Act shall be available to initiate multiyear procurement
contracts for any systems or component thereof if the value of the multiyear contract
would exceed $500,000,000 unless specifically provided in this Act: Provided further,
That no multiyear procurement contract can be terminated without 30-day prior
notification to the congressional defense committees: Provided further, That the
execution of multiyear authority shall require the use of a present value analysis to
determine lowest cost compared to an annual procurement: Provided further, That none
of the funds provided in this Act may be used for a multiyear contract executed after the
date of the enactment of this Act unless in the case of any such contract—
(1) the Secretary of Defense has submitted to Congress a budget request for full funding
of units to be procured through the contract and, in the case of a contract for procurement
of aircraft, that includes, for any aircraft unit to be procured through the contract for
which procurement funds are requested in that budget request for production beyond
advance procurement activities in the fiscal year covered by the budget, full funding of
procurement of such unit in that fiscal year;
Congressional Research Service
20

Multiyear Procurement and Block Buy Contracting in Defense Acquisition

(2) cancellation provisions in the contract do not include consideration of recurring
manufacturing costs of the contractor associated with the production of unfunded units to
be delivered under the contract;
(3) the contract provides that payments to the contractor under the contract shall not be
made in advance of incurred costs on funded units; and
(4) the contract does not provide for a price adjustment based on a failure to award a
follow-on contract.
Senate
Section 8010 of S. 1558 as reported by the Senate Appropriations Committee (S.Rept. 114-63 of
June 11, 2015) states:
Sec. 8010. None of the funds provided in this Act shall be available to initiate: (1) a
multiyear contract that employs economic order quantity procurement in excess of
$20,000,000 in any one year of the contract or that includes an unfunded contingent
liability in excess of $20,000,000; or (2) a contract for advance procurement leading to a
multiyear contract that employs economic order quantity procurement in excess of
$20,000,000 in any one year, unless the congressional defense committees have been
notified at least 30 days in advance of the proposed contract award: Provided, That no
part of any appropriation contained in this Act shall be available to initiate a multiyear
contract for which the economic order quantity advance procurement is not funded at
least to the limits of the Government's liability: Provided further, That no part of any
appropriation contained in this Act shall be available to initiate multiyear procurement
contracts for any systems or component thereof if the value of the multiyear contract
would exceed $500,000,000 unless specifically provided in this Act: Provided further,
That no multiyear procurement contract can be terminated without 30-day prior
notification to the congressional defense committees: Provided further, That the
execution of multiyear authority shall require the use of a present value analysis to
determine lowest cost compared to an annual procurement: Provided further, That none
of the funds provided in this Act may be used for a multiyear contract executed after the
date of the enactment of this Act unless in the case of any such contract—
(1) the Secretary of Defense has submitted to Congress a budget request for full funding
of units to be procured through the contract and, in the case of a contract for procurement
of aircraft, that includes, for any aircraft unit to be procured through the contract for
which procurement funds are requested in that budget request for production beyond
advance procurement activities in the fiscal year covered by the budget, full funding of
procurement of such unit in that fiscal year;
(2) cancellation provisions in the contract do not include consideration of recurring
manufacturing costs of the contractor associated with the production of unfunded units to
be delivered under the contract;
(3) the contract provides that payments to the contractor under the contract shall not be
made in advance of incurred costs on funded units; and
(4) the contract does not provide for a price adjustment based on a failure to award a
follow-on contract.
S.Rept. 114-63 states:
E2–D Advanced Hawkeye.—The fiscal year 2016 budget request includes $272,149,000
for continued modernization of the E2–D Advanced Hawkeye airborne early warning
aircraft, an increase of $95,449,000 over amounts appropriated in fiscal year 2015. The
Committee notes that the budget request includes funds for the development of three
distinct software configurations in fiscal year 2016, each consisting of multiple efforts.
Congressional Research Service
21

Multiyear Procurement and Block Buy Contracting in Defense Acquisition

The Committee further notes that the most costly effort within in these software
configuration upgrades is for the development of an aerial refueling capability. The E2–D
Hawkeye will enter full rate production in fiscal year 2016, and received congressional
authority to enter into a multi-year procurement contract in fiscal year 2014, which
requires stable program requirements and configurations. Developing, testing and
integrating an aerial refueling capability adds technical risk to the program, and will
likely result in significant additional costs to modernization efforts.
The Committee believes that executing the development of an aerial refueling capability
in concert with a multitude of other, lower priority upgrades is technically and fiscally
risky, and recommends that the Navy limit its fiscal year 2016 efforts to high priority
upgrades only, specifically the development of aerial refueling and counter electronic
attack capabilities. Therefore, the Committee does not recommend funding for fiscal year
2016 new start efforts to be fielded concurrently with an aerial refueling capability in
software configuration 4, a reduction of $26,100,000 from the request, and recommends
that funds appropriated for software configuration 5 be invested towards counter
electronic attack only, a reduction of $30,900,000 from the request. The Committee
recommends full funding of the Navy’s aerial refueling capability, and recommends an
additional $10,000,000 only for radar development to overcome limitations of existing
capabilities.
Further, the Committee directs the Assistant Secretary of the Navy for Research,
Development and Acquisition to submit with the fiscal year 2017 budget submission cost
estimates for each planned E2–D Hawkeye Delta System/Software Configuration Build
that delineate the content of each configuration, as well as total development, test and
integration costs by effort within each configuration. In addition, the Assistant Secretary
of the Navy for Research, Development and Acquisition is directed to identify any
unfunded requirements for improved airborne surveillance and battle management
command control systems to protect against sophisticated adversaries with anti-ship
cruise and ballistic missiles. (Page 166)
Congressional Research Service
22

Multiyear Procurement and Block Buy Contracting in Defense Acquisition

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
2015
H.R. 83/P.L. 113-235
Section 8010 of Division C
[none]
2014
H.R. 3547/P.L. 113-76
Section 8010 of Division C
E-2D Advanced Hawkeye
SSN 774 Virginia class submarine
KC-130J, C-130J, HC-130J, MC-130J, AC-130J
aircraft, and government-furnished equipment
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 well 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
Congressional Research Service
23

link to page 29 Multiyear Procurement and Block Buy Contracting in Defense Acquisition

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
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
Congressional Research Service
24

link to page 29 Multiyear Procurement and Block Buy Contracting in Defense Acquisition

Fiscal
Year

Bill/Law
Section on MYP
Program(s) Approved for MYP
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 bil s.
a. In H.R. 5504/P.L. 102-396 and H.R. 3072/P.L. 101-165, the general provisions title was Title IX.

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

Congressional Research Service
25