The Pentagon relies more often on multiyear procurement contracts (MYPs) than block-buy contracting (BBC) deals, according to the Congressional Research Service (CRS).
“Annual[Department of Defense] appropriations acts since fiscal 1990 typically have approved the use of MYP for one or a few DOD programs each year,” CRS reports. “The three most recent DOD appropriations acts (for fiscal 2009, fiscal 2010 and fiscal 2011) have each approved one DOD program for MYP.”
That is not the case for BBCs. “Since its use at the start of the Virginia-class [submarine] program, BBC has been used very rarely,” CRS says. “The Navy did not use it again in a shipbuilding program until December 2010, when it awarded two block-buy contracts, each covering 10 LCS (Littoral Combat Ships) to be procured over the six-year period fiscal 2010 - fiscal 2015, to the two LCS builders.
“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,” CRS says. “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).”
BBC is similar to MYP, CRS notes, in that it permits the Pentagon 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.
But CRS points out that BBC still differs from MYP in several ways:
• There is no permanent statute governing the use of BBC and no requirement that BBC be approved in both a DOD appropriations act and a non-appropriations act.
• Programs being considered for BBC do not need to meet any legal 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 batches during the first year or two of the contract — does not come automatically as part of BBC authority.
• BBC contracts are also less likely to include cancellation penalties.