Can DoD procure used parts to be utilized as spares? What is the regulation / law that permits or prevents the procurement?
DoD can pretty much buy anything it needs, subject to the FAR, DFARS, case law and Executive Orders. There is no prohibition on buying "used spare parts" as long as the RFP allows it and does not include the "New Material" clause.
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Before the OEM buys the spares back, I would get U.S. Government involvement and a statement from somebody in authority that specifies how these spares can be acceptable (what tests or inspections they would have to pass) before the Government would accept and pay for them.