Commercial item – A beacon of accessibility
Over the past several decades, the Government has sought ways to remove barriers to acquiring readily available technologies that appear just out of reach, or at least significantly difficult to procure in a timely manner. Both the Government and suppliers echo frustrated sentiments with the difficulties of procuring advanced, innovative products from leading providers of technology.1 Many providers of commercially available products want to avoid the bureaucratic, administratively expensive process of selling to the Federal Government, i.e. commercial business must grapple with numerous contract clauses.
For example, leading technology developers of sensors or artificial intelligence believe the risk of compliance is too high versus the reward. The cherished seal2 of “Commercial item,” as defined under FAR 2.101, leaves a laundry list of go and no-go decisions that is cumbersome to navigate. In fact, Congress created the 809 Panel3 under the 2016 NDAA to look at this very issue, which followed a prior Panel created in 1991,4 to address these very same challenges with acquiring innovative products. Until more is done to bring the procurement process in line with traditional commercial practices, the Government will struggle to procure highly coveted, readily available commercial products.
In the meantime, to assist companies in navigating the nuances of the regulations, our team of professionals looked at the FAR 2.101 definition5 and began separating out these distinct characteristics. We broke down the criteria into an easy-to-use decision flowchart to assist contractors in qualifying a commercial item. When an item is determined to be commercial, companies are not required to certify to either cost or pricing data, but may be required to provide “data other than certified pricing information”6 to substantiate the fairness of the price. Click here to access the flowchart.
To briefly explain “of a type” on the commercial services page, this is meant to provide contracting officers wider authority in making a commercial service determination. As per the January 2018 Department of Defense Guidebook for Acquiring Commercial Items, “The definition is applied when ascertaining whether items sold or offered for sale to the general public are present in the marketplace, and are similar [emphasis added] to those offered to fulfill the Government requirement.”
We recognize with the recent NDAA, the 2018 Congress instructs DOD to accept prior commercial item determinations that were acquired applying FAR Part 12 acquisition procedures, unless a senior procurement executive determines it is no longer appropriate. We fully support these moves to simplify and clarify confusing language; however, we believe there remains much more to be done in simplifying and streamlining the acquisition of technologies offered in the commercial market, while still protecting our security interest.
For more information about how to determine if your commercial item or service is exempt from the certified cost or pricing data requirement, please contact our government contracting professional listed below.
Chase Clark, CPA
Manager, Government Contracting Industry Practice
For over 40 years, CohnReznick has provided comprehensive services to assist government contractors with a full life cycle approach to winning and managing contracts. We ensure your financial and procurement processes are compliant, efficient and effective - so you can focus on what matters most, profitable growth.
2 There is no official “seal” or “designation” to commercial item exemption or what is known as a contracting officer’s determination letter. We took liberty to characterize this commercial item determination as a seal of approval by the contracting officer.
3 FY 2016 National Defense Authorization Act (NDAA), 25 Nov 2015, Section 809,
4 FY 1991 NDAA, Section 800 Panel sought was to streamlining commercial procurement laws, which led to the Federal Acquisition Streamlining Act of 1994 (FASA)
5 FAR 2.101 Definition (26 Oct 2018). The definition contains 559 plus associated bullets.
6 FAR 2.101 Definition (26 Oct 2018); 15.403-1
InsightInvestors: Are your portfolio companies ready to compete for federal infrastructure opportunities?Now is the time for private equity firms to assess portfolio companies’ readiness to win and execute on government projects. Read more.
InsightFederal contractors should prepare now for a government shutdownRebecca Kehoe, Richard MeeneWith the current political climate, anything is possible; including a government shutdown. Federal contractors should be preparing for a shutdown now. Learn more.
Insight2021 GAUGE Report: Creating a winning proposalWith new federal infrastructure funding and contracts coming, it’s more important than ever to know where the market is going. Download the 2021 GAUGE Report now.
InsightFinal rule regarding the limitations on subcontracting: What contractors need to knowJeff ShapiroFinal ruling and amending of the Federal Acquisition Regulation (FAR) regarding the standardized limitations on subcontracting will be effective Sept. 10. This article addresses key points to be aware of as a government contractor. Learn more.
InsightWhat to know about the good faith in small business subcontracting final ruleKaty BarkerThe Federal Acquisition Regulation (FAR) will start providing examples of good faith efforts, as well as failures to make a good faith effort, to comply with a small business subcontracting plan starting in September. Learn more.