commercial item | The Contracting Education Academy

December 18, 2019 By cs

DoD proposes to amend definition of ‘commercial items’

On November 27, 2019, the Department of Defense (DoD) issued a proposed rule to amend the Defense Federal Regulation Supplement (DFARS) regarding the Treatment of Certain Items as Commercial Items (DFARS Case 2019-D029).

The proposed rule has three main elements:

It implements Section 877 of the National Defense Authorization Act (NDAA) for Fiscal Year 2017, providing for the Treatment of Commingled Items purchased by Contractors under DoD contracts as Commercial Items
It implements Section 878 of the NDAA for Fiscal Year 2017 by providing for the Treatment of Services Provided by Nontraditional Contractors as Commercial Items; and
It further implements Section 848 of the NDAA for Fiscal Year 2018, which provides that a contract for an item using FAR part 12 procedures shall serve as a prior commercial item determination. The proposed rule would apply only to DoD acquisitions.

Keep reading this article at: http://www.mondaq.com/unitedstates/x/871372/

July 16, 2019 By AMK

Proposed rule offers foreign military sales as a potential pathway to commerciality

Earlier this month, the FAR Council issued a proposed rule to expand the definition of “commercial item” under the Federal Acquisition Regulation (FAR) to include certain items sold in substantial quantities to foreign governments. This new rule implements section 847 of the National Defense Authorization Act (NDAA) for FY 2018 (Pub. L. 115-91), and has the potential to extend commercial item status to defense articles that have been sold to foreign militaries, including sales under the Foreign Military Financing program.

Ensuring the commercial item status of products and services has long been a key point of federal contracting compliance for many businesses, as commercial item contracts typically avoid many of the more burdensome provisions imposed by the FAR. While the term “commercial item” is often generalized to refer to items offered for sale to the general public for non-governmental purposes, the definition of “commercial item” under FAR 2.101 includes certain items used for governmental purposes and sold in substantial quantities to multiple state and local governments. See FAR 2.101. This provision permitted products like protective equipment used by police and fire departments to be deemed commercial items.

Specifically, the FAR provides that a “nondevelopmental item” can qualify for commercial item status “if the procuring agency determines the item was developed exclusively at private expense and sold in substantial quantities, on a competitive basis, to multiple State and local governments.” See FAR 2.101. While the foregoing provision is limited to sales to state and local governments, the FAR separately defines “nondevelopmental item” as “[a]ny previously developed item of supply used exclusively for governmental purposes by a Federal agency, a State or local government, or a foreign government with which the United States has a mutual defense cooperation agreement.” (emphasis added) So while the FAR defines “nondevelopment item” to include products sold to foreign governments, the commercial item definition only extends to products sold to state and local governments.

The proposed rule expands the commercial item definition to include nondevelopmental items sold in substantial quantities to foreign governments. While this change results in adding only four words to the FAR, it represents a potentially significant expansion to the concept of commerciality in federal contracting, as items used exclusively for defense applications would potentially be deemed commercial items under the proposed rule. The notice of proposed rulemaking is clear that intent of the rule is to include defense articles previously developed at private expense for U.S. allies under the definition of commercial item.

Keep reading article at: https://www.insidegovernmentcontracts.com/2019/05/proposed-rule-offers-foreign-military-sales-as-a-potential-pathway-to-commerciality/

June 27, 2019 By AMK

Proposed FAR rule would broaden ‘commercial item’ status to products developed exclusively for and sold to friendly foreign governments

A little-heralded change to the statutory definition of “commercial item” has now made its way to a proposed FAR rule, which will open up regulatory relief to a whole new class of government contractors – companies, both domestic and foreign, that regularly sell products developed at private expense to friendly foreign governments.

With the December 12, 2017, passage of Section 847 of the National Defense Authorization Act of 2018, Pub. L. 115-91 (“2018 NDAA”), the statutory set of definitions for the term “commercial items” was amended. See 41 U.S.C. § 103. More specifically, Section 103(8), addressing “nondevelopmental items,” was broadened as follows:

(8) a nondevelopmental item if the procuring agency determines, in accordance with conditions in the Federal Acquisition Regulation, that the item was developed exclusively at private expense and has been sold in substantial quantities, on a competitive basis, to multiple State and local governments or to multiple foreign governments.

(Emphasis reflects new language). On May 10, 2019, the FAR Council promulgated a Proposed Rule amending and broadening the definition of “commercial item” in FAR 2.101 to include the statutory language.

A “nondevelopmental item” (“NDI”) is separately defined by FAR 2.101 as, in pertinent part:

(1) an already developed product “used exclusively for governmental purposes by a Federal agency, a State or local government, or a foreign government with which the United States has a mutual defense agreement”; (2) a product which meets the definition in (1) that requires minor modifications or modifications “of a type customarily available in the commercial marketplace;” or (3) a product which does not meet the definition in either (1) or (2) “solely because the item is not yet in use.”

Keep reading article at: https://www.jdsupra.com/legalnews/new-proposed-far-rule-makes-way-for-88083

April 26, 2019 By AMK

What the 809 Panel didn’t quite get right

The Section 809 panel offers an important new idea on how the defense acquisition system could be improved to provide the Pentagon greater access to innovative new technologies that are rapidly developed in the private sector.

But the panel fumbled its recommendations with a contradictory and incoherent legislative approach that would hurt more than it helps. That should not undermine the significance of the panel’s underlying idea: a new focus on the source of funding for commercial items instead of the marketplace in which they are sold. This could encourage companies to develop defense-unique products at their own expense. Today, many are driven away when they are forced to accept regulated pricing and burdensome, government-unique contract terms and conditions.

Successes and Failures

We had high hopes when we helped to write the commercial buying acquisition reforms in the Federal Acquisition Streamlining Act of 1994 and the Clinger-Cohen Act of 1996. These reforms broadened the definition of commercial items, established a commercial item preference, and authorized waivers to government-unique requirements and contract clauses for the purchase of commercial solutions.

As a result, the government went from 476 contracts under simplified commercial item procedures in 1996 to nearly 13 million contracts worth almost $75 billion in 2011. As our colleague Jon Etherton has explained, this enabled the U.S. government to catch up with the information technology revolution that had swept the private sector in the 1990s and likely saved the Department of Defense (DOD) billions of dollars by avoiding unnecessary research and development and the extended acquisition lead times associated with government-unique products.

Keep reading this article at: https://breakingdefense.com/2019/04/what-the-809-panel-didnt-quite-get-right-greenwalt-levine/

March 26, 2019 By AMK

Reject Section 809 Panel’s acquisition reforms, federal workers urge Congress

Federal workers told Congress last week that defense acquisition reform proposals billed as cutting red tape for the Pentagon to buy trailblazing commercially available items would “result in large unnecessary costs,” and they are urging lawmakers to reject them.

The opposition by the American Federation of Government Employees, which counts 300,000 Pentagon employees in its ranks, to recommendations from the congressionally mandated Section 809 Panel means lawmakers will have multiple arguments to chew on as they decide which of the panel’s many reform proposals to include in the annual defense policy bill. The Section 809 Panel’s two-year effort yielded a 2,000-page report that was finalized in January.

AFGE’s national president, J. David Cox Sr., argued in a six-page letter to the House and Senate Armed Services committees dated March 15 that the panel’s proposed “dynamic marketplace framework” and other recommendations would line the pockets of defense contractors and only appear as well-reasoned reforms and streamlining of regulations.

“Nothing could be further from the truth,” Cox said in the letter. “This would, while increasing contracting profits, predictably decrease funds that otherwise could have been targeted toward compelling needs such as military readiness, support to our uniformed volunteers and their families, and the replacement of aging war-fighting equipment.”

Cox argued the panel hadn’t made the operational case for the proposal and that buying commercial might thwart the military’s interoperability goals and introduce more cyber vulnerabilities. He said the panel had been made up of former industry and procurement officials who were “biased solely to give expanding procurement opportunities to the private sector” and lacked representation from the “total force management communities.”

Keep reading this article at: https://www.defensenews.com/congress/2019/03/19/reject-defense-reforms-federal-workers-urge-congress

On November 27, 2019, the Department of Defense (DoD) issued a proposed rule to amend the Defense Federal Regulation Supplement (DFARS) regarding the Treatment of Certain Items as Commercial Items (DFARS Case 2019-D029).

The Section 809 panel offers an important new idea on how the defense acquisition system could be improved to provide the Pentagon greater access to innovative new technologies that are rapidly developed in the private sector.

Federal workers told Congress last week that defense acquisition reform proposals billed as cutting red tape for the Pentagon to buy trailblazing commercially available items would “result in large unnecessary costs,” and they are urging lawmakers to reject them.

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