On Monday, August 3, 2015, the Department of Defense (DoD) issued a long-awaited proposed rule that could have a significant impact on how the DoD and prime contractors procure commercial items.  

The Proposed Rule is said to merely implement Section 831(a) of the Fiscal Year 2013 National Defense Authorization Act (NDAA), but goes much further, proposing significant substantive changes to what qualifies as a “commercial item” under DoD-funded contracts and imposing significant burdens on prime contractors to gather data from their commercial item subcontractors.

Section 831 directed DoD to, among other things, issue guidance including “standards for determining whether information on the prices at which the same or similar items have previously been sold is adequate for evaluating the reasonableness of prices.”  Section 831 was, in part, a response to DoD’s recent efforts to narrow the broad commercial item paradigm created by Congress in the 1990s, including a 2012 DoD legislative proposal to change the statutory and regulatory definition of “commercial item.”

Specifically, DoD requested legislation to grant DoD greater access to cost or pricing data associated with commercial items and sought to change the definition of commercial items to exclude items that are merely “offered for sale” or “of a type” offered for sale in the marketplace.  Congress declined to make those changes, recognizing the Federal Acquisition Streamlining Act (FASA) purposefully includes a broad definition of commercial items in order to ensure that the federal government has access to products available in the commercial marketplace.

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