May 18 2012

Department of Defense Proposes Changes to Commercial Item Language “of a Type”

By: adayers

Posted in: IDCC Papers


On March 28, 2012, the Department of Defense (DoD) submitted legislative suggestions to the House and Senate Armed Services Committees.  One of the proposals was to revise and narrow the definition of commercial Items in the Federal Acquisition Regulation (FAR), which currently permits purchases to be considered commercial items if they are "of a type" similar to items available for sale in the private sector.  The revision would no longer allow "of a type" items to qualify as "commercial items" unless they "are to be offered for sale" in the commercial market, or are sold in "substantial quantities" in the commercial market. 

The DoD claims that the change is necessary to combat pricing issues in the agency for what are supposed to be non-DoD-specific items.  Often in commercial market place, materials and components that are standard commercial items are tailored to specific requirements to meet the customer's needs in their manufacturing process.  For example, a company or the DoD might order a resistor with various length leads to accommodate a specific circuit being made.  Such changes would actually have the result of denying the DoD and civilian agencies access to critical technologies, reducing competition, and erecting significant barriers for businesses to gain entry, or remain, in the federal market. 

It is the belief of several organizations and companies that the recently adopted administrative rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to require higher level approval for commercial item determinations exceeding $1 million when the determination is based on "of a type" language will address such concerns. This regulatory change was recommended by the DoD internal Panel on Contracting Integrity and included in its 2009 report to Congress concerning compliance with the DFARS documentation requirements for commercial item determinations.  This added internal oversight has just been put into effect and the DoD needs to work with this provision in place to determine whether it resolves the problem before revising the definition of commercial item.

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