NDAA 2019 - Commercial Products and Commercial Services

The President signed the 2019 NDAA (National Defense Authorization Act) named for Senator John McCain on Monday this week. We've covered a couple of the provisions in the legislation that are of interest to Government contractors, especially small businesses. Monday we discussed the prohibition against contracting officers arbitrarily withholding consent to subcontract just because they didn't like the price or the estimated cost and yesterday we took a look at a provision designed to enhance the effectiveness of PTACs (Procurement Technical Assistance Centers). Yesterday we discussed a new requirement  that allows the Defense Department to pay small businesses in 15 days rather than the traditional 30 days. Today we will look at the new definition of "commercial items". There are two definitions now, one for commercial products and the other for commercial services. These will become important distinctions as the Government's stated preference is to buy commercial first and if commercial items are not available, then to utilize some other procurement mechanism.

Commercial product. Commercial product means a product, other than real property, that is of a type customarily used by the general public or by non-governmental entities for purposes other than governmental purposes and has been sold, leased, or licensed, or offered for sale, lease, or license, to the general public. It also means a product that evolved from a commercial product through advances in technology or performance and is not yet available in the commercial marketplace but will be available in the commercial marketplace in time to satisfy the delivery requirements under a Federal Government solicitation. Thirdly, it also includes a product that satisfies the above criteria were it not for modifications of a type customarily available in the commercial marketplace or minor modifications made to meet Federal Government requirements.

Commercial services. Commercial services means any of the following:

1. Installation services, maintenance services, repair services, training services, and other services if those services are procured for support of a commercial product, regardless of whether the services are provided by the same source or at the same time as the commercial product and the source of the services provides similar services contemporaneously to the general public under terms and conditions similar to those offered to the Federal Government.
2. Services of a type offered and sold competitively, in substantial quantities, in the commercial marketplace based on established catalog or market prices for specific tasks performed or specific outcomes to be achieved and under standard commercial terms and conditions.
3. A service described above even though the service is transferred between or among separate divisions, subsidiaries, or affiliates of a contractor.

 Note that for commercial services, if they are not procured to support a commercial product, must have been sold in substantial quantities in the commercial marketplace.