Tuesday, December 14, 2010

Commercial Items, Government Access to Records

FAR Part 12 prescribes policies and procedures for acquiring commercial items. To qualify as a commercial item, the product or service must meet the definition of commercial item found in FAR 2.101. That definition is long and involved but essentially, a commercial item is one that is customarily used by the general public and has been sold (or at least offered) to the general public. The definition has evolved over the years as the Government tries to qualify more and more items as commercial items on the presumption that it can save money by buying commercially.

The question arises from time to time whether the Government has any access to records rights when it comes to commercial item procurement. Generally the Government does not have access, but there is one situation where the Government does have limited access rights – Time and Material (T&M) contracts. On commercial T&M contracts, the rates are established based on commerciality. However, the hours expended, claimed and billed must still be supported to the Government. Therefore the Government has the right to access whatever records are necessary to determine the propriety of claimed hours.

Specifically, FAR 52.212-4 (Alternate I) gives the Government the following access rights on commercially priced T&M contracts:

  1. Records that verify that the employees whose time has been included in any invoice met the qualifications for the labor categories specified in the contract. 
  2. For labor hours (including any subcontractor hours reimbursed at the hourly rate in the schedule), when timecards are required as substantiation for payment— 
    • The original timecards (paper-based or electronic); 
    • The Contractor’s timekeeping procedures; 
    • Contractor records that show the distribution of labor between jobs or contracts; and 
    • Employees whose time has been included in any invoice for the purpose of verifying that these employees have worked the hours shown on the invoices.
  3. For material and subcontract costs that are reimbursed on the basis of actual cost—
    • Any invoices or subcontract agreements substantiating material costs; and
    • Any documents supporting payment of those invoices.

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