Commercial Items - Part III

In our previous two posts on this subject, we described the Government's penchant for buying goods and services commercially and provided a bit of regulatory guidance on what does and does not constitute commercial items and commercial practices. As we conclude this short series today, we will be discussing some general policies and practices the Government uses to make those purchases.

The basic policies and procedures are contained in FAR Part 12. Most agencies have supplemental regulations. For DoD, its DFARS 212. Additionally, each agency has specific policies and procedures that implement the regulations. For DoD, its PGI 212 (Procedures, Guidance, and Instructions). Fundamentally, commercial item policies and procedures rely heavily on the education, training, and professional expertise of Government acquisition personnel. Government acquisition personnel are trained and instructed to use flexibility and exercise sound business judgment in its interpretations and application of policies and procedures.

The decision to use a commercial item to meet the Government's requirements for a specific acquisition is based on market research and an analysis of the marketplace. Contracting officers must ensure that the contract files fully and adequately document the market research and rationale supporting a conclusion that the commercial item definition (described in Part I) has been satisfied. Failure to do so risks having awards overturned if losing bidders appeal to the GAO (Government Accountability Office).  Under DoD rules, commercial items over $1 million must have a written determination that the item(s) satisfy the commercial item definition.

While the documentation requirements on contracting officers are extensive, they are even more cumbersome  for determinations involving modifications of a type customarily available in the commercial marketplace and items offered, but not yet sold, leased, or licensed to the general public. In these situations the documentation must clearly detail the particulars of the modifications and sales offers. When such items lack sufficient market pricing information, contracting officers must support determinations that prices are fair and reasonable by other means. The fact that a price is included in a catalog does not necessarily mean that it is fair and reasonable.

If the contracting officer cannot determine whether an offered price is fair and reasonable, even after obtaining additional information from sources other than the offeror, the contracting officer must require the offeror to submit information other than cost or pricing data to support further analysis. In extreme cases, when "other than cost or pricing data" is still not adequate to support the reasonableness of the offered price, certified cost or pricing data may be required.

Contractors who desire to sell commercially, should be prepared to assist the contracting officer in his/her documentation efforts.