Friday, May 4, 2012

Commercial Item Definition - Proposed Change

Each year, Government agencies prepare and send in "legislative proposals" to Congress for its consideration. Last year, for example, DoD sent in 12 different packages of legislative proposals for consideration under the National Defense Authorization Act (NDAA) for FY 2012. For the FY2013 NDAA, it has already submitted six packages with more expected before a June cut-off date. Not all of these proposals make it through the legislative process of course but many do.

One of the proposals submitted in a package on March 28, 2013 would revise the definition of the term "commercial pricing" by

  1. eliminating the "of a type" criterion, 
  2. eliminating items or services that are merely offered for sale but not yet sold, and 
  3. adjust the threshold that requires prior sale of "substantial" quantities to one that allows prior sale of "like" quantities.

In DoD's view, this proposal would permit the Government to acquire commercial items at better prices by ensuring that such items are only those goods or services that actually have been sold, leased, or licensed in comparable quantities in the commercial marketplace and therefore have prices that clearly are based on competitive market pricing or established catalog prices.

The DoD Inspector General and the GAO have been critical of DoD's use of commercial item pricing. Those oversight agencies have found that DoD sometimes uses commercial item procedures to procure items that are misclassified as commercial items and therefore not subject to the forces of a competitive marketplace. Misclassification of items as commercial can leave DoD (as well as all Government agencies) vulnerable to accepting prices that are not the best value for the Government. Another DoD-IG report concluded that the commercial item definition is broad and has allowed contracting officials to award contracts for defense systems and subsystems that had no commercial market.

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