Customary Commercial Practices

The Federal Acquisition Streamlining Act of 1994 (FASA) established a preference and specific requirements for acquiring commercial items that meet an agency's needs. FAR requires market research by the acquiring agency to address, among other things, customary practices regarding the provision of the commercial item. Consistent with this approach, FAR bars the tailoring of solicitations for commercial items in a manner inconsistent with customary commercial practice unless a waiver is obtained. If a waiver is requested, it must describe the customary commercial practice found in the marketplace, support the need to include a term or condition that is inconsistent with that practice, and include a determination that the use of the customary commercial practice is inconsistent with the needs of the Government. That may be a lot of hoops to jump through but the purpose is to encourage acquisitions of commercial items when and where possible.

A recent bid protest decision passed down from the Comptroller General's office (i.e the GAO) sheds some insight on how the Government conducts its market research and determines customary commercial practices.

The Army issued a solicitation for waste management services (i.e. garbage pickup) at Fort Polk Louisiana. Offerors were required to submit fixed rices on a per-ton basis. Before the contract was awarded, one of the bidders protested on the grounds that the requirement to propose fixed prices on a per-ton basis was inconsistent with commercial practices.The Army agreed to take corrective action and so this appeal was dropped.

However, the Army's corrective action did not change the solicitation requirements for fixed prices on a per-ton basis. It set out to demonstrate that garbage pick-up on a per-ton basis was a commercial practice. And so, the offeror protested once again.

The offeror maintained that customary commercial practices for regular trash collection schedules are not priced on a per-ton basis since contractors' costs are driven by the number and frequency and distance between stops on a collection schedule. The costs a contractor incurs are essentially the same whether the refuse containers are full, partially full, or empty.

The Army responded that it had performed market research to justify its per-ton pricing. It reviewed other Army refuse contracts, requested feedback from industry in "Sources Sought Notice (SSN) and contacted a sales representative from a company in New York.

The Comptroller General didn't buy the Army's logic. It stated that the Army's market research failed to reasonably support its conclusion that pricing for refuse contracts on a per-ton basis reflects customary commercial practice.

First, it was unreasonable for the Army to rely on other Government refuse contracts as a basis for establishing customary commercial practice since contracts with the federal government are not generally considered to be part of the commercial marketplace.

With respect to the SSN (Sources Sought Notice), the Army received seven responses. Four stated that pricing should be on a monthly basis and three did not comment. The Army's reliance on three of the respondents who did not comment on this issue provides no basis for the Army to conclude that the solicitation's pricing terms were consistent with customary commercial priactice.

Finally, contacting a trash collector in another state did not provide an adequate basis for concluding that the price-per-ton approach constituted customary commercial practice. The record did not contain or even reference any particular commercial refuse contract to which the New York trash company was a party. Nor did the record contain any documentation from the company representative or support for the "expertise and knowledge" of the sales representative.

The Army was trying hard to award the contract to the incumbent contractor but was foiled, at least for the time being.

You can read the entire decision by clicking here.