Thursday, January 5, 2017

Commercial Item Preference - Market Research Still Required

Existing statutes and regulations require the Government to ensure that its requirements with respect to a procurement of supplies or services are stated in terms of (i) functions to be performed, (ii) performance required, or (iii) essential physical characteristics. This is necessary so that commercial items, to the extent practical, can be procured to fulfill such requirements and sellers of commercial items are provided an opportunity to compete in any procurement to fill such requirements (see 10 USC 2377).

Although the regulations impose a strong preference to purchase commercial items, contracting officers must also determine that prices are fair and reasonable.  Just because a price is in a catalog or just because a contractor sells the same or similar items commercially, does not mean that the prices quoted to the Government are fair and reasonable. Perhaps there are other vendors offering commercial items that meet the Government's needs for lower prices. Anecdotal evidence suggests that in their push to buy commercially, to comply with regulations, and please their bosses, some contracting officers have entered into commercial item contracts without first determining that the prices were fair and reasonable.

To allay this concern, the House included a provision in the 2017 NDAA that will require contracting officers to (always) conduct market research to support the determination of reasonableness. The Senate agreed. Specifically, the provision, included as Sec 871 in the 2017 NDAA reads as follows:
Market Research For Price Analysis.—The Secretary of Defense shall ensure that procurement officials in the Department of Defense conduct or obtain market research to support the determination of the reasonableness of price for commercial items contained in any bid or offer submitted in response to an agency solicitation. To the extent necessary to support such market research, the procurement official for the solicitation ...

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