Friday, May 5, 2017

Commercial Item Determinations - Minor or Major Modifications

The Army awarded a sole-source commercial item contract to AAR Mobility Systems for environmentally controlled shelters which can be mounted on the Army's family of medium tactical vehicle platforms. AAR had been manufacturing these shelters in various configurations for all services of the military for many years.

Gichner Systems Group, Inc. challenged the Army's determination that AAR's shelter is a commercial item. Although Gichner acknowledged that the basic shelter is a commercial item, it argued that the modifications required by the solicitation are not minor changes as provided in the FAR (Federal Acquisition Regulations) definition of a commercial item.

Gichner stated that unlike a standard, commercially available 20-foot ISO container, the Army required a shelter that is divided into three compartments and includes patented features such as integrated jacks, roller plates on the bottom of the shelter, and detent rails that lock into a military-specific material handling system.

The GAO found that the Army's judgment was reasonable.

The FAR defines a commercial item to be:
(1) Any item, other than real property, that is of a type customarily used by the general public or by non-governmental entities for purposes other than governmental purposes, and   (i) Has been sold, leased, or licensed to the general public; or   (ii) Has been offered for sale, lease, or license to the general public;* * * * *(3) Any item that would satisfy a criterion expressed in paragraphs (1) or (2) of this definition, but for--
   (i) Modifications of a type customarily available in the commercial marketplace; or   (ii) Minor modifications of a type not customarily available in the commercial marketplace made to meet Federal Government requirements. Minor modifications means modifications that do not significantly alter the nongovernmental function or essential physical characteristics of an item or component, or change the purpose of a process. . . .

According to GAO, Gichner focused on the wrong definition. Gichner focused on definition 3 above but the GAO found that AAR's shelter meets the commercial item definition based on the first paragraph. AAR's shelters are regularly used by a variety of commercial industries for transportation, storage, and housing options and therefore meets the criteria for commercial item. The record shows that the shelter was offered on its website to the general public - the only modification required would be tailoring the location of partition walls, doors, and entry panels to meet the Army's specific space requirements.

Therefore, GAO concluded that the Army reasonably determined that the shelter is a commercial item.

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