Commercial Item Determination

Your CO's response is somewhat contradictory to the definition of Commercial Items at FAR 2.101. There is not any requirement that a previous CO determined it commercial, only that "...customarily used by the general public or by non-governmental entities for purposes other than governmental purposes..."

Agency and procuring activity competition advocates are responsible for promoting the acquisition of commercial items - see FAR 6.502(a) & 6.502(. I would suggest you contact the Competition Advocate of the buying activity of your CO for assistance. Many times this office is located on the Chief Counsel or similar Legal Office.

So is there a board, office, division, whatever, where you can get a determination that will apply to all purchases of a part, or a class of parts? Or are we stuck with the whims of an individual CO in every buying office for every purchase?

I don't know of any central office where you can go for a decision other than the CO. But you are not stuck with the "whims" of the CO. You can submit a nonmonetary claim for an official interpretation of the contract, demand a final decision of the CO, and appeal to the cognizant board of contract appeals or the Court of Federal Claims if you are not willing to accept the CO's decision.

To add to what Vern wrote, I know of no reason why you could not protest the terms of the solicitation if it is not issued for a commercial item.

Vern,

If I understand the scenario, this is a pre-award concern. There's no contract dispute and you can't submit a CDA claim to the CO for an interpretation of the contract. The bid protest route would seem to be available.

OLG

Fara Fasat wrote "Here's the situation - before issuing the last solicitation, the CO asked whether we could show any commercial purchase orders for the part. No? Then it's not a commercial item."

I know of a company that claims commerciality and has the commercial P.O.'s to prove it. That doesn't keep the CO from demanding cost data ("[non-certified] cost or pricing data") to support proposed pricing. This drives the company nuts because they don't account for costs in the traditional government contractor way. (Example: their manufacturing people don't track time to a particular "project" because all boxes in the factory are the much the same and manufacturing labor is treated as a fixed production cost. So there is no easy way to tell how much labor was spent for any particular P.O., or even how much manufacturing labor is direct versus indirect.) My point here is that even a commercial item determination from the CO may not relieve the contractor from having to address some tough issues.

If I were in Fara Fasat's seat and wanted to claim commerciality, I would submit a list of commercial (non-governmental) customers and be prepared to provide the prices paid by those customers. If I was relying on "offered for sale" versus actually sold, then I would provide a catalog or some other marketing material that would show the product is actually offered for sale to the general marketplace.

I would try to slide past the "of a type" argument, unless the CO challenged what I submitted as being different from the item being solicited. In that case, I would hand over a White Paper, prepared by my technical team, that discussed the differences between what was solicited and my standard commercial item; if my technical team could not coclude that the differences were insignificant, then I would give up the fight. But if they did conclude that the solicited item was not significantly different from the standard commercial item, I would fight the CO on the issue.

To sum up, those contractors seeking a determination of commerciality should be prepared. They should invest in preparing to support their position, preferably before receiving an RFP but certainly as part of the proposal effort.

Hope this helps.

That particular contract action by that CO was not a big problem -- under the TINA threshold, sole source. We shrugged it off at the time. BUT, it had a cascading effect. A prime buyer saw the synopsis, said, Aha, it's not a commercial item, and demanded C or P data. We had been battling with that prime for awhile over this issue, with the prime refusing to agree it was commercial because he wanted to see cost data. That CO's incompetent decision reinforced his own misapplication of the law.

That's why we're looking for a body/board/office/panel/committee etc to get a commercial item determination.

H2H - your reply came in while I was writing my last post. We did all that, and we're beyond that point. The CO wanted to see commercial POs for that product, sold by us. She actually suggested that I educate myself on the law when I tried to explain how modifications were allowed. Going further was pointless.

Vern,

If I understand the scenario, this is a pre-award concern. There's no contract dispute and you can't submit a CDA claim to the CO for an interpretation of the contract. The bid protest route would seem to be available.

OLG

I took it to be a postaward problem.

FF,

It sounds like you have done all you could do. Ultimately, it comes down to a management decision: do you or do you not want the business? If you decide you want the business, you have to abandon claims of commerciality and provide cost or pricing data to your customers. If you stand on commerciality, you have to be willing to walk away from the business.

Naturally, there may be additional costs associated with moving toward a traditional government contractor cost accounting and compliance structure. Make sure your government and prime customers pay their fair share of such additional costs.

H2H

1. I take it that the answer is that there is no place to get a commercial item determination except on each individual contract action.

2. It's a sad commentary on contracting when people whose ignorance of the law and regs, and frankly, their jobs, can force a company to choose between walking away from business or incurring additional costs.

I would still suggest contacting the CO's Competition Advocate and discuss this action preferably in a face to face meeting that includes the CO. The Compettion Advocate is charged with promoting commercial acquisition. Additionally, it can't hurt to have another office e.g. Competition Advocate outside of contracting looking at the situation and they may see it your way and get you what you are looking for. It's worth a try. Also it would provide your Management with additional informtion to make a more informed decision.

Fara Fasat,

There is another perspective, you know -- maybe the contracting officer you're dealing with has had too many instances where contractor representatives, maybe with the support of Govenrment program officials, try to disguise their products or especially services as "commercial" for the sole reason of getting higher prices without the scrutiny that the Truth in Negotiations Act requires. I think H2H at no. 11 balances it well -- if you want the business, you have to dance to the music. If you don't like the music in one barn, you can go to another barn.

I fully support the practice of a contracting officer looking at the facts and making a decision.

Where someone wants a second opinion, he or she can get one -- file a protest (before award) or a claim (after award) or simply send a kind letter to the chief of the contracting office asking for a re-visit of the contracting officer's decision.

That's the problem -- the CO refused to look at the facts. The definition does not require that the same part be sold commercially. If it was, it would be COTS.

Look at it this way -- Congress created a class of items called commercial items. If a product fits in that class, then certain consequences follow, such as exemption from TINA, CAS, and other requirements. You may not like it, but it's no longer your choice, it's the law. The one not dancing to the music is the CO.

Fara:

What exactly is the problem? Is the CO issuing a solicitation using other than FAR Part 12 terms? Do you think the solicitation should be issued pursuant to FAR Part 12?

That started it, and led to the question about other ways to get a CI determination besides on each contract action.

The other part of the problem is the ignorance of, misapplication of, or just plain refusal to follow the commercial item law that Congress created. I will concede up front that there are contractors that stretch it and abuse it. However, in my opinion, there is no excuse for a CO whose knowledge is so limited that she applies a COTS test and refuses to listen to anything else. It is endlessly frustrating to try to conduct your business on a commercial item basis, and then run into people, both on the government and prime side, who can't deal with it. I could tell several stories about primes who would hold a CI decision hostage until you agreed to give them cost data.

I don't have suggestions, so this is probably nothing more than a rant at this point. I appreciate the suggestions on other ways to get a CI determination.

Has the government specified an item or service that is commercial in nature, but is refusing to acknowledge it as such? Or are you offering a commercial item in response to the government's noncommercial specification?

I suppose I could find out, but why does it matter? That contract action is over. The point of this thread is the refusal to follow the definition of a commercial item, and where to go to get a determination.

I just wanted to understand the context of the problem. It doesn't really matter.

As for where to go: (1) If you are challenging the terms of a solicitation or the evaluation of a proposal, you can protest to the agency, the GAO, or the COFC. (2) If the question comes up after award and is a matter of contract compliance, you can submit a claim to the CO.

Thanks. I understand. I was looking more for a solution to the broader scope, not this particular acquisition. Maybe a database of NSNs that are commercial, maybe a central CI determination office. Who knows? It just seems inefficient that a determination must be made in every contract action by a different CO every time. That leads to inconsistent determinations as well.

I agree that it's inefficient. The inefficiency is the inevitable result of a complex definition that is designed to relax the laws and regulations, e.g., TINA, for a rather amorphous class of things while maintaining them for all other things and leaving the decision to individual officials. The "of a type" rule is very controversial. See http://www.federalti...l-buying-rules.

That might explain the CO's reluctance to accept your "of a type" argument.

Just to clarify - we weren't trying to use "of a type." The item was modified in the same way it is for all commercial customers, as the definition allows. Not that it would have mattered. The CO only wanted to see prior commercial sales of the same part. That's COTS, not a commercial item.

It was not unreasonable for the CO to ask for proof of sales to the public. See paragraph (1)(i) of the definition. That is not the only criterion of commerciality, but it is the clearest one from a CO's standpoint.

We get it that you're unhappy with the CO and think that he/she was unreasonable, but we're hearing only your side of the story. You know what your options are in the future. Let us know what you did and how you came out if this comes up again.

We'll have to agree to disagree. I just cannot agree that it is reasonable for the CO to cut off any discussion of anything other than COTS sales, and then suggest that I was the one who didn't understand the definition. In fact it's uninformed, to put it politely. True, (1)(I) may be the clearest (i.e. easiest) criterion; applying the other parts of the definition requires a little more effort. She cut off all but a small subset of commercial items. Why are you letting her off the hook?

Of course, that's only my side. However, you have my word that it was a very short conversation, consisting only of the above.

I didn't say that it was reasonable to "cut off any discussion" of other information. I said it was reasonable of her to ask for proof of sales. I feel your pain.

I'm still glad the decision is made by the contracting officer on a case-by-case basis. Here's why--

Just assuming, arguendo, that Fara Fasat is right, well, he can still sell his wares to other contracting officers. But if the decision was made by a central office and was dispositive on all contracting officers in the United States and abroad, and the contracting officer in question worked there, well, then he could never sell his wares anywhere in the Government as commercial items.

See? Discretion at the lowest level is the best way! :-)

Very good thinking!

True, there could be unintended consequences. On balance however, I think a central office, whose sole function is making CI determinations, would be more likely to be more experienced and knowledgeable, and more likely to apply the full definition. Furthermore, if you have confidence in the office, you are more likely to accept the decision and not feel like you got screwed.

It's hard to predict. It could end up like the old saying: "Be careful what you ask for, because you might get it."

Let's call such an office the Central Commerciality Office (CCO). How would such an office work?

1. Would firms be able to seek a determination from the CCO in advance of and without reference to any particular procurement or would they have to seek a determination for a particular procurement?

2. If firms could seek a determination if advance of and without reference to any particular procurement, what redress would a firm have if the office determined its product to be noncommercial, since they could not protest and they could not proceed under the Contract Disputes Act.

3. How many such requests do you think the CCO would get? How long do you think such determinations should take? How much staff would you give the CCO to process such determinations? What would be your justification for the expense -- the convenience of firms wanting to do business with the government?

4. If firms can go to the central office for a determination in connection with a particular procurement, then the buying office could be subject to a protest without any authority to propose corrective action. It would be held in thrall to the decisions of the central office. Consider, too, the question of how

5. Could contractors seek a determination from the CCO for particular contract? In that case, it seems likely that the person making the determination would have to be a contracting officer for that purpose. Would a lengthy period of determination be grounds for a delay claim? If so, then the buying office would be in thrall to the CCO for the costs of delays that it did not cause.

6. Where in the government would the CCO be situated? At OMB? OFPP? GSA? The Pentagon? At each contracting activity? In each contracting office? If at the agency level of below, would a determination by one organization be binding on the rest of the government? If so, would there be a route of appeal?

I ask those questions and make those points (I could make many more) to show you that it's easy to propose an idea, but hard to design it to work in a way that would be acceptable to all.

Haven't lost interest. Just busy on other things.

Quick preliminary question re: #6 - isn't DLA the keeper of NSNs?

I think so. You want to give the determination authority to DLA?

Regarding NSNs, some are managed by DLA and some are managed by GSA. Additionally, AbilityOne is the sole authorized source for certain NSNs, but I think the specs for such NSNs still belong to the cognizant Governement agency.

Maybe. Just wondering what agency already has a database of information on products. That would be a good starting point.

OK, here are a few more thoughts. Assume just for discussion that DLA already maintains an extensive database of NSNs, and could add a field for whether it is a commercial item. A check means it is; no entry means nothing (kind of like the old "neutral" for no past performance).

Here is how it might work: DLA could, as part of its charter, conduct a systematic review of its NSNs, and check the field if it is a CI. Contractors could also submit a justification and ask for a determination. Again, no entry means nothing. A contractor would still be free to make its case to the CO on an individual solicitation, just as it does now.

Now, for a few of Vern's comments on a potential Central Commerciality Office -- CCO:

1. Would firms be able to seek a determination from the CCO in advance of and without reference to any particular procurement or would they have to seek a determination for a particular procurement?

1. yes whenever they think they need it.

2. If firms could seek a determination in advance of and without reference to any particular procurement, what redress would a firm have if the office determined its product to be noncommercial, since they could not protest and they could not proceed under the Contract Disputes Act.

2. no redress from the CCO. The contractor would have to make its case on an individual contract action, just like it does now.

3. How many such requests do you think the CCO would get? How long do you think such determinations should take? How much staff would you give the CCO to process such determinations? What would be your justification for the expense -- the convenience of firms wanting to do business with the government?

3. who knows how many, how long, etc? Justification for cost -- consistency, more educated determination, efficiency (as more parts get a positive determination -- saves a separate determination on each contract action).

4. If firms can go to the central office for a determination in connection with a particular procurement, then the buying office could be subject to a protest without any authority to propose corrective action. It would be held in thrall to the decisions of the central office.

4. no. CCO operations are separate from individual contract actions. If a product has a positive CI listing at DLA, all future contract actions would use it. If there is no listing, the CO must do as he/she does now -- do market research, make a determination. Also, the contractor could submit its justification. All the same as now.

5. Could contractors seek a determination from the CCO for particular contract? In that case, it seems likely that the person making the determination would have to be a contracting officer for that purpose. Would a lengthy period of determination be grounds for a delay claim? If so, then the buying office would be in thrall to the CCO for the costs of delays that it did not cause.

5. no. CCO is a separate function from contract actions. If there is a positive determination, it is used in contract actions. If not, it means nothing. No change from current state of affairs.

6. Where in the government would the CCO be situated? At OMB? OFPP? GSA? The Pentagon? At each contracting activity? In each contracting office? If at the agency level of below, would a determination by one organization be binding on the rest of the government? If so, would there be a route of appeal?

6. wherever it makes most sense. yes, a positive determination would be binding.

Thanks.

Fara, I know this doesn't answer your question, but DOD published a handbook a while back on Commercial Items.

http://www.acq.osd.mil/dpap/Docs/cihandbook.pdf

What are the advantages to a Contractor to having something determined to be a Commercial Item ?

All I can think of is that:

1. they don't have to furnish any cost or pricing data, plus

2. a couple dozen clauses and provisions for non-CI solicitations/ contracts are left out.

Are there any disadvantages ?

.............................

On the other hand, for an Agency, it seems like it makes a much bigger difference to them.

The whole acquisition process goes faster, including evaluation.

The one downside I can think of, CO's who are more comfortable looking at cost and price data may fear that they are paying too much.

What are the reasons a CO may NOT want to call something a Commercial Item ?

This authority has been around for almost 20 years now.

I'd expect it to be used more often.

Bringing this string back to life, so as not to re-create, but rather expand...

How about the pain felt by a small business subcontractor when proposing a Commercial Item to the Prime. Prime is rigorous (no argument here) and calls in DCMA. DCMA reviews vigorously (many hours of our staff, but that's part of the deal), and gives a blessing. The agency declines to accept DCMA approval. The agency (not just current CO) has taken the stand that any comp invoices must be no older than @2 years. (don't look for a reference in the FAR/DFAR) The insanity is that tech companies move rapidly forward in evolving products and the USG is buying the same product for upwards of 10 years due to program lifespans. If our last 'commercial' sale was 5+ years ago, that does NOT make our product any less commercial today.

As mentioned above, on one hand the gov't advocates 'commercial' solutions, yet on the other is deaf to a commonsense argument.

BC

FARA - Simple view.....So did you do a FBO search on the same need to see how others might,be acquiring?

In the 2016 National Defense Authorization Act, section 851 requires DoD to establish a central office to oversee commercial item determinations, and provides that a prior determination will serve as a presumption of commerciality for subsequent acquisitions. There are several other provisions regarding price information, flowdown, etc., but this may have the most impact.

Buying commercial products and services makes perfectly good sense, and the government ought to do so whenever possible. The problem with government CI policy is that CIs are exempt from many controls over the government buying process and Congress wanted to make sure there were that there would be no loopholes that would let the wrong ones into the CI sanctuary. So it created a complex definition and then amended it to make it even more complex, and now DOD must create a new bureaucracy to oversee commercial item determinations.

What this shows is the impossibility of government doing anything simply.

Acquisition reform is a long-running joke. Thanks to the Federal Acquisition Streamlining Act , we have more rules than ever. Go back and check the page count of the FAR in 1994, before the enactment of FASA, and then check it 10 years later.

Here is Section 851. Also, there is a Subtitle E--Provisions Relating to Commercial Items which includes other sections.

Section 851 creates a new ground for protest.

I wonder if the FAR Councils will pick this up and make (B ) applicable government-wide or just leave DoD to struggle with it.

I doubt that the CAAC would go for that, but I wouldn't bet my house.