Procurement Lawyer

News from the Committees

Meeting of the Commercial Products and Services Committee, November 9, 2017: The guest speaker was Ryan Connell, Northeast pricing supervisor, DCMA Commercial Item Group (CIG). He discussed CIG’s mission, including market research, commerciality, price analysis, advising contracting officers in making commercial item determinations, and providing price reasonableness recommendations for commercial items.

Ryan began with a general overview of commercial acquisition and the evolution of commerciality, describing commercial acquisition as a “streamlined AQ process.” He noted FAR 52.244-6, which requires that “[t]o the maximum extent practicable, the Contractor shall incorporate, and require its subcontractors at all tiers to incorporate, commercial items or non-developmental items as components of items to be supplied under this Contract.” He then discussed three recent NDAAs pertinent to commerciality, those for 2013, 2016, and 2017, of which the one for 2017 is especially significant.

Ryan then stated CIG’s mission: to “[d]evelop a robust ‘cadre’ of commercial acquisition expertise to support buying commands and DCMA for commercial item recommendations and pricing.” CIG is set up in six regions: Denver, Phoenix, Indianapolis, Boston, Philadelphia, and St. Petersburg, Florida each with specialties. He then set forth the procedure and responsibilities for CIG support of Department of Defense (DoD) acquisition activities. He emphasized, however, that “[d]ecisions, no matter who is responsible, rely heavily on market research.”

He then gave an overview of the definition of a commercial item, beginning with the definition in FAR 2.101: “[a]ny item, other than real property, that is of a type customarily used by the general public or by nongovernmental entities for [non-governmental] purposes.” Ryan then proceeded with the CIG definition, with some clarifications: (1) “of a type” means “similar” or “customarily” used; (2) evaluating a “similar” item involves looking at its form, fit, and function, etc.; and (3) “customarily” used means “usually” or “commonly.” He then discussed CIG’s procedure for determining commerciality under FAR Parts 12 and 15 and for establishing a common framework for a memorandum of agreement (MOA) between DCMA and a contractor. Especially important, he said, is sharing decisions of commerciality; CIG has a help desk. Presently, CIG retains a spreadsheet at Commercial@dcma.mil; a future database will incorporate procuring contracting officer (PCO) decisions.

Ryan’s next topic was market research, defined in FAR 2-101 as “collecting and analyzing information about capabilities within the market to satisfy agency needs.” In FAR Part 10, it means using the results of market research to determine if commercial items can be used to meet the agency’s needs, “a continuous process designed to gather data on products and services, market capabilities, and the business practices associated with them,” explained Ryan. It is used “to evaluate trade-offs among the various ways of meeting an [agency’s] requirements” and involves “the documentation of the data collected and its presentation in a way to facilitate acquisition decisions.”

Ryan then discussed commercial item pricing, evaluation of which may be by a variety of techniques, including (1) comparison to other prices received from other companies, (2) comparison to prior prices paid, (3) parametric estimating methods, (4) government cost estimates, (5) market research on same or similar items, (6) data other than certified cost or pricing data, and (7) value-based pricing. He then noted that CIG is augmenting contractor purchasing system reviews (CPSRs), observing that an adequate purchasing system means that the government can rely on the information the system is producing.

Ryan then gave a brief overview of the definition of “modification” regarding a commercial item. It should be “customarily” available to the public or required to meet specific government requirements, but must be minor. He then set forth criteria for what constitutes a “minor” modification. Next he discussed commercial services, which he defined as installation, maintenance, repair, training, and other services, under certain conditions; and services of a type offered and sold competitively in substantial quantities in the commercial marketplace based on established catalog or market prices for specific tasks performed or specific outcomes to be achieved and under standard commercial terms and conditions.

Finally, he gave an overview of nondevelopmental items (NDIs), which are defined in FAR 2.101 as: (1) any previously developed item of supply used exclusively for governmental purposes by a federal agency, a state government, or a foreign government with which the United States has a mutual defense cooperation agreement; (2) any item described in definition (1) that requires only minor modifications, or modifications of a type customarily available in the commercial marketplace in order to meet the requirements of the procuring department or agency; or (3) any item of supply being produced that does not meet the requirements of definition (1) or (2) solely because the item is not yet in use.