Federal Acquisition Streamlining Act of 1994: Commercializing Government Procedure
| Jurisdiction | United States,Federal |
| Citation | Vol. 24 No. 5 Pg. 1039 |
| Pages | 1039 |
| Publication year | 1995 |
1995, May, Pg. 1039. Federal Acquisition Streamlining Act of 1994: Commercializing Government Procedure
In the January 1995 issue of The Colorado Lawyer, the "Business Law Newsletter" article(fn1) discussed the sections of the Federal Acquisition Streamlining Act of 1994 ("Act") that amended the source selection and award and disputes provisions of the procurement statutes applicable to federal procurement of goods and services. This article discusses other changes made by the Act that are designed to streamline the procurement process and further commercialize government procurement.
By expanding the definition of "commercial item," the Act theoretically broadened the range of procurement in which companies do not have to comply with burdensome contract requirements that apply to procurements of government-unique items such as military equipment. The Act also limited the situations in which offerors and subcontractors are required to submit cost or pricing data, widely regarded as a burden on contractors.
This month's article summarizes those changes as well as the new small purchase thresholds that are expected to simplify government procurement in the vast majority of total procurement actions. The lingering question is whether companies manufacturing or dealing in commercial items, such as office equipment, computer supplies, furniture and other items not requiring government-unique specifications, will have an easier time selling to the government.
Consider this hypothetical situation: A small business manufacturer of office furniture has just read about the new statute. For the past three years, it has successfully sold a line of its modular computer stations to local federal agencies in small purchases of less than $25,000, accounting for 80 percent of its total sales of the item. The remaining 20 percent of sales have been to commercial customers and state and local governments at catalog prices. The manufacturer is interested in negotiating a General Services Administration ("GSA") Multiple Award Schedule ("MAS") contract to sell nationally to the federal government.(fn2)
Estimating the impact of the Act on this small business starts with an understanding of the term commercial item, which is the predicate for many of the Act's other provisions. The Act expresses a strong preference for commercial item procurements, which is similar to the regulatory preference already expressed in the Federal Acquisition Regulations("FAR"). The Act establishes a statutory scheme for purchase of commercial items that is the same for the Department of Defense ("DOD"), the National Astronautics and Space Administration ("NASA") and civilian executive agencies. Section 8001 of the Act amends the Office of Procurement Policy Act ("OFPP"), at 41 U.S.C. § 403, by expanding the definition of the term commercial item.
A company competing in a commercial item procurement should benefit from less restrictive policies applicable only to such procurements. Consequently, some companies that purposely avoided the federal market because of perceived onerous requirements---such as detailed quality assurance provisions and warranties that are inconsistent with commercial practices---may now decide to compete for government contracts. The Act contemplates the restriction of clauses that may be included in contracts for commercial items and will exempt such contracts from the myriad of requirements normally applied to government suppliers.
A commercial item is any item of a type customarily used by the general public or nongovernmental entities and offered or sold, leased or licensed to the general public. It includes any item that has evolved through advances in technology or performance and is not yet available in the commercial marketplace, but will be available in time to satisfy delivery requirements. Modifications customarily available in the commercial marketplace, or minor modifications necessary to meet federal requirements, satisfy the definition. The definition now, for the first time, includes services offered and sold competitively
in substantial quantities in the commercial marketplace at established catalog prices, a change likely to cover primarily computer or office automation equipment service contractors that publish prices for their services in catalogs.
In this hypothetical, the manufacturer should qualify as a manufacturer of commercial items. Its computer stations have been sold, although in limited quantities, to the general public. Consequently, the manufacturer should escape the certification requirements and operation of laws specifically identified in the Act as inapplicable to commercial item procurements, such as the Drug-Free Workplace Act of 1988 and any other statutes that are later made inapplicable to commercial item procurements by the Federal Acquisition Regulatory Council.
The manufacturer also should avoid having to comply with contract clauses not considered by the Council to be consistent with "standard commercial practice,"(fn3) however that term is later defined. In particular, the manufacturer's existing quality assurance systems and commercial warranties will be used to the maximum extent practicable in these procurements.(fn4)
An agency can establish market acceptance criteria and require offerors to demonstrate that items have achieved commercial market acceptance; have been previously supplied; or otherwise meet item descriptions, specifications or other criteria prescribed in the solicitation.(fn5) The use of market acceptance criteria in solicitations can...
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