FAR Council Replaces Commercial Item Definition.

• Author: Stanley, Brooke
• Position: Government Contracting Insights

Brooke Stanley is an associate and Scott Freling a partner at Covington & Burling LLP.

* On Nov. 4, the Federal Acquisition Regulatory Council issued a final rule revising the federal acquisition definition of "commercial item," a move which should aid contractors.

The rule effectively splits the prior definition of "commercial item" into separate definitions for "commercial product" and "commercial service" without making substantive changes to the existing definitions. It also replaces references to "commercial items" throughout the Federal Acquisition Regulation with corresponding references to "commercial products," "commercial services," or both, as appropriate.

The changes come after the congressionally chartered Section 809 Panel recommended that separate definitions be adopted to, among other things, reflect the substantial role the services play in the Defense Department's procurement budget and reduce confusion caused by the reference to "items" which occasionally are thought to include products but not necessarily services. The modifications should reduce such confusion and promote uniformity in the application of commercial procedures.

The additional distinction and uniformity should help defense contractors determine whether an offered product or service is commercial. In the past, these determinations have not been made consistently, even for the same or similar products or services, resulting in much criticism from both industry and government.

While the final rule cautions that the change neither expands the universe of products and services to which the definition applies nor changes the manner in which the federal government procures products and services, the practical effect is that acquisition professionals should reach more consistent determinations regarding commerciality, thus allowing the government to better leverage the flexibilities afforded for such procurements and economic advantages of commercially available offerings. This is good news for entities providing commercial products and services, including those "of a type" offered in the commercial marketplace.

However, the changes do not resolve broader issues that the Section 809 Panel identified with commercial contracting.

For example, the group noted that commercially available off-the-shelf products remain a subset of commercial products, with distinctions continuing to be drawn between requirements applicable to commercial products other than COTS...