Problems Persist with Commercial Item Rule.

• Author: Barnett, Kevin
• Position: Government Contracting Insights

* On Jan. 31, the Defense Department published a final rule regarding commercial item purchasing. Among other amendments, the rule modifies the Defense Federal Acquisition Regulation Supplement by: formalizing a presumption of commerciality for items that the department previously treated as commercial; providing commercial treatment to items offered by nontraditional defense contractors; and prioritizing the types of information that the contracting officer can consider when determining price reasonableness in the absence of adequate competition.

However, despite receiving repeated input from industry and Congress, the rule still provides little concrete guidance. Although these changes were made with the stated purpose of promoting consistency across purchasing components, it appears likely that inconsistencies will persist. In particular, it continues to leave the door open for contracting officers to make potentially burdensome requests for information to support proposed pricing for commercial items.

The rule establishes a presumption of commerciality in two ways.

First, it updates regulations to allow contracting officers to presume that a prior Defense Department commercial item determination applies to subsequent procurements of the same item. Contracting officers are not permitted to unilaterally overturn a prior determination, and instead must "request a review of the commercial item determination by the head of the contracting activity that will conduct the procurement."

To overturn a prior determination of commerciality, the head of the contracting activity must determine in writing that the determination was improper.

While significant, it is important to understand the limitations of this presumption. It does not apply to determinations by civilian agencies, nor does it allow agencies to rely on prior commercial item determinations made by prime contractors--which represent the overwhelming majority of such determinations.

In the analysis of public comments on the final rule, the department indicated that it had limited statutory authority and lacked the ability to rely upon commerciality determinations made by civilian agencies or prime contractors.

Second, the final rule adds a regulation which limits an agency's ability to use non-commercial procedures to procure items that were previously acquired under commercial procedures. Specifically, prior to converting a procurement of items that a Defense Department component...