At long last, the Department of Defense (DoD) on January 31, 2018, issued its final rule regarding the procurement of commercial items. On the same day, the DoD also published an updated two-part “Commercial Item Acquisition Guidebook,” a draft of which the DoD circulated last year.
Dentons has been tracking both, including an analysis regarding the proposed rule and an earlier DFARS case that contributed to it. Although the final rule contains some beneficial elements for commercial item contractors and nontraditional defense contractors, it fails to overcome several of the barriers that deter such contractors from selling to DoD and sets the stage for possible problems down the road.
Starting with some potentially good news, it is helpful that the discussion and analysis in the final rule expressly acknowledges that the DoD considers the commercial item determination to be separate from the price reasonableness determination. This was an issue that was of particular concern in industry comments submitted in response to the DoD’s proposed rules. Moreover, the DoD’s acknowledgement of these separate inquiries is important because it also emphasizes and reinforces the avenue by which items that have not previously been sold may nonetheless qualify as commercial items if they are “of a type.” It was not long ago that the DoD was actively engaged in an effort to revise the statutory commercial item definition to remove this very concept.
Another bit of good news in the final rule relates to nontraditional defense contractors. The final rule defines a nontraditional defense contractor as an entity “that is not currently performing and has not performed any contract or subcontract for DoD that is subject to full coverage under [CAS] . . . for at least the 1-year period preceding the solicitation . . . .” The language at DFARS 212.102 states that contracting officers may treat supplies and services provided by nontraditional defense contractors as commercial items.
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