1. Commercial Item Acquisitions: A Brief Update
Alan Chvotkin, Esq.
Professional Services Council
To the ABA PCL Accounting, Cost and Pricing Committee
April 11, 2017

2. COMMERCIAL ITEMS – THE BASICS
Chvotkin’s critical three-prong analysis must be undertaken
Does good or service meet the definition(s) of a commercial item?
What are the methods for the government to acquire the item?
What are the government techniques for making the price reasonableness determination?
FAR provides definitions (2.101), acquisition methods (8, 12, 13, 14, and even 15), as well as information on pricing techniques
Agency FAR supplements (particularly DFARS) elaborate on requirements
The responsibility for making the determination of commerciality rests with the “procurement” contracting officer

3. Commercial Item Determination – Supplies (FAR 2.101)
Is the item “of a type” customarily used by the public for other than government purposes? If yes, has the item been sold, leased or licensed to the general public? [If so, it is a commercial item!]
If no, has the item evolved from such item that is not yet available but will be available in the commercial marketplace to meet government requirements? [If so, it is a commercial item!]
Does it meet the criteria in 1 or 2 except for modifications? Is the modification “of a type” customarily available in the commercial marketplace? [If so, it is a commercial item!] If not, is it a minor modification that does not significantly alter the non-governmental function, essential characteristics, or purpose? [If so, it is a commercial item!]
Is this any combination of items meeting the requirements of 1, 2 or 3 and that are of a type customarily combined and sold in combination to the general public? [If so, it is a commercial item!]

4. Commercial Item Determination – Services (FAR 2.101)
Is this for installation, maintenance, repair, training or other services of a commercial product? If yes, are the services in support of commercial items? If yes, does the company provide similar services contemporaneously to the general public under similar terms and conditions? [If so, the service is a commercial item!]
Is this a service “of a type” offered and sold competitively in substantial quantities based on established catalog or market priced for specific tasks to be performed or specific outcomes to be achieved? [If so, the service is a commercial item!]
Is this an item or combination of items transferred between or among separate divisions, or non-development items sold in substantial quantities competitively to state or local governments? [If so, the service is a commercial item!]

5. Active DoD Actions
DFARS proposed rule: Procurement of Commercial Items (DFARS D006; 8/11/16) implementing requirements of law and providing guidance to contracting officers to promote consistency and uniformity in the acquisition process
ABA PCL 10/12/16 comments
CODSIA 10/28/16 comments
Guidance on Commercial Item Determinations and Determination of Price Reasonableness for Commercial Items (DPAP 9/2/16 memo)
DoD Guidebook for Acquiring Commercial Items – Parts A and B (2/24/17)
DCMA Commercial Item Centers of Excellence resource

6. Selected FY 17 NDAA Provisions
Sec. 873: Clarification of requirements relating to commercial item determinations (expands DoD centralized records relating to commercial item determinations to include market research and price reasonableness analysis, and eliminates the requirement that such records be publicly available)
Sec. 874: Inapplicability of Certain Laws and Regulations to the Acquisition of Commercial Items and COTS (requires DFARS to list defense-unique provisions of law and clauses not expressly required by law that are not applicable to (1) commercial item contracts; (2) subcontracts under such contracts; and (3) contracts for COTS)
Sec. 876: Preference for Commercial Sales (requires new guidance providing for a written determination that (1) market research was conducted before DoD may award a contract for certain services that are not commercial services and (2) no commercial services are suitable to meet agency needs)

7. Selected FY 17 NDAA Provisions (cont.)
Sec. 877: Treatment of commingled items purchased by contractors as commercial items (the purchase of items valued at less than $10,000 for use in the performance of multiple contracts and not identifiable to any particular contract shall be treated as a commercial item)
Sec. 878: Treatment of services provided by non-traditional contractors as commercial items (treats business units of non- traditional contractors that offer services as a commercial item if the business unit uses the same personnel and similar pricing methodologies used for commercial pricing)

8. What’s Next? For DoD: For Other Agencies:
Finalize DFARS 2016-D006 case?
Assess impact of FY 17 NDAA provisions on current regulations and policy
Adjudicate comments on 2/17 Commercial Items Guidebook
For Other Agencies:
Assess impact of statutory changes on current regulations and policy
But Executive Branch regulatory freeze still in effect and Trump “2 for 1” and Regulatory Review Executive Orders must be addressed
Congress:
Will additional statutory changes be made?

9. DoD Feb 24, 2017 Guidebook for Acquiring Commercial Items Part A – Commercial Item Determinations
Overview and Vision Forward
Market Research to Encourage Competition
Commercial Item Determination
Use of Commercial Item Determination
New Determinations
Other Considerations

10. DoD Feb 24, 2017 Guidebook for Acquiring Commercial Items Part B – Pricing Commercial Items
Overview
Value Analysis
Market Research
Pricing Analysis
Prime and Subcontract Price Analysis
Services Price Analysis
Beyond Price Analysis
Preparing for and Conducting Negotiations

11. Executive Vice President and Counsel Professional Services Council
QUESTIONS?
Alan Chvotkin, Esq.
Executive Vice President and Counsel
Professional Services Council
(703)