Streamlining Procurement

Over the past 15 years, the federal government procurement arena has seen a huge shift away from large negotiated procurements in favor of streamlined commercial item acquisitions. This is a direct result of the passage of laws such as the Federal Acquisition Streamlining Act of 1994 (FASA) and the 1996 Clinger-Cohen Act, which paved the way for simplified and efficient procurements. As implemented by the Federal Acquisition Regulations (FAR), FASA and the Clinger-Cohen Act established a preference for federal agencies to buy commercial goods and services in conformance with standard commercial practices, including commercial terms and condition.

The mid-1990’s push toward the use of commercial item acquisitions came at a point when the federal government found itself falling behind in the field of technology. The effort involved in conducting a full-blown procurement often meant that by the time a contract was awarded goods — that were the latest innovations during the time they were proposed — had become obsolete and outdated. In short, commercial item acquisitions were given a green light in order to create less administrative burdens for government contracting officers and contractors alike. Using FAR Part 12 procurement regulations means applying far fewer rules and regulations than one would normally apply. The idea is that the government can loosen its reins somewhat since the commercial marketplace will ensure that the price offered is fair and reasonable. Specifically, the following laws and requirements, among others, are either not applicable or are applicable in modified form with respect to federal contracts for the acquisition of commercial items:

• 41 U.S.C. 43, The Walsh-Healey Act;

• 41 U.S.C. 254(a) and 10 U.S.C. 2306(b), Contingent Fees;

• 41 U.S.C. 701, et seq., Drug-Free Workplace Act of 1988;

• 22 U.S.C. 7104, Trafficking Victims Protection Reauthorization Act of 2003;

• 40 U.S.C. 3701 et seq., Requirement for a certificate and clause under the Contract Work Hours and Safety Standards Act;

• 41 U.S.C. 57(a) and (b), and 58, Requirement for a clause and certain other requirements related to the Anti-Kickback Act of 1986;

• 49 U.S.C. 40118, Requirement for a clause under the Fly American provisions;

• 41 U.S.C. 253g and 10 U.S.C. 2402, Prohibition on Limiting Subcontractor Direct Sales to the United States;

• 41 U.S.C. 254(d) and 10 U.S.C. 2306a, Truth in Negotiations Act;

• 41 U.S.C. 422, Cost Accounting Standards

So what is a commercial item? Commercial items are defined by FAR 2.101 as:

1. Any item, other than real property, that is of a type customarily used by the general public or by non-governmental entities for purposes other than governmental purposes, and —

   (i) Has been sold, leased or licensed to the general public; or

   (ii) Has been offered for sale, lease, or license to the general public;

2. Any item that evolved from an item described in paragraph (1) of this definition through advances in technology or performance and that is not yet available in the commercial marketplace, but will be available in the commercial marketplace in time to satisfy the delivery requirements under a government solicitation;

3. Any item that would satisfy a criterion expressed in paragraphs (1) or (2) of this definition, but for —

   (i) Modifications of a type customarily available in the commercial marketplace; or

   (ii) Minor modifications of a type not customarily available in the commercial marketplace made to meet Federal Government requirements. Minor modifications means modifications that do not significantly alter the nongovernmental function or essential physical characteristics of an item, or change the purpose of a process.

4. Installation services, maintenance services, repair services, training services and other services if —

   (i) Such services are procured for support of an item referred to in paragraph (1), (2), (3) or (4) of this definition, regardless of whether such services are provided by the same source or at the same time; and

   (ii) The source of such services provides similar services contemporaneously to the general public under terms and conditions similar to those offered to the federal government;

5. Services of a type offered and sold competitively in substantial quantities in the commercial marketplace based on established catalog or market prices for specific tasks performed or specific outcomes to be achieved and under standard commercial terms and conditions….

Historically this definition has been broadly interpreted, allowing agencies to procure a myriad of items that one would not arguably consider a commercial item. The FAR definition itself leaves room for interpretation. What constitutes “substantial quantities?” What are “services of a type offered and sold competitively?” Can simply posting a commercial pricelist, without more, satisfy the requirement for “offered for sale?” The answers are not readily available, and there are few legal decisions shedding any light on these otherwise subjective terms. At the end of the day, it boils down to a decision by the contracting officer. Does the product or service reasonably and rationally meet the definition? Until the definition is revised, agencies will likely continue to use commercial acquisitions to the greatest extent possible because of the efficiencies they afford.

About the Author

Andrew Mohr is a partner in the law firm of Cohen Mohr LLP. He specializes in government and commercial contracts, including GSA schedules, security clearance and contract administration and compliance. Mohr’s e-mail is [email protected]; he can be reached at (202) 342-2550, fax (202) 342-6147, and at www.cohenmohr.com.