Commercial Items Update

There’s been a lot of activity and chatter around commercial items, Better Buying Power (BBP), and acquisition reform over the past few weeks. For me, it’s difficult to see these as mutually exclusive topics. The Government buys $60 billion of commercial items annually, through every agency and office. BBP and acquisition reform are not going to change that fact. In fact, the rule changes will increase the number and dollar value of commercial acquisitions. I want to focus on the interpretation and application of those rules – something I will do in more detail as the rules become final. For now, I’ll share the latest updates.

 

Just yesterday, the Washington Business Journal posted “Want to sell your commercial product to DoD? It might get harder,” by Stan Stolloway that sumarizes all of the issues:

  • Commercial item determinations are critical (not in the weeds)
  • Many DoD officials have the decision tree upside down and use a “weapons systems’ aperature”
  • An item’s cost or price structure has absolutely nothing to do with its status as a commercial item
  • Creating a cadre of commercial item specialists under the direct control of those causing the current harangue will not solve the problem – we need a separate and unbiased group
  • DoD wants more competition and increased technological capabilities, hence more commercial companies and items
  • The Pentagon effectively wants to add layers of bureaucracy to the process while still claiming a goal of reducing compliance costs

On March 31, Reuters reported “Pentagon shifts approach to speed up commercial buying,” with Shay Assad conceding that commercial item determinations were taking “far too long” to process (as long as nine months), and set a new target of 10 business days. My experience, and the feedback of others, is that Contracting Officers get the decision tree of commercial items and cost-or-pricing data inverted. The first decision is whether or not something is a commercial item. The outcome of that determination will guide the contract type, submission of cost or pricing data, intellectual property rights, and other terms and conditions.

On March 27, Government Executive reported Rep. Mac Thornberry’s bill in “House Defense Acquisition Reform Plan Seen as Step in the Right Direction.” Thornberry stated, “The acquisition system is slow and cumbersome, delivering vital equipment years late that underperforms and is difficult and costly to maintain. His bill addresses four broad areas: the workforce, acquisition strategy, streamlining the chain of command, and thinning out reporting requirement and paperwork.

In the midst of all of this, OFPP Administrator Anne Rung continues her “Ambitious plan to reshape federal contracting” through category management, new digital tools, and data-driven decisions. Category management has experienced mixed results in the private sector with some questioning its effects on small businesses and other government initiatives.

On March 20, Washington Technology reported “GSA launches review of contracts for commercial items,” identifying 15 areas where it thinks contracts for commercial items are inconsistent with federal law. I see this as a step in the right direction toward administrative clarification of T&C – an area where my clients often spend months negotiating contracts. While negotiations often involve scope, SOW, or technical specifications, my experience is that protracted negotiations are centered around T&C, particularly intellectual property.

On March 4, GSA announced a “Proposed Rule on Transactional Data Reporting.” Since GSA contracts and items are arguably commercial in nature (see article above), this means potentially more data reporting for GSA contract holders. Essentially, the Government wants to ensure they are receiving the best price for any item or service they purchase. The new reporting would require contractors to submit sales data on other qualifying contracts and transactions.

Keep your eyes and ears open, new releases of BBP 3.0 addressing cyber security, and the Commercial Item Handbook are expected in the coming days. I’ll keep you posted!

In the meantime, if you have questions about the acquisition of commercial items in your contracts, let’s talk!

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