Commercial Item Updates in NDAA 2018

Each year brings about new budgets and new National Defense Authorization Acts (NDAA). NDAAs address funding, strategic plans, and rules affecting the defense acquisition process. NDAA 2018 is no exception and here are the highlights regarding cost, price, and accounting.

The NDAA includes a number of provisions that reinforce the Congress’ commitment to the acquisition of commercial items under commercial terms. These include requirements for a reassessment of what general procurement statutes should apply to commercial items and the establishment of a so-called “Amazon for Government” online portal for the acquisition of commercial off-the-shelf (COTS) items.

Section 846, termed “the Amazon provision,” mandates establishment of a program “to procure commercial products through commercial e-commerce portals … through multiple contracts with multiple commercial e-commerce portal providers, and shall design the program to be implemented in phases with the objective of enabling Government-wide use of such portals.”

  • No later than 90 days after the date of enactment of the NDAA, the Office of Management and Budget (OMB) and General Services Administration (GSA) must submit an implementation plan to Congress.
  • No later than one year after submission of the implementation plan, the OMB and GSA must conduct a market analysis of commercial e-commerce portal providers and recommend “any changes to, or exemptions from, laws necessary for effective implementation” of the program.
  • No later than two years after the date of submission of the implementation plan, the OMB and GSA must issue guidance to implement and govern the use of the program, such as protocols for compliance with product screening requirements, data security and data analytics.

The delay in full implementation of the program was incorporated into the provision during conference consideration of the NDAA to address concerns from various segments of the contracting community. The goal of the provision is to:

  • streamline and simplify the DoD’s acquisition of many COTS items
  • enhance competition
  • expedite procurement
  • enable market research
  • ensure reasonable pricing and create cost-savings
  • promote increased transparency and accountability

Section 847 proposes to add language to 41 U.S.C. § 103 to clarify that non-developmental products or services developed at a private expense and sold competitively in “substantial quantities” to “multiple foreign governments” also qualify as “commercial items.” If enacted, this language would broaden paragraph #8 of the definition in FAR 2.101 of what constitutes a commercial item, perhaps opening up the United States commercial item market to foreign vendors that regularly sell non-developmental items to foreign governments.

Section 848 provides that the DoD’s acquisition of an item through commercial item procedures constitutes a “prior determination” that the item is a commercial item that is binding on future DoD acquisitions unless (i) the head of contracting authority determines that the prior determination was improper or (ii) the senior procurement executive for a military service or the DoD determines that it is no longer appropriate to acquire the item under commercial item procedures. This change may improve consistency within the DoD acquisitions system and streamline the determination process for future acquisitions.

Note that NDAA 2016, and corresponding DPAP memo, and PGI (DFARs) guidance put an emphasis on relying on prior written Commercial Item Determinations. NDAA 2018 says that a contract for items acquired using FAR 12 commercial item procedures shall serve as a Commercial Item Determination. We suspect that DoD will use this guidance for FAR 12 acquisitions going forward, but may not consider FAR 12 acquisitions that occured prior to NDAA 2018. In other words, if you’re currently trying to make a commercial item argument based on an acquisition that occurred before December 12, 2017, you may still have a battle to fight.

Section 849 requires the Secretary of Defense to comprehensively review the procurement statutes and regulations applicable to commercial item acquisitions not required by statute, but have nevertheless been applied through the DFARS based on a determination that it is in the government’s interest . The Secretary of Defense is required to review each provision and provide an exemption, by December 12, 2018, from the statute or regulation for commercial item acquisitions unless he or she “determines there is a specific reason not to provide the exemption.” This provision provides a strong signal to the DoD that Congress wants a reduction in the number of provisions applicable to commercial item acquisitions.

Perhaps the most important aspect of all these changes is the requirement for DoD to promulgate new regulations implementing the changes. The DAR Council must propose new rules, publish them in the Federal Register, solicit public feedback, and institute the final rule. Follow all of the DFARS cases here. Register here for Federal Register notifications.

If you have questions about these changes and your federal contract, please contact or call (614) 556-4415.