Under the National Defense Authorization Acts (NDAAs), Congress provides legislation on various aspects of how the Department of Defense (DOD) defines and purchases commercial items. In July, Government Accountability Office (GAO) released a study on detailing (1) trends in the DOD’s acquisition of commercial items; and (2) recent NDAA changes from fiscal years 2013-2017 related to procurement of commercial items and actions taken by DOD in response to this legislation.
The Federal Acquisition Streamlining Act of 1994, of course, established a preference within the federal government to procure commercial items rather than items developed exclusively for the government. “Commercial items” are generally defined as products and services readily available in the commercial marketplace. Purchasing commercial items enables the DOD to participate in the commercial marketplace (when appropriate) and to take advantage of market innovations and reduce its acquisition costs. Despite this preference, the GAO study shows the DOD has been slow to embrace the preference to buy commercial items – but why? The answer is in the implementation of the FAR.
When a contracting officer evaluates a commercial item for a procurement action, the contracting officer, prior to award, must determine that the price is fair and reasonable. However, by the item’s very nature as a “commercial item,” the information available to a contracting officer to determine whether the commercial item’s price is fair and reasonable is limited. See FAR 15.404-1(b). This is because commercial item purchases are exempt from the FAR certified cost or pricing data requirements. FAR 15.403-1(b).
The GAO report explains that DOD has set up Commercial Item Centers of Excellence to provide guidance and training to contracting officers in making commercial item acquisitions and related price reasonableness determinations. Whether this effort will assist the DOD in increasing its commercial item spending remains to be seen. Hopefully, the NDAA legislation will turn this trend around so DOD can take advantage of the innovations and efficiency benefits inherent of commercial item spending.