[Federal Register Volume 65, Number 167 (Monday, August 28, 2000)]
[Proposed Rules]
[Pages 52284-52286]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-21855]



[[Page 52283]]

-----------------------------------------------------------------------

Part VII





Department of Defense

General Services Administration

National Aeronautics and Space Administration





-----------------------------------------------------------------------



48 CFR Part 2, et al.



Federal Acquisition Regulation; Acquisition of Commercial Items; 
Proposed Rule

  Federal Register / Vol. 65, No. 167 / Monday, August 28, 2000 / 
Proposed Rules  

[[Page 52284]]


-----------------------------------------------------------------------

DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 2, 12, 46, 52

[FAR Case 2000-303]
RIN 9000-AI88


Federal Acquisition Regulation; Acquisition of Commercial Items

AGENCIES: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: Federal Acquisition Regulatory Council (FARC) is proposing to 
amend the Federal Acquisition Regulation (FAR) to implement two 
statutory changes relevant to the definition of ``Commercial Items'': 
Section 803(a)(2)(D) of the Strom Thurmond National Defense 
Authorization Act for Fiscal Year 1999 to revise the definition of 
``commercial item'' to provide specific guidance on the meaning and 
appropriate application of the term ``purposes other than government 
purposes'' at 41 U.S.C. 403(12)(A); and Section 805 of the National 
Defense Authorization Act for Fiscal Year 2000 to clarify the 
definition of ``commercial item'' with respect to associated services.
    In addition, the FAR Council is proposing other changes related to 
the acquisition of commercial items, including conforming the coverage 
regarding contractor liability for property loss or damage to 
commercial practice.
    This proposed rule revises and supersedes the proposed rule FAR 
case 98-304, Commercial Items--Nongovernmental Purposes, published in 
the Federal Register at 64 FR 40694, July 27, 1999. As a result, 
proposed rule 98-304 is hereby withdrawn.

DATES: Interested parties should submit comments in writing on or 
before October 27, 2000, to be considered in the formulation of a final 
rule.

ADDRESSES: Submit written comments to: General Services Administration, 
FAR Secretariat (MVRS), 1800 F Street, NW, Room 4035, ATTN: Laurie 
Duarte, Washington, DC 20405.
    Submit electronic comments via the Internet to: [email protected].
    Please submit comments only and cite FAR case 2000-303 in all 
correspondence related to this case.

FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS 
Building, Washington, DC, 20405, at (202) 501-4755 for information 
pertaining to status or publication schedules. For clarification of 
content, contact Ms. Victoria Moss, Procurement Analyst, at (202) 501-
4764. Please cite FAR case 2000-303.

SUPPLEMENTARY INFORMATION:   

A. Background

    Federal Acquisition Regulation Part 12, Acquisition of Commercial 
Items, was developed to implement Title VIII of the Federal Acquisition 
Streamlining Act of 1994 (FASA) (Pub. L. 103-355). The regulations 
became effective on October 1, 1995. The FAR Council has identified 
several areas that need updating and clarification. This rule addresses 
a number of those changes.
    This proposed rule amends the definition of ``commercial item'' at 
FAR 2.101 and the definition in the clause at FAR 52.202-1 to implement 
Section 803(a)(2)(D) of the Strom Thurmond National Defense 
Authorization Act for Fiscal Year 1999 (Pub. L. 105-261) and Section 
805 of the National Defense Authorization Act for Fiscal Year 2000.
    Paragraph (a) of the ``commercial item'' definition at FAR 2.101 is 
revised to implement Section 803(a)(2)(D) of the Strom Thurmond 
National Defense Authorization Act for Fiscal Year 1999 (Pub. L. 105-
261). Section 803(a)(2)(D) requires that the FAR be revised to provide 
specific guidance on the meaning and appropriate application of the 
term ``purposes other than Government purposes'' in the definition of 
``commercial item'' at 41 U.S.C. 403(12)(A). This proposed language 
revises and supercedes a proposed rule, published in the Federal 
Register at 64 FR 40694, July 27, 1999, under FAR case 98-304, that was 
issued to implement Section 803(a)(2)(D). Eight public comments were 
received in response to the July 27, 1999, proposed rule. A majority of 
the public comments were substantive and had a common theme. In 
general, the public believed that the proposed rule exceeded the scope 
of the statute, introduced ambiguous terms, created new criteria, and 
narrowed the definition of a commercial item. This proposed rule 
addresses those concerns by incorporating language from FASA into the 
definition.
    Paragraph (e) of the commercial item definition at FAR 2.101 has 
been revised to implement Section 805 of the National Defense 
Authorization Act for Fiscal Year 2000 (Pub. L. 106-65), (Clarification 
of Definition of Commercial Items with Respect to Associated Services). 
Section 805 clarifies that services ancillary to a commercial item, 
such as installation, maintenance, repair, training, and other support 
services, are considered a commercial service, regardless of whether 
the service is provided by the same vendor or at the same time as the 
item, if the service is provided contemporaneously to the general 
public under similar terms and conditions. The FAR clause at 52.202-1, 
Definitions, is similarly revised to make the new definition available 
to contractors and subcontractors.
    Paragraph (f) of the ``commercial item'' definition at FAR 2.101 is 
revised to add definitions of ``Catalog Price'' and ``Market Price'' to 
this rule to provide guidance for identifying services that may be 
acquired under FAR Part 12.
    Guidance is added at FAR 12.209 to help make contracting officers 
aware of customary commercial terms and conditions related to the 
determination of price reasonableness when pricing commercial items. 
Additionally, the rule proposes to amend language in Part 46 to 
reconcile it with the coverage regarding contractor liability for 
property loss or damage with paragraph (p) in the clause at 52.212-4, 
and to amend the clause at 52.212-4(p) to conform to commercial 
practice (i.e., deleting the phrase ``or implied'' permits industry to 
take advantage of the latitude provided by the Uniform Commercial Code 
which allows sellers to exclude the application of an implied warranty 
through the terms of an express warranty).
    This is not a significant regulatory action and, therefore, was not 
subject to review under Section 6(b) of Executive Order 12866, 
Regulatory Planning and Review, dated September 30, 1993. This rule is 
not a major rule under 5 U.S.C. 804.

B. Regulatory Flexibility Act

    The FAR Council does not expect this proposed rule to have a 
significant economic impact on a substantial number of small entities 
within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et 
seq., because changes made by the rule will primarily affect large 
businesses that are more likely than small businesses to have separate 
workforces for Federal contracts and to be ultimately liable for 
consequential damages. It clarifies the definition of commercial item 
to more closely parallel the statutory language and provide guidance 
for identifying services that may be acquired under FAR Part 12. The 
rule further conforms language regarding contractor liability to

[[Page 52285]]

commercial practice. An Initial Regulatory Flexibility Analysis has, 
therefore, not been performed. We invite comments from small businesses 
and other interested parties. The Councils will consider comments from 
small entities concerning the affected FAR parts 2, 12, 46, and 52 in 
accordance with 5 U.S.C. 610. Interested parties must submit such 
comments separately and should cite 5 U.S.C. 601, et seq. (FAR case 
2000-303), in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the proposed 
changes to the FAR do not impose information collection requirements 
that require the approval of the Office of Management and Budget under 
44 U.S.C. 3501, et seq.

List of Subjects in 48 CFR Parts 2, 12, 46, and 52

    Government procurement.

Jeremy F. Olson,
Acting Director, Federal Acquisition Policy Division.
    Therefore, DoD, GSA, and NASA propose that 48 CFR parts 2, 12, 46, 
and 52 be amended as set forth below:
    1. The authority citation for 48 CFR parts, 2, 12, 46, and 52 
continues to read as follows:

    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

PART 2--DEFINITIONS OF WORDS AND TERMS

    2. In section 2.101, amend the definition ``Commercial item'' by 
revising paragraphs (a), (e), and (f) to read as follows:


2.101  Definitions.

* * * * *
    Commercial item means--
    (a) 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 that--
    (1) Has been sold, leased, or licensed to the general public; or
    (2) Has been offered for sale, lease, or license to the general 
public;
    Purposes other than governmental purposes are those that are not 
unique to a government.
* * * * *
    (e) Installation services, maintenance services, repair services, 
training services, and other services if--
    (1) Such services are procured for support of an item referred to 
in paragraphs (a), (b), (c), or (d) of this definition, regardless of 
whether such services are provided by the same source or at the same 
time as the item; and
    (2) 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;
    (f) 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 under 
standard commercial terms and conditions.
    This does not include services that are sold based on hourly rates 
without a catalog or market price for a specific service performed. For 
purposes of these services--
    (1) Catalog Price means a price included in a catalog, price list, 
schedule, or other form that is regularly maintained by the 
manufacturer or vendor, is either published or otherwise available for 
inspection by customers, and states prices at which sales are 
currently, or were last, made to a significant number of buyers 
constituting the general public; and
    (2) Market Prices mean current prices that are established in the 
course of ordinary trade between buyers and sellers free to bargain and 
that can be substantiated through competition or from sources 
independent of the offerors.
* * * * *

PART 12--ACQUISITION OF COMMERCIAL ITEMS

    3. Revise section 12.209 to read as follows:


12.209  Determination of price reasonableness.

    While the contracting officer must establish price reasonableness 
in accordance with 13.106-3, 14.408-2, or subpart 15.4, as applicable, 
when contracting by negotiation, the contracting officer should be 
aware of customary commercial terms and conditions when pricing 
commercial items. Commercial item prices are affected by factors that 
include, but are not limited to, speed of delivery, length and extent 
of warranty, limitations of seller's liability, quantities ordered, 
length of the performance period, and specific performance 
requirements. The contracting officer must ensure that contract terms, 
conditions and prices are commensurate with the Government's need.

PART 46--QUALITY ASSURANCE

    4. In section 46.801, revise the last sentence of paragraph (a) to 
read as follows:


46.801  Applicability.

    (a) * * * This subpart does not apply to commercial items.
* * * * *


46.804  [Reserved]

    5. Remove and reserve section 46.804.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    6. In section 52.202-1, revise the date of the clause and 
paragraphs (c)(1), (c)(5), and (c)(6) to read as follows:

[[Page 52286]]

52.202-1  Definitions.

* * * * *

Definitions (Date)

* * * * *
    (c) Commercial item means--
    (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 that--
    (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:
    Purposes other than governmental purposes are those that are not 
unique to a government.
* * * * *
    (5) 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 paragraphs (c)(1), (2), (3), or (4) of this definition, 
regardless of whether such services are provided by the same source 
or at the same time as the item; 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;
    (6) 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 
under standard commercial terms and conditions. This does not 
include services that we sold based on hourly rates without a 
catalog or market price for a specific service performed. For 
purposes of these services--
    (i) Catalog Price means a price included in a catalog, price 
list, schedule, or other form that is regularly maintained by the 
manufacturer or vendor, is either published or otherwise available 
for inspection by customers, and states prices at which sales are 
currently, or were last, made to a significant number of buyers 
constituting the general public.
    (ii) Market Prices mean current prices that are established in 
the course of ordinary trade between buyers and sellers free to 
bargain and that can be substantiated through competition or from 
sources independent of the offerors.

* * * * *


52.212-4  [Amended]

    7. In section 52.212-4, revise the date of the clause and remove 
``or implied'' in paragraph (p).

[FR Doc. 00-21855 Filed 8-25-00; 8:45 am]
BILLING CODE 6820-EP-U