[Federal Register Volume 83, Number 21 (Wednesday, January 31, 2018)]
[Rules and Regulations]
[Pages 4431-4447]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-01781]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Parts 202, 212, 215, 234, 239, and 252
[Docket DARS-2016-0028]
RIN 0750-AJ01
Defense Federal Acquisition Regulation Supplement: Procurement of
Commercial Items (DFARS Case 2016-D006)
AGENCY: Defense Acquisition Regulations System, Department of Defense
(DoD).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: DoD is issuing a final rule amending the Defense Federal
Acquisition Regulation Supplement (DFARS) to implement sections of the
National Defense Authorization Acts for Fiscal Years 2013, 2016, and
2018 relating to commercial item acquisitions.
DATES: Effective January 31, 2018.
FOR FURTHER INFORMATION CONTACT: Mr. Mark Gomersall, telephone 571-372-
6176.
SUPPLEMENTARY INFORMATION:
I. Background
DoD published a proposed rule in the Federal Register at 81 FR
53101 on August 11, 2016, to amend the DFARS to implement the
requirements of sections 851 through 853 and 855 through 857 of the
National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2016
(Pub. L. 114-92, enacted November 25, 2015), as well as the
requirements of section 831 of the NDAA for FY 2013 (Pub. L. 112-239,
enacted January 2, 2013). This rule provides guidance to contracting
officers for making price reasonableness determinations, promotes
consistency in making commercial item determinations, and expands
opportunities for nontraditional defense contractors to do business
with DoD.
On August 3, 2015, DoD published proposed DFARS rule 2013-D034 to
implement the requirements of section 831 of the NDAA for FY 2013 (80
FR 45918). Based on the comments received in response to that proposed
rule, and in order to implement the requirements in sections 851
through 853 and 855 through 857 of the NDAA for FY 2016, DFARS rule
2013-D034 was closed into this DFARS rule.
In addition, this final rule implements section 848 of the NDAA of
FY 2018
[[Page 4432]]
(Pub. L. 115-91, enacted December 12, 1017), which amended 10 U.S.C.
2380 regarding the content of the written determination required when
determining that the prior use of commercial procedures was
inappropriate or is no longer appropriate.
II. Discussion and Analysis
Twelve respondents submitted public comments in response to the
proposed rule. DoD reviewed the public comments in the development of
this final rule. A discussion of the comments and the changes made to
the rule as a result of those comments are provided as follows:
A. Summary of Significant Changes
1. For consistency in terminology, the word ``data'' has been
changed to ``information'' where appropriate throughout the rule.
2. The language at DFARS 212.102(a)(ii) has been revised to state
that a contracting officer may presume that a prior commercial item
determination, or a determination that overturned a prior commercial
item determination, made by a military department, a defense agency, or
another component of DoD shall serve as a determination for subsequent
procurements of such item.
3. The language at DFARS 212.102(a)(iii) on nontraditional defense
contractors was reworded for clarity.
4. The language at DFARS 212.209(b) and 215.404-1(b)(ii) was
amended to add the word ``and'' to allow contracting officers to
consider recent purchase prices paid by both the Government ``and''
commercial customers for the same or similar commercial items.
5. DFARS 215.404-1(b)(iv) and 234.7002(d)(3), have been revised
such that if the contracting officer determines that the pricing
information submitted is not sufficient to determine the reasonableness
of price, the contracting officer shall request other relevant
information to include cost data. The proposed rule directed that the
contracting officer may request other relevant information to include
cost data.
6. To expedite commercial item determinations, the provision at
DFARS 252.215-7010, paragraph (b)(1)(ii)(A) has been revised to require
offerors to provide contract numbers and if available, a Government
point of contact for items that have been previously determined to be
commercial.
7. The provision at DFARS 252.215-7010, paragraph (b)(1)(ii)(B) has
been reworded to remove the unintended offeror certification language
from the proposed rule.
8. The provision at DFARS 252.215-7010, paragraph (d) has been
reworded to require ``the minimum information necessary'' instead of
``all data'' to permit a determination that the proposed price is fair
and reasonable.
9. The proposed rule language at DFARS 252.215-7010, paragraph
(d)(3) has been removed as unnecessary, and paragraphs (d)(4) and
(d)(5) have been renumbered accordingly.
10. The language at DFARS 252.215-7010, paragraph (d)(3), formerly
paragraph (d)(4), has been reworded for clarity.
11. The DFARS provision 252.215-7013, Supplies and Services
Provided by Nontraditional Defense Contractors, has been added to
advise offerors that in accordance with 10 U.S.C. 2380a, supplies and
services provided by a nontraditional defense contractor, as defined in
DFARS 212.001, may be treated as commercial items.
B. Analysis of Public Comments
1. Agree with the rule.
Comment: Two respondents expressed support for the rule, stating
that the rule will reduce the risk of fraud, increase accountability,
and make the buying process more seamless for the military.
Response: DoD appreciates the support for this rule.
2. Audit clause.
Comment: One respondent recommended that DFARS 252.215-7010(b)(2)
mirror the entire language of Federal Acquisition Regulation (FAR)
52.215-20(a)(2) because the respondent did not believe that Congress
intended for either section 831 of the NDAA for FY 2013 or sections 851
and 853 of the NDAA for FY 2016 to expand the Government's access to
cost or profit information when commercial items are priced based on
catalog or market prices, or set by law or regulation.
Response: Section 831 of the NDAA for FY 2013 requires the
establishment of standards for determining the extent of uncertified
cost information that should be required in cases in which price
information is not adequate for evaluating the reasonableness of price.
To that extent, the rule sets forth a hierarchy of information that the
contracting officer shall require to determine the reasonableness of
the price, including other relevant information that can serve as the
basis for a price assessment. Further, section 853 requires that
contracting officers shall consider evidence provided by offerors of
recent purchase prices paid by the Government for the same or similar
commercial items in establishing price reasonableness on a subsequent
purchase if the contracting officer is satisfied that the prices
previously paid remain a valid reference for comparison after
considering the totality of other relevant factors such as the time
elapsed since the prior purchase and any differences in the quantities
purchased or applicable terms and conditions.
3. Catalog pricing provision.
Comment: Two respondents recommended removing or revising the
catalog pricing provision. The respondents recommended deleting DFARS
252.215-7010(b)(1)(ii)(B)(2) because it is not based on any provision
in the NDAA for FY 2013 or the NDAA for FY 2016, and is unclear about
what it means for ``catalog pricing'' to be ``consistent'' or ``not
consistent'' with ``all relevant sales data.'' According to the
respondent, the provision raises these unanswered questions:
(a) Does ``catalog pricing'' refer to prices shown in the catalog
in question or in the offeror's proposed pricing for the proposal?
(b) Does ``catalog pricing'' refer to prices shown in the catalog
that must be used in the pricing of all sales in order for that pricing
to be ``consistent'' with ``all relevant sales data?''
(c) Does the determination of consistency take into account whether
``catalog pricing'' is higher or lower than the pricing reflected in
``all relevant sales data''?
(d) How does the use of the term ``all relevant sales data'' in the
provision relate to the definition of the term ``relevant sales data''
in the proposed DFARS provision 252.215-7010(a)?
The respondent is concerned that contracting officers will not know
what offerors mean by these statements, which could lead to confusion
and misunderstandings.
Another respondent recommends removing the requirement in DFARS
252.215-7010 that an offeror provide an explanation as to whether their
proposed prices that are based on catalog pricing are consistent with
relevant sales data. The offeror believes this requirement constitutes
a new and unauthorized certification.
Response: The language at DFARS 252.215-7010(b)(1)(ii)(B)(2) has
been revised to remove the certification requirements. However, for a
commercial item exception, the offeror shall submit, at a minimum,
information that is adequate for evaluating the reasonableness of the
price for the acquisition, including prices at which the same item or
similar items have been sold in the commercial market. Without the
DFARS 252.215-
[[Page 4433]]
7010(b)(1)(ii)(B)(2) requirements, the contracting officer will not
have sufficient information to determine whether the price is fair and
reasonable, and will need to request additional data. The catalog must
state prices at which sales are currently, or were last made to a
significant number of buyers constituting the general public. If the
catalog pricing provided is not consistent with all relevant sales
data, the offeror must describe the differences. It does not matter
whether the catalog price is higher or lower than the proposed price.
``Relevant sales data'' means evidence provided by an offeror of sales
of the same or similar items that can be used to establish price
reasonableness taking into consideration the age, volume, and nature of
the transactions (including any related discounts, refunds, rebates,
offsets or other adjustments).
4. Collaboration on commercial item and price reasonableness
determinations.
Comment: One respondent recommended that the rule codify and
provide the opportunity for offerors to collaborate with DoD's cadre of
experts prior to a final decision by the contracting officer on
commercial item and price reasonableness determinations.
Response: DoD concurs with the statement that an open exchange of
information by both parties leads to more timely commercial item
determinations and price analysis. DoD has already issued guidance to
contracting officers to collaborate with the Defense Contract
Management Agency (DCMA) cadre of experts to assist in the timeliness
and consistency of commercial procurements. The cadre regularly engages
with offerors to obtain an understanding of proposed commercial items
and associated pricing. DCMA is also facilitating collaboration with
offerors through commercial item memorandums of agreement with
interested companies.
5. Commercial item determination.
Comment: One respondent questioned if there is no commercial market
place to establish price reasonableness and the contractor only offers
an item that is ``of a type'' customarily used by the general public
for sale, is that sufficient for the contractor to escape the Truthful
Cost or Pricing Data requirement? The respondent further questioned
what constitutes an offer, and whether an advertisement on a website is
sufficient? The respondent suggested that the rule define an ``offer''
to incorporate a bona fide offer in a known market where competitive
forces exist.
Response: DoD considers commercial item determinations separately
from price reasonableness determinations. Commercial item
determinations are not dependent upon the offered price of an item. The
FAR 2.101 definition of ``commercial item'' does not require that the
identical proposed item must be sold or offered for sale to the general
public. When deciding whether to grant a commercial item exception to
the requirement for certified cost or pricing data, FAR 2.101 permits
contracting officers to consider items that are ``of a type''--i.e.,
items that are similar to those customarily used by and sold or offered
for sale to the general public. While pricing based on market prices is
the preferred method to establish a fair and reasonable price, a
commercial marketplace is not required for the item to meet the
definition of a commercial item. This embraces DoD's broader view of
the types of items that may qualify as commercial items and gives
consideration to products and services offered by both traditional and
nontraditional defense contractors. Contracting officers must use
business judgement and consider all relevant factors when evaluating
evidence of offers for sale, which may include advertisements on
websites, sales orders, quotes, or other information that demonstrate
that the similar item has been offered for sale in the commercial
marketplace.
Comment: One respondent stated that the final rule should permit
commercial item determinations in a timely and efficient manner with
minimal deliberations. The respondent further suggested that any
further guidance that might be issued in support of commercial item
determinations after the final rule is published would greatly improve
its chances of succeeding and facilitate the desired results of the
final rule.
Response: Timely and consistent commercial item determinations are
the standard for DoD. The proposed rule promotes timeliness and
efficiency by providing that contracting officers may presume that a
prior commercial item determination made by a military department,
defense agency, or another component of DoD shall serve as a
determination for subsequent procurements. As such, DoD has instructed
contracting officers to adopt the practice of recognizing prior known
determinations as valid. To further assist in the timeliness and
consistency of commercial procurements, DoD has established a cadre of
experts within DCMA to provide advice to contracting officers. DCMA is
also streamlining the exchange of information for the evaluation and
pricing of commercial items through ``memorandums of agreement'' with
interested companies. DoD will finalize the Commercial Item Handbook to
provide further guidance to contracting officers.
6. Conflating pricing with commercial item exception.
Comment: Two respondents recommended that commercial item
determinations for exceptions from certified cost or pricing data be
separated from price reasonableness determinations. One respondent
recommended that DFARS 252.215-70XX(b)(1)(ii) be amended by striking
the phrase ``For a commercial item exception'' and replacing it with
the phrase ``For items determined to be commercial'' to ensure that the
commercial item determination and the price reasonableness
determination are kept separate.
Another respondent recommended changing DFARS 252.215-
7010(b)(1)(ii) by separating the initial commercial item determination
procedure from concurrent submission of any cost or pricing data that
may be needed for a subsequent and independent evaluation of price
reasonableness. This new clause creates several negative impacts when
requiring subcontractors and/or prime contractors initial upfront
submission of all past sales because:
(a) It excludes any use of FAR 2.101 commercial item definition of
``offered for sale'' because there is no sales data yet for ``offered
for sale'' commercial items.
(b) It forces them to concurrently meet both the commercial item
determination and price reasonableness data submission criteria, which
will invite contracting officers to use the submitted cost or pricing
data to actually determine initial commerciality, rather than using one
or more of the current FAR 2.101 definitions of commercial items.
(c) It is a direct conflict with current FAR 15.402(a)(2) and
(a)(3) for obtaining cost or pricing data from subcontractors and/or
prime contractors to determine price reasonableness. The proposed rule
directly conflicts with both newly proposed DFARS 212.209 and FAR
15.402 provisions.
Another respondent recommended modifying proposed DFARS 252.215-
7010(b)(1)(ii) to separate a commercial item determination from a price
reasonableness determination of a commercial item. Although this
language mirrors FAR 52.215-20(a)(1)(ii), both elements are equally
important to the Government's procurement of commercial items, but only
the commercial item determination
[[Page 4434]]
is necessary for an exception to submitting certified cost or pricing
data. Pricing information is not solely determinative of whether a
product or service is a ``commercial item,'' yet that is the only
information the proposed language requires. DoD should make
improvements to FAR 52.215-20 with supplemental guidance, which not
only implements the requirements of section 831 of the NDAA for FY 2013
and sections 851, 852, and 855 of the NDAA for FY 2016, but also
clarifies important distinctions that are critical to DoD's commercial
item acquisition. This distinction was maintained by Congress, for a
commercial item determination to be made and only then for price
reasonableness to be assessed. The respondent asserted that commercial
items determinations should be focused on the Government's market
research and the commercial item definition in FAR 2.101, and cost or
pricing data required for price reasonableness determinations should be
uncertified when required by the clause to support the Government's
price reasonableness determination.
Response: DoD considers commercial item determinations separately
from price reasonableness determinations, however, offerors are still
expected to provide adequate supporting data with their proposal
submissions in order to avoid unnecessary delays in contract award. It
would not be in the best interest of DoD or industry to delay
acquisitions by establishing a formal two-step sequential proposal
process of first requiring supporting information only for the purpose
of making a commercial item determination, and then following up with a
second request for information in order to make a determination of
price reasonableness. In accordance with DFARS 252.215-7010, and
consistent with the existing requirements of FAR 52.215-20, where
commercial items are proposed in response to a solicitation, the
offeror is required to concurrently submit information that is adequate
for evaluating the reasonableness of the proposed price.
7. Congressional comments on previous rule.
Comment: One respondent indicated Congressman Derek Kilmer (R-WA),
wrote a letter to the Director of Defense Pricing (March 7, 2014) and
voiced his concerned with the application of the term ``of a type''
that was used to determine what is or is not a commercial item or
service in certain cases. The Congressman addressed his concern with
DoD's attempts to restrict ``offered for sale'' and ``of a type''
commercial item procurements, and its negative impact on the innovative
defense community and the Government's defense mission. A contracting
officer's commerciality determination may have long-ranging effects
that impact the company's interest in investing private capital into
innovation or participating in the Government marketplace. These are
most likely to be dual-use and second-tier suppliers that tend to be
among our most innovative and that are willing to invest their own
money in development.
Another respondent indicated that Senator John McCain (R-AZ) wrote
a letter to the Secretary of Defense (September 8, 2015) indicating he
was deeply concerned by a new proposed DFARS CASE 2013-D034 and its
ability to effectively preclude any significant participation by
commercial firms in defense programs. The Senate and the House have
included provisions in the NDAA for FY 2016 to entice new firms into
the defense market and retain them once there. The Senator stated that
the rule would deter privately-held start-up companies from offering
their products and services to DoD, because it would impose cumbersome
and excessive bureaucratic requirements on these firms and require
firms to build entirely new accounting systems. The respondent
indicated the current rule in question does not succeed in removing the
accumulated detritus of law, process, and regulation sought by Senator
McCain.
Response: DoD received comments on proposed DFARS rule 2013-D034
from many respondents, including members of Congress. Based on the
comments received in response to that proposed rule, and in order to
implement the requirements in sections 851 through 853 and 855 through
857 of the NDAA for FY 2016, DFARS rule 2013-D034 was closed into this
DFARS rule, 2016-D006.
8. Contractual limitations on information necessary to support a
determination of fair and reasonable Pricing.
Comment: One respondent recommended deleting DFARS
215.402(a)(i)(B), because the language does not appear to be based on
statutory authority cited under section 831 of the NDAA for FY 2013.
The use of terms ``any data'' and ``necessary supporting information''
are unclear and creates confusion regarding the scope of the
information the Government would require.
Another respondent recommended adding language to DFARS
215.402(a)(i)(B) to state that any provision that limits the
Government's ability to obtain any information that may be necessary to
support a determination of fair and reasonable pricing is void.
Response: The language at 215.402(a)(i)(B) is intended to prohibit
DoD contracting officers from agreeing to contract terms that preclude
obtaining supporting information that may be necessary to support a
determination of fair and reasonable pricing. For clarification, the
language has been revised to state that the contracting officer shall
not limit the Government's ability to obtain ``information . . . '' in
lieu of ``any data,'' and is sufficient to instruct contracting
officers not to agree to any such limitations.
9. Converting commercial to noncommercial.
Comment: One respondent recommended changing DFARS 212.7001(a)
allowing contracting officers to either consider finding errors ``or''
cost savings when converting from a commercial acquisition to a
noncommercial acquisition. The current language reads ``and.'' Making
this change will allow Government officials to convert the procurement
when it is deemed appropriate.
Response: The language at DFARS 212.7001(a)(1)(i) and (ii) is in
accordance with section 856 of the NDAA for FY 2016 and as such is
unchanged.
10. Definition of ``commercial item''.
Comment: One respondent supported narrowing the definition of a
``commercial item'' to mean goods or services that are actually sold to
the general public in like quantities. This change would be a huge
improvement over the current definition, which includes goods or
services ``of a type'' that are merely ``offered'' for sale or lease.
Response: The definition of ``commercial item'' is not revised
under this rule since the definition is set forth in 41 U.S.C. 103,
which defines ``commercial item'', in part, as an item, other than real
property, that--
(a) Is of a type customarily used by the general public or by
nongovernmental entities for purposes other than governmental purposes;
and
(b) Has been sold, leased, or licensed, or offered for sale, lease,
or license, to the general public.
11. Definition of ``market research''.
Comment: One respondent recommended amending the definition of
``market research'' to provide additional guidance to contracting
officers to focus more directly on pricing and adequate evaluation of
the fairness and reasonableness of an offeror's proposed price. A
critical
[[Page 4435]]
component of market research--particularly for determining fair and
reasonable pricing--is reviewing and understanding pricing conditions
and related considerations in the relevant industry and marketplace.
The respondent proposed adding the following into the definition of
``market research'':
(a) Include review of previous prices of the items.
(b) Considering offeror's net profit margins.
(c) Review and identify previous contract types.
(d) Other contract terms that may have affected differences in
pricing (i.e., warranties, financing, discounts).
Response: The recommended revisions are not necessary. Language
within the proposed rule and sections of FAR part 10 addresses these
factors and does not require change. Specific to listed factor (a), the
proposed language at DFARS 215.404-1 provides a hierarchy to follow
when determining what information is necessary to determine the
reasonableness of price. Included in this hierarchy is a review of
information on prices paid. Specific to listed factor (b), the net
profit margins would require access to cost data and including this as
a factor would encourage contracting officers to seek cost data before
considering DFARS 212.209(c) and the order of techniques listed in
DFARS 215.404-1. Specific to listed factors (c) and (d), FAR
10.002(b)(1)(iii) includes reference to customary practices, including
warranty, financing, discounts, and contract types.
12. Definition of relevant sales data.
Comment: One respondent supported the concept that contracting
officers should review the age, volume, and nature of transactions when
considering price reasonableness information (DFARS 252.215-7010).
Response: Section 831 of the NDAA for FY 2013 requires standards to
be established for determining whether information on prices at which
the same or similar items have previously been sold is adequate for
evaluating the reasonableness of price. DFARS 215.404-1, Proposal
Analysis Techniques, implements the requirements of section 831 by
providing guidance to contracting officers to consider the totality of
relevant factors when evaluating the reasonableness of price, including
the time elapsed since the prior purchase, any differences in the
quantities purchased, and applicable terms and conditions.
13. Federal Supply Schedule contracts.
Comment: Two respondents recommended revising the DFARS to
recognize Federal Supply Schedule (FSS) contracts as commercial. One
respondent recommended deleting the requirement at DFARS 252.215-
7010(b)(1)(ii)(D) that an offeror must provide proof of a commercial
item exception when an item is sold via an active FSS contract, because
it is redundant and unsupported by statue. By the mere fact that items
are included on FSS contracts, means that they have been determined to
qualify as commercial items (see CGI Fed. Inc. v. United States, 779
F.3d 1346, 1353 (Fed. Cir. 2015)). In addition, the proposed rule
disregards the prior work of the General Services Administration FSS
contracting officers, and provisions of the NDAA do not require proof
that a commercial item exemption has been granted for a schedule item.
Response: Section 851 of the NDAA for FY 2016 provided the
authority for DoD contracting officers to presume that a prior
commercial item determination made by a military department, a defense
agency, or another component of the Department of Defense shall serve
as a determination for subsequent procurements of such item. This does
not preclude contracting officers from applying a commercial item
exception when an item is sold via an active FSS contract. However,
this statutory language does not mandate that DoD contracting officers
apply the same presumptions to prior commercial item determinations
made by non-DoD agencies. Therefore, the language at DFARS 252.215-
7010(b)(1)(ii)(D) remains unchanged.
14. Format for submission of data.
Comment: One respondent recommended revising the language that
requires the offeror to provide data to the contracting officer in a
format regularly maintained in the offeror's business operations by
replacing the word ``operations'' with the word ``systems''.
Response: Section 831 of the NDAA for FY 2013 requires that
guidance be established to ensure that in cases in which such
uncertified cost information is required, the information shall be
provided in the form in which it is regularly maintained by the offeror
in its business operations. The language included in the rule is
consistent with the language in section 831 of the NDAA for FY 2013.
15. ``Of a type'' items.
Comment: One respondent indicated that language in the proposed
rule Federal Register notice (Section II.B., Analysis of Public
Comments, on DFARS Rule 2013-D034), at Comment 3, asserts that
``Regulations for CIDs [commercial item determinations] for `of a type'
. . . are unchanged by this rule'' is not entirely correct. Since it's
a fact that the ``of a type'' commercial item category is the most
widely used designation by innovative subcontractors, then it is also a
fact that the new DFARS requirement for ``concurrent'' productions of
cost or pricing data with a commercial item determination application
will impact that class of subcontracted items the most. The proposed
rule seems to be a thinly disguised major reversal of congressionally
mandated direction in 2012 for DoD to procure more commercial items,
especially ``of a type'' items.
Another respondent suggested that the rule clarify that for an ``of
a type'' item to meet the definition of a commercial item (excluding
modifications and services) there should be a two prong test: (1) The
item has to be of a type that customarily used by the general public
and (2) the item itself has to have been sold (leased or licensed) or
offered to the general public.
Response: The language of this rule does not revise the definition
of ``commercial item'' in FAR part 2, nor alter the requirements for
commercial item determinations for ``of a type'' items. As stated in
the response to comment 6 herein, DoD considers commercial item
determinations separately from price reasonableness determinations.
However, offerors are still expected to provide adequate supporting
data with their proposal submissions in order to avoid unnecessary
delays in contract award.
16. Major systems acquisition.
Comment: One respondent suggested the proposed rule language for
major system acquisitions at DFARS 234.7002 incorporates proposal
analysis techniques under DFARS 215.404-1, and provides that only a
contracting officer may determine that a ``subsystem, component or
spare part'' is a commercial item for a major weapon system. This same
DFARS requirement first imposed in 2015, squarely conflicts with the
older pragmatic DFARS policy requirement in DFARS 244.402 that mandates
that only prime contractors ``shall determine whether a particular
subcontract item meets the definition a commercial item.'' This will
not alleviate the inevitable log jam of subcontract commercial item
applications on major weapons.
Response: This is a statutory requirement under 10 U.S.C.
2379(b)(2). DFARS 244.402 does require contractors to determinde
whether a particular subcontract item meets the definition of
[[Page 4436]]
commercial item. However, it explicitly states that the requirement
does not affect the contracting officer's responsibilities for
determinations made under FAR 15.403-1(c)(3) whereby if the contracting
officer determines than an item is not commercial and no other
exception or waiver applies, then the contracting officer shall require
the submission of certified cost or pricing data. This authority
applies to prime contracts and subcontracts.
17. Market prices.
Comment: One respondent expressed concern that the definition of
``market prices'' focuses on ``current prices.'' The proposed
definition could be interpreted by contracting officers to limit market
prices to only those prices that have just been agreed to by a
customer, and in extreme cases, only prices that are less than a few
days old. Whether a price is ``current enough'' to be relevant varies
based on many factors that are best addressed through guidance on age
of data rather than within the definition of market prices. The
respondent pointed out that section 853 of the NDAA for FY 2016 uses
the term ``recent'' in lieu of the term ``current.'' The difference
between ``recent'' and ``current'' is significant. ``Recent'' is having
happened not long ago whereas ``current'' means in the present,
contemporaneous, or being used or done now.
Response: Recent prices paid can be used in the determination of
price reasonableness. ``Market prices'' means 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. At any point in time, the
market price would be the current price.
Comment: One respondent stated that for an item to be exempt from
submitting certified cost or pricing data, a commercial market place
should exist that allows for establishing price reasonableness.
Excluding this requirement from the definition of a commercial item has
created a policy for which proposed regulations have tried and failed
to work around.
Response: This rule does not revise the established FAR definition
of a commercial item which, in part, specifically identifies an item
that ``Has been offered for sale, lease, or license to the general
public''. Section 831 of the NDAA for FY 2013 requires that standards
be established for determining the extent of uncertified cost
information that should be required in cases in which price information
is not adequate for evaluating the reasonableness of price. While
pricing based on market prices is the preferred method to establish a
fair and reasonable price, a commercial marketplace is not required for
the item to meet the definition of a commercial item. Furthermore, the
rule sets forth a hierarchy of information that the contracting officer
shall require to determine the reasonableness of the price, including
other relevant information that can serve as the basis for a price
assessment.
18. Market research.
Comment: One respondent recommends removing ``where appropriate''
from DFARS 212.209(a) because it injects the uncertainty that market
research is conditional. Understanding the market place, even if there
is limited research, is critical for commercial item determinations.
A second respondent recommended including language in the DFARS to
require contracting officers to conduct market research prior to
soliciting information from offerors for purposes of price
reasonableness determinations of commercial items, however, another
respondent opposes the use of market research to determine price
reasonableness, when obtaining offeror cost or pricing data would be
more time efficient and germane.
One respondent recommends that the rule specify that market
research be conducted before the solicitation in order to inform the
contracting officer whether a solicitation can be accommodated under
FAR part 12.
Response: DoD agrees that understanding the market place, even if
there is limited research, is critical for commercial item
determinations. DoD disagrees that ``where appropriate'' indicates that
it is conditional, but simply if it is appropriate at that point in the
acquisition process. Market research also informs decisions at several
other points in the requirements development and acquisition process,
and is one of several techniques contracting officers may use to reach
a conclusion regarding price reasonableness.
Market research is conducted at several points in the acquisition
process, and that is adequately covered in FAR 10.001(a)(2) as well as
in this rule. Market research is first conducted by the Requirements
Community in developing requirements. The Acquisition Community builds
upon initial market research in development of the acquisition strategy
and drafting of the solicitation. However, additional focused market
research is again conducted during the pricing and proposal analysis
phase.
19. Modified and similar items.
Comment: One respondent stated that under FAR 15.403-1, if a minor
modification of a commercial item exceeds the greater of the threshold
for obtaining certified cost or pricing data or 5 percent of the total
price of the contract, certified cost or pricing data are required. The
respondent questioned whether equivalent requirements apply to price
reasonableness assessments based on a ``similar'' item. The respondent
believes that conceptually it seems it should. The respondent further
questioned if there is a difference between a ``similar'' item and an
item that has been modified, and whether a ``similar'' item can be an
unmodified item of the item being purchased.
Another respondent suggested that the rule define a ``similar''
item as an item that is so sufficiently comparable in technical and
physical characteristics that the differences in price due to those
differences is not material to the assessment of price reasonableness.
The respondent further stated that if significant price differences are
allowed for similar items, there seems no meaningful way to distinguish
similar items from modified items.
One respondent stated that in practice one of the biggest obstacles
to determine price reasonableness on commercial items is the physical
differences between the item being acquired and the item for which
sales data is provided. It is difficult for the Government or
contractor personnel to assess the price impact, with any level of
fidelity, of the physical differences without associated price or cost
data. Parametric models typically generate values with a gross level of
precision, especially when using data from sources external to the
manufacturer. The respondent suggested that the rule address data
required for modifications of an item to include the technical or
physical differences and the associated price or cost impact of each.
The respondent further suggested that the rule address data required
for ``similar'' items to include the technical or physical differences
and the associated price or cost impact of each; including the data
requirements for subcontractors in 252.215-7010, Requirements for
Certified Cost or Pricing Data and Data Other Than Certified Cost or
Pricing Data. This would be required to validate that the physical
differences do not have a price impact.
Response: The rule provides the ability for contracting officers to
obtain necessary data to determine price reasonableness. Consistent
with FAR 15.403-1(b)(3), contracting officers shall not request
certified cost and pricing data when a commercial item is being
[[Page 4437]]
acquired, but may require data other than certified cost and pricing
data as defined in FAR 2.101 to support a determination of a fair and
reasonable price. The rule does not define ``similar items'' for the
purposes of determining price reasonableness, but authorizes
contracting officers, when appropriate, to require the contractor to
supply information that is sufficient to determine the reasonableness
of price, including information showing the similar item is comparable
to the item being purchased to be used as a comparison in price
reasonableness. Since no two contract actions are exactly the same, the
rule provides a broad framework for data requirements. Contracting
officers must use business judgement and consider all relevant factors
including the similarity of items when making comparisons for the
purposes of determining price reasonableness. Further information on
the comparison of same or similar items may be found at FAR 15.404-
1(b)(2)(ii).
20. Non-governmental entities.
Comment: One respondent recommended adding the term ``non-
governmental entities'' into the rule where data is considered based on
sales to the Government and commercial customers.
Response: The language of this rule is consistent with the
preexisting terminology in the DFARS.
21. Nontraditional defense contractors.
Comment: One respondent recommended elimination of the permissive
nature of this authority. The respondent further recommended deletion
of the language stating that the use of commercial item procedures
under this authority does not mean the item is commercial, stating that
this additional direction adds uncertainty for nontraditional
contractors for renewal contracts and could adversely impact their
initial decision to sell to DoD.
Additionally, two respondents recommended clarifying that
``subcontractors'' be added to the definition of nontraditional defense
contractors so that items provided by a subcontractor that meet the
definition of a ``nontraditional defense contractor'' may be treated as
commercial items.
Response: Section 857 amended 10 U.S.C 2380a to provide DoD with
the permissive authority to treat items and services provided by
nontraditional defense contractors as commercial items. This authority
was neither mandatory nor was it extended to prime contractor
commercial item determinations for subcontracted items and services.
Comment: One respondent recommended broadening the statement of
intent in DFARS 212.102(a)(iv) to state: ``This permissive authority is
intended to enhance defense innovation and investment, enable DoD to
acquire items that otherwise might not have been available, and create
incentives for qualified firms to do business with DoD.''
The respondent further recommended an editorial revision to state
``. . . does not require a commercial item determination . . .'' in
lieu of ``. . . does not constitute a requirement for a commercial item
determination. . . .''
Response: DoD concurs with the recommended revisions and has
revised DFARS 212.102(a)(iii) accordingly. In addition, the DFARS
provision 252.215-7013, Supplies and Services Provided by
Nontraditional Defense Contractors, has been added to advise offerors
that in accordance with 10 U.S.C. 2380a, supplies and services provided
by a nontraditional defense contractor, as defined in DFARS 212.001,
may be treated as commercial items.
22. Order of preference for determining price reasonableness.
Comment: One respondent recommended changing DFARS 215.404-1 to
clearly conform to the order of preference in FAR 15.402(a) in
determining the sources, order and type of data needed to adequately
determine price reasonableness. The respondent asserts that listing
``market research'' as first in the order of preference gives the
contracting officer unintended discretion to determine whether any
market research is even appropriate. The respondent stated that the
proposed rule side-steps the FAR 15.402 cost or pricing threshold and
data exceptions as well as the requirement to rely on data available
within the Government before going through market research, and
demands, at a minimum up-front, information on prices at which the same
or similar items have been sold in the commercial market (via DFARS
Clause 252.215-7010).
Response: This rule establishes DFARS language to supplement the
requirements of the FAR, including the requirements at FAR 15.402. It
does not establish a different order of preference in determining the
sources, order, and type of data needed to adequately determine price
reasonableness. Per FAR 10.001, agencies must conduct market research
(appropriate to the circumstances) before soliciting offers for
acquisitions with an estimated value in excess of the simplified
acquisition threshold.
23. Price analysis.
Comment: One respondent indicated the proposed rule would require
prime contractors to obtain whatever information necessary from
subcontractors to support concurrent commercial item determinations and
price realism analyses. This requirement will more likely create
disputes between prime contractors and subcontractors regarding the
types of information necessary to support a subcontractor's commercial
item assertion. Further, the respondent expressed concern that the rule
gives DoD the subjective ability to effectively challenge the prime
contractor's costs incurred for commercial item subcontracts under
cost-type contracts, and provides fodder for DoD to challenge the
adequacy of a prime contractor's purchasing system.
Response: The standards for what information is necessary to make
commercial item determinations and determinations of price
reasonableness should not be relaxed for subcontractors. Prime
contractors are responsible for exercising the same due diligence as
DoD contracting officers in making subcontractor commercial item
determinations and evaluating their subcontractors' price
reasonableness.
Comment: One respondent recommended changing DFARS 215.404-1(b)(ii)
to allow contracting officers to consider recent purchase prices paid
by both the Government ``and'' commercial customers for the same or
similar commercial items. The current language reads ``or''. Making
this change can give Government officials access to both, which can
ensure the Government is obtaining the best prices.
Response: DoD concurs with the respondent's recommendation and has
incorporated this revision in the final rule in DFARS 212.209(b) and
215.404-1(b)(ii).
24. Price analysis techniques.
Comment: One respondent suggested expanding DFARS 212.209 and
215.404-1(b)(ii) to reference FAR 15.404 that lists the various price
analysis techniques and procedures to ensure a fair and reasonable
price.
Response: It is not necessary to reiterate the various price
analysis techniques and procedures in FAR 15.404 in this rule.
25. Price reasonableness determinations.
Comment: One respondent recommended that DFARS 252.215-7010(d) be
revised to require only the minimum data necessary to support a
determination that the proposed price is fair and reasonable instead of
requiring all data necessary to support such a determination.
[[Page 4438]]
Response: To ensure contracting officers request only the data
necessary to permit a determination that the proposed price is fair and
reasonable, the language has been revised to state ``the minimum
information'' instead of ``all data.'' However, this does not relieve
the requirement that offerors submit minimum essential information
necessary to determine that the proposed price is fair and reasonable.
Comment: One respondent recommended changing DFARS 212.209(d),
215.404-1(b)(iv), and 234.7002(d)(3) to state the contracting officer
``shall request'' the offeror to submit other relevant information,
including uncertified cost data instead of the current language ``may
request.'' This change clears up confusion, especially when contractors
refuse to turn over cost data to DoD. Since the proposed rule limits
DoD's access to uncertified cost data to that which is regularly
maintained by the offerors in its business operations, there should be
no additional burden on contractors.
Response: DoD concurs that DFARS 215.404-1(b)(iv) and
234.7002(d)(3) should be changed to ``shall'' in accordance with the
language in the NDAA for FY 2016.
26. Prior commercial item determination.
Comment: One respondent recommended adding the requirement under
DFARS 212.102 that a prior commercial item determination will remain if
the contracting activity fails to provide a written explanation of the
basis for the revision within the 30 day review period.
Response: This rule will not impose such a time constraint on
commercial item determinations.
Comment: Two respondents recommended that a prior commercial item
determination made by a prime contractor shall serve as a determination
for subsequent procurements of such item. One respondent recommended
adding to DFARS 212.102(a)(iii)(A) that the contracting officer shall
``also'' presume that a prior commercial item determination made by a
prime contractor for a subcontracted item (pursuant to the mandate of
DFARS 244.402(a) Policy Requirements), shall serve as a determination
for subsequent procurements of such subcontracted item either by the
prime contractor or directly by the Government as a spare part.
Three respondents recommended further consistency and uniformity in
the acquisition process by allowing the contracting officer to consider
prior commercial items determinations made by ``any'' federal
department or agency, including civilian agencies, departments and
components not only DoD Agencies, or another component of DoD as stated
under 212.102(a)(iii). The proposed provisions implement and are
consistent with 10 U.S.C. 2306(a)(b)(4), however, this recommendation
is not prohibited by section 851 of the NDAA for FY 2016.
Response: 10 U.S.C. 2306a(b)(4)(A) states that for purposes of
applying the commercial item exception under paragraph (1)(B) to the
required submission of certified cost or pricing data, the contracting
officer may presume that a prior commercial item determination made by
a military department, a defense agency, or another component of DoD
shall serve as a determination for subsequent procurements of such
item. This statutory language does not extend this authority to prior
determinations made by prime contractors or civilian agencies.
Comment: One respondent recommended adding a DFARS provision that
clearly separates commercial item determinations of ``end items/
weapons'' by the contracting officer from commercial item
determinations by prime contractors of subcontractor subsystems and
components. This addition will streamline commercial item procurements.
Response: This rule does not alter prime contractors'
responsibility for making subcontractor commercial item determinations
and evaluating their subcontractors' price reasonableness, regardless
of whether the end item has or has not been determined to be a
commercial item.
Comment: One respondent suggested DFARS 212.102(a)(iii)(A) can lock
DoD into buying items that are no longer commercial, and that requiring
commercial item determinations as listed under DFARS 212.102(a)(iii)(B)
and (C) can slow down the process by taking up to 30 days.
Response: DoD contracting officers remain responsible for adhering
to the definition of commercial items set forth in 41 U.S.C. 103 and
applying professional judgement in making commercial item
determinations as expeditiously as possible. To that end, DoD has stood
up a DCMA cadre of experts to assist contracting officers in making
commercial item determinations.
27. Prior commercial sales.
Comment: One respondent recommended that the rule be revised to
permit contracting officers to accept prior FAR part 12 contract
numbers from the offeror to demonstrate prior commercial item
determinations.
Response: Contracting officers must validate a previous commercial
item determination and document the file appropriately. DoD agrees with
the respondent that the identification of contract numbers is
beneficial. In accordance with DFARS 252.215-7010, for items previously
determined to be commercial, offerors are required to identify the
contract and military department, defense agency, or another DoD
component that rendered such determination. To expedite the commercial
item determination, this language has been revised to include the
contract number and, if available, a Government point of contact.
Additionally, offerors are also required to provide information that is
adequate for evaluating the reasonableness of the price for the
acquisition.
28. Proposal analysis techniques.
Comment: One respondent suggested DFARS 215.404-1 doesn't
incorporate the NDAA for FY 2016 section 855 ``preference'' for pricing
based upon existing market prices. The respondent asserts that the
proposed rule includes a cornucopia of market research and relevance
``factors'' that are confusing and will be extremely burdensome and
time consuming for contractors, innovative subcontractors, and the
Government.
Response: The language at DFARS 215.404-1 states that ``In the
absence of adequate price competition in response to the solicitation,
pricing based on market prices is the preferred method to establish a
fair and reasonable price.'' This rule implements requirements from
both the NDAA for FYs 2013 and 2016. Having the guidelines required by
section 831 of the NDAA for FY 2013 should help contracting officers to
know what information to request and also help contractors, as the data
will be limited to the minimum necessary to make a determination of
price reasonableness.
29. Revised commercial item determination.
Comment: One respondent recommended requiring that a revised
commercial item determination be provided to the offeror.
Response: Offerors will be notified of the results of any
commercial item redetermination during the negotiation process.
30. Right to examine offeror data.
Comment: Two respondents believed that offerors should be exempt
from the requirement in DFARS 252.215-7010(b)(2) to submit data to
support proposed prices based on catalog or market prices, or those
prices set by law
[[Page 4439]]
or regulation in accordance with the limitations set forth under FAR
52.215-20(a)(2).
Another respondent is concerned that the language at DFARS 252.215-
7010(b)(2), which grants DoD the right to examine, at any time before
award, books, records, documents, or other directly pertinent records
to verify any request for a commercial item exception, and to determine
the reasonableness of price, will negatively impact the entry of large
and small commercial firms into the defense sector, impeding innovation
and reducing competition.
Response: Section 831 of the NDAA for FY 2013 requires that
standards be established for determining the extent of uncertified cost
information that should be required in cases in which price information
is not adequate for evaluating the reasonableness of price. To that
extent, the rule sets forth a hierarchy of information that the
contracting officer shall require to determine the reasonableness of
the price, including other relevant information that can serve as the
basis for a price assessment.
31. Rule origination.
Comment: One respondent suggested an investigation be conducted of
how or who originated this proposal and how high up in the DoD
hierarchy there is an understanding of how this proposal subverts
congressional mandates.
Response: This rule implements sections of the NDAAs for FYs 2013
and 2016 relating to commercial item acquisitions, and is consistent
with Congressional intent as set forth in statute.
32. Significant economic impact.
Comment: One respondent strongly believed the proposed rule goes
much further than implementing section 831(a) of the NDAA for FY 2013
and sections 851-853, 855-857 of the NDAA for FY 2016. The respondent
asserts that the requirement for submission of cost or price data
concurrently with a contractor's commercial item determination request
under DoD-funded prime contracts and commercial subcontracts would
impose significant time and paperwork burdens on prime contractors for
submission to the contracting officer. Although section IV. of this
preamble indicates there will be no significant economic impact on a
substantial number of entities, the converse is true. It is a major
rule which will have a significant adverse effect on competition,
investment and innovation, especially in the innovative subcontractor
market place. In addition, the respondent states that commercial items
merely ``offered for sale'' in the commercial market are implicitly
excluded from ever getting a positive commercial item determination
because they can't meet their DFARS clauses ``minimum'' prior sales
data standard.
Response: There is no minimum prior sales standard that impacts the
determination of commerciality. If an offeror does not have sales data
to submit, the rule provides a list of other data that may be
submitted, such as prices paid for similar levels of work or effort on
related products or services. As previously stated, offerors are
expected to provide adequate supporting data with their proposal
submissions. It would not be in the best interest of DoD or industry to
delay acquisitions by establishing a formal two-step sequential
proposal process of first requiring supporting information only for the
purpose of making a commercial item determination, and then following
up with a second request for information in order to make a
determination of price reasonableness. The rule does not contain any
new information collection requirements that require the approval of
the Office of Management and Budget under the Paperwork Reduction Act
(44 U.S.C. chapter 35).
33. Sole source commercial acquisitions.
Comment: One respondent suggested that this proposed rule be
further amended to address the situation of sole source commercial item
acquisitions where market prices do not accurately reflect fair and
reasonable prices due the lack of competition and the Government's bulk
buys.
Response: If the contracting officer determines that the
information obtained through market research is not sufficient, the
contracting officer will follow the order of preference and request
additional data until there is sufficient information to determine
price reasonableness.
34. Solicitation provision.
Comment: One respondent recommended that the final rule incorporate
the alternate version of DFARS solicitation provision 252.215-7010 in
lieu of the proposed basic version of the provision to facilitate the
ability of commercial companies that have an item not granted an
exception to support the determination of price reasonableness with
their commercial business systems.
Response: Both the basic and alternate versions of the provisions
are required. Contracting officers shall use the basic provision when
submission of certified cost or pricing data is required to be in the
FAR Table 15-2 format, or if it is anticipated, at the time of
solicitation, that the submission of certified cost or pricing data may
not be required. Contracting officers shall use the alternate I
provision to specify a format for certified cost or pricing data other
than the format required by FAR Table 15-2.
35. Subcontract cost or pricing data flowdown requirements.
Comment: One respondent believed that the requirement for
subcontractors to provide certified cost or pricing data and for data
other than certified cost or pricing data is outside the scope of
section 831 of the NDAA for FY 2013 because:
(a) Subcontract pricing has no bearing on the commercial price
offered to the Government.
(b) In a fixed-price type commercial transaction, the prime
contractor bears all the risk of subcontract price increases.
(c) There is little incentive for the offeror's commercial
subcontractors to provide information necessary to support price
reasonableness.
(d) Due to the nature of commercial supply chains, the fluidity of
subcontractors is a common occurrence. With the increased use of
electronic auctions and reverse auctions on commodities and basic
services, the flowdown requirement regarding proposal preparation and
evaluation to first-tier subcontractors would be problematic from a
compliance standpoint.
(e) It is exponentially more difficult to flow down to
subcontractors at all tiers, as many lower-tier subcontracts may not be
negotiated at the same time as the prime contract.
(f) There is no way to flow down a solicitation provision in a
``subcontract'' because there isn't a subcontract yet.
(g) The requirements for certified cost or pricing data are flowed
down to all lower-tier subcontractors above the certified cost or
pricing data threshold without exception, despite the fact that many
subcontracts may qualify for an exemption from certified cost or
pricing data due to competition or commercial item status.
(h) The rule requires subcontractors to submit detailed data to
support subcontract pricing for all subcontracts exceeding the
simplified acquisition threshold, without any rationale or
determination that such detailed data is necessary or relevant to the
prices proposed by the prime.
(i) The contractor purchasing processes will require substantial
changes to deal with this issue and for those commercial companies not
so conversant on Government regulations.
[[Page 4440]]
(j) This is a significant cost driver and runs counter to Better
Buying Power.
(k) FAR 52.215-20, the regulation that the proposed rule would
replace, does not contain special rules for subcontracts.
(l) If the commercial item meets the Government's requirement and
is determined to have a fair and reasonable price, there is little
incentive for offeror's commercial subcontractors to provide
``information necessary to support price reasonableness.'' In a
commercial marketplace, the Government's buying power or position is
not significant enough to garner unique pricing data not customarily
provided to commercial buyers.
(m) There is little justification to propose a DoD-unique
subcontract price evaluation requirement as part of a rule to address
Congressional direction on standards and limitations of cost data to
support commercial pricing at the prime contract level.
The respondent further suggested that if the requirement for the
offeror to provide data from subcontractors is retained, the final rule
should exempt firm-fixed price contracts from this requirement.
Response: Section 831 of the NDAA for FY 2013 does not relieve
prime contractors from their responsibility for exercising the same due
diligence as DoD contracting officers in making subcontractor
commercial item determinations and evaluating their subcontractors'
price reasonableness.
36. Supporting information.
Comment: One respondent recommended deleting the ten-day
requirement for offerors to provide additional information to support
proposal analysis in the DFARS provision 252.215-7010(d)(4).
Response: The ten-day requirement is reasonable for offerors to
provide additional data consistent with similar time limitations cited
in the FAR and DFARS. Since the source selection process is time
constrained, it is appropriate to impose a time limit on the provision
of information to be considered in the source selection process.
37. Uncertified cost data.
Comment: One respondent asserted that the term ``uncertified cost
data'' is inconsistent with the statutory language and recommended that
the term be deleted from the rule.
Response: Section 831 of the NDAA for FY 2013 requires that
standards be established for determining the extent of uncertified cost
information that should be required in cases in which price information
is not adequate for evaluating the reasonableness of price. Section 852
of the NDAA for FY 2016 further provides language on information
submissions regarding the basis for price. The rule defines
``uncertified cost data'' as the subset of data other than certified
cost or pricing data that relates specifically to cost data. The term
``uncertified cost data'' is included as a subset to reinforce that
cost data may be requested as a last resort after pricing data has been
determined to be insufficient to determine the price reasonableness.
For consistency in terminology, this rule uses the term ``uncertified
cost data'' in lieu of the term ``uncertified cost information'' as
used in section 831.
Comment: One respondent stated that the language at DFARS 215.404-1
suggests a prohibition against obtaining other than certified cost or
pricing data when there may only be a miniscule amount of nongovernment
sales. The respondent suggested that the proposed rule should highlight
instead that the Government should consider any cost data in its
possession and seek additional cost data as permitted elsewhere in the
regulations.
Response: The rule does not preclude the contracting officer from
considering any cost data. DFARS 215.404-1 provides that if the
contracting officer determines that the pricing information submitted
is not sufficient to determine the price reasonableness, the
contracting officer may request other relevant information, to include
cost data. The language does not create a prohibition, but does provide
a hierarchy that includes incorporation as to when to request other
relevant information. Additional references within the rule, to include
DFARS 212.209(d), provide that nothing in the section shall be
construed to preclude the contracting officer from requiring the
contractor to supply information that is sufficient to determine the
reasonableness of the price. This would further reinforce that there is
not a prohibition in place to restrict obtaining other than certified
cost or pricing data when necessary to determine price reasonableness.
Comment: One respondent is concerned that the proposed rule leaves
open a very favorite information shielding mechanism for contractors,
insofar as it does not require contractors to disclose, in meaningful
detail, the actual terms and conditions at which other buyers have
acquired their commercial products. The respondent suggested that since
information provided to the Government is protected from unwarranted
disclosure under various federal procurement and data protection
statutes, there is no valid reason why the regulations cannot require
sharing of the actual commercial sales terms and conditions, as well as
prices paid and identities of the purchasers.
Response: DoD agrees that that terms and conditions are frequently
included in public websites and in catalogues for the prospective
purchaser. Similarly, it is reasonable to require the offeror to
provide terms and conditions as well as the price to support an
informed and efficient decision by the contracting officer, whether the
commercial procurement is competed or a sole source commercial
acquisition. However, this comment is covered in DFARS 215.404-1(b)(iv)
which states, ``If the contracting officer determines that the pricing
information submitted is not sufficient to determine the reasonableness
of price, the contracting officer shall request other relevant
information, to include cost data.''
38. Volume and completeness of transaction data.
Comment: One respondent recommended revising the definition of
``Volume and completeness of transaction data'' to remove the
requirement to identify the customer as part of the key information.
Further, the respondent recommended adding the phrase ``to the extent
it is reasonably available and can be released by the offeror.'' Many
commercial customer sales agreements contain non-disclosure provisions
that restrict the seller's ability to disclose contract information,
including customer identity, outside of the organization. These
confidentiality provisions are extremely common in business-to-business
agreements due to the fact that the identity of a business's suppliers
and the prices paid to those suppliers is competitively sensitive
information. A supplier may determine that price information may be
disclosed so long as the customer's identity is not included with the
disclosure, however requiring that both the price and the customer be
identified puts the supplier at risk of violating contractual
agreements with other customers. Using the phrase ``released by the
offeror'' will allow the current practice of allowing the contracting
officer to view un-redacted invoices (but not physically collect them)
to ensure the data provided to the Government supports price
reasonableness.
Response: The language states ``customer'' but does not state
``customer name.'' It is relevant to the contracting officer whether
the customer is a commercial customer versus a Government customer. The
subsequent paragraph provides further clarification that the DoD
contracting officer needs to understand the type of customer.
[[Page 4441]]
Nothing prohibits the current practice that the DoD contracting officer
can travel onsite to review un-redacted invoices.
39. Out of scope comments.
Comment: One respondent commented on the affordability of
technology. Another respondent stated that 100% of U.S. Government
requirements should be purchased from U.S. small businesses.
Response: Both of these comments are beyond the scope of this rule.
III. Applicability to Commercial Item Acquisitions
The objective of this rule is to implement sections 851 through 853
and 855 through 857 of the NDAA for FY 2016 and section 831 of the NDAA
for FY 2013. Sections 831, 851, and 853 address requirements related to
commercial items. The statutes are silent on applicability to contracts
for the acquisition of commercial items or commercially-available-off-
the shelf (COTS) and do not provide for criminal or civil penalties.
Therefore, sections 831, 851, and 853 do not apply to the acquisition
of commercial items unless the Director, Defense Procurement and
Acquisition Policy (DPAP) makes a written determination as provided in
41 U.S.C. 1906 to apply the statutes for commercial items and 41 U.S.C.
1907 for COTS items. Consistent with 41 U.S.C. 1906 and 1907, the
Director, DPAP, has determined that it is in the best interest of DoD
to apply sections 831, 851, and 853 to the acquisition of commercial
items.
IV. Expected Cost Savings
This final rule prescribes the use of a new DFARS provision
252.215-7010, to be used in lieu of FAR provision 52.215-20,
Requirements for Certified Cost or Pricing Data and Data Other Than
Certified Cost or Pricing Data. The new DFARS provision includes the
existing requirement under FAR provision 52.215-20 for offerors to
submit certified cost and pricing data and data other than certified
cost or pricing data, as appropriate; however, the new DFARS provision
adds levels of granularity to assist offerors in their proposal
preparation with regards to ``other than certified cost or pricing
data'' and implements a statutory exemption to the requirement for
``certified cost or pricing data'' for nontraditional defense
contractors.
This rule will impact large businesses and small entities who
currently compete on DoD solicitations issued using FAR part 15,
Negotiation Procedures, and are valued at $750,000 or more. Offerors
competing on contracts and orders subject to the new DFARS provision,
will have the benefit of additional details on (and a hierarchy of) the
types of ``other than certified cost or pricing data'' that they should
consider including in their proposal. This information has the
potential to improve the quality of proposals from businesses and
reduce resubmissions of data during negotiations. In addition, this
rule adds a statutory exemption from the requirement to submit
``certified cost or pricing data'' for nontraditional defense
contractors, who may now ``other than certified cost or pricing data,''
which takes less time to prepare.
Finally, this rule also advises contracting officers that they may
presume that a prior commercial item determination made another DoD
component shall serve as a determination for subsequent procurements of
such items, unless the contracting officer obtains a determination from
the head of the contracting activity that the item is not commercial
and the basis for that decision.
DoD has performed a regulatory cost analysis on this rule. The
following is a summary of the estimated public cost savings in
millions, which are calculated in 2016 dollars at a 3-percent and 7-
percent discount rate:
------------------------------------------------------------------------
------------------------------------------------------------------------
Present Value at 3%............................................ $4.4
Annualized at 3%............................................... 0.1
Present Value at 7%............................................ 1.6
Annualized at 7%............................................... 0.1
------------------------------------------------------------------------
To access the full Regulatory Cost Analysis for this rule, go to
the Federal eRulemaking Portal at www.regulations.gov, search for
``DFARS Case 2016-D006,'' click ``Open Docket,'' and view ``Supporting
Documents.''
V. Executive Orders 12866 and 13563
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess
all costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). E.O.
13563 emphasizes the importance of quantifying both costs and benefits,
of reducing costs, of harmonizing rules, and of promoting flexibility.
This is not a significant regulatory action and, therefore, was not
subject to review under section 6(b) of E.O. 12866, Regulatory Planning
and Review, dated September 30, 1993. This rule is not a major rule
under 5 U.S.C. 804.
VI. Executive Order 13771
This final rule is considered to be an E.O. 13771 deregulatory
action. Details on the estimated cost savings can be found in Section
IV. of this rule.
VII. Regulatory Flexibility Act
A final regulatory flexibility analysis has been performed and is
summarized as follows:
This rule amends the DFARS to provide additional guidance to
contracting officers on making price reasonableness determinations,
expand opportunities for nontraditional defense contractors to do
business with DoD, and provide additional details on the types of
``other than certified cost or pricing data'' that offerors should
include in their proposal in order to for the purposes of determining
whether proposed prices for commercial items are fair and reasonable.
The objective of this rule is to implement the requirements of sections
851 through 853 and 855 through 857 of the National Defense
Authorization Act (NDAA) for Fiscal Year (FY) 2016 (Pub. L. 114-92,
enacted November 25, 2015), as well as the requirements of section 831
of the NDAA for FY 2013 (Pub. L. 112-239, enacted January 2, 2013) and
section 848 of the NDAA for FY 2018 (Pub. L. 115-91, enacted December
12, 1017).
There were no significant issues raised by the public in response
to the initial regulatory flexibility analysis.
This rule will apply to contractors that compete for contracts
being awarded using FAR part 15 Negotiation procedures that are valued
at $750,000 or more. According to data available in the Federal
Procurement Data System for FY 2016, DoD awarded approximately 6,865
contracts meeting this criteria to 5,105 unique contractors, of which
4,544 contracts (~66 percent) were to 3,536 (~70 percent) unique small
businesses.
DoD does not expect this rule to have a significant impact on the
small businesses that may be affected by this rule, because the rule
does not add to or remove any of the existing requirements for the
submission of other than certified cost or pricing data for the purpose
of determining the reasonableness of prices proposed for commercial
items. Rather the rule provides offerors additional details and a
hierarchy of the ``other than certified cost or pricing data'' that
should be included in their proposals. This additional detail could
reduce the amount of time it takes a small business resubmit data
during negotiations. In
[[Page 4442]]
addition, the exception to ``certified cost or pricing data'' for
nontraditional defense contractors would be of benefit to small
businesses that meet the definition.
There are no significant alternative approaches to the rule that
would meet the requirements of the statute.
VIII. Paperwork Reduction Act
The rule does not contain any information collection requirements
that require the approval of the Office of Management and Budget under
the Paperwork Reduction Act (44 U.S.C. chapter 35).
List of Subjects in 48 CFR Parts 202, 212, 215, 234, 239, and 252
Government procurement.
Jennifer L. Hawes,
Regulatory Control Officer Defense Acquisition Regulations System.
Therefore, 48 CFR parts 202, 212, 215, 234, 239, and 252 are
amended as follows:
0
1. The authority citation for parts 202, 212, 215, 234, 239, and 252
continues to read as follows:
Authority: 41 U.S.C. 1303 and 48 CFR chapter 1.
PART 202--DEFINITIONS OF WORDS AND TERMS
0
2. Amend section 202.101 by adding, in alphabetical order, the
definitions of ``non-Government sales'', ``sufficient non-Government
sales'', and ``uncertified cost data'' to read as follows:
202.101 Definitions.
* * * * *
Non-Government sales means sales of the supplies or services to
non-Governmental entities for purposes other than governmental
purposes.
* * * * *
Sufficient non-Government sales means relevant sales data that
reflects market pricing and contains enough information to make
adjustments covered by FAR 15.404-1(b)(2)(ii)(B).
* * * * *
Uncertified cost data means the subset of ``data other than
certified cost or pricing data'' (see FAR 2.101) that relates to cost.
PART 212--ACQUISITION OF COMMERCIAL ITEMS
0
3. Section 212.001 is added above subpart 212.1 to read as follows:
212.001 Definitions.
As used in this part--
Market research means a review of existing systems, subsystems,
capabilities, and technologies that are available or could be made
available to meet the needs of DoD in whole or in part. The review
shall include, at a minimum, contacting knowledgeable individuals in
Government and industry regarding existing market capabilities and
pricing information, and may include any of the techniques for
conducting market research provided in FAR 10.002(b)(2) (section 855 of
the National Defense Authorization Act for Fiscal Year 2016 (Pub. L.
114-92)).
Nontraditional defense contractor means an entity that is not
currently performing and has not performed any contract or subcontract
for DoD that is subject to full coverage under the cost accounting
standards prescribed pursuant to 41 U.S.C. 1502 and the regulations
implementing such section, for at least the 1-year period preceding the
solicitation of sources by DoD for the procurement (10 U.S.C. 2302(9)).
0
4. Amend section 212.102 by--
0
a. Adding a paragraph (a)(i) heading;
0
b. Redesignating paragraph (a)(ii) as (a)(i)(D) and revising the newly
redesignated paragraph (a)(i)(D); and
0
c. Adding new paragraphs (a)(ii) and (a)(iii).
The revision and additions read as follows:
212.102 Applicability.
(a)(i) Commercial item determination. * * *
* * * * *
(D) Follow the procedures and guidance at PGI 212.102(a)(i)
regarding file documentation and commercial item determinations.
(ii) Prior commercial item determination. This section implements
10 U.S.C. 2306a(b)(4) and 10 U.S.C. 2380(b).
(A) The contracting officer may presume that a prior commercial
item determination made by a military department, a defense agency, or
another component of DoD shall serve as a determination for subsequent
procurements of such item. See PGI 212.102(a)(ii) for information about
items that the Department has historically acquired as military unique,
noncommercial items.
(B) If the contracting officer does not make the presumption that a
prior commercial item determination is valid, and instead chooses to
proceed with a procurement of an item previously determined to be a
commercial item using procedures other than the procedures authorized
for the procurement of a commercial item, the contracting officer shall
request a review of the commercial item determination by the head of
the contracting activity that will conduct the procurement. Not later
than 30 days after receiving a request for review of a commercial item
determination, the head of a contracting activity shall--
(1) Confirm that the prior determination was appropriate and still
applicable; or
(2) Issue a determination that the prior use of FAR part 12
procedures was improper or that it is no longer appropriate to acquire
the item using FAR part 12 procedures, with a written explanation of
the basis for the determination (see 212.70).
(iii) Nontraditional defense contractors. In accordance with 10
U.S.C. 2380a, contracting officers may treat supplies and services
provided by nontraditional defense contractors as commercial items.
This permissive authority is intended to enhance defense innovation and
investment, enable DoD to acquire items that otherwise might not have
been available, and create incentives for nontraditional defense
contractors to do business with DoD. It is not intended to recategorize
current noncommercial items, however, when appropriate, contracting
officers may consider applying commercial item procedures to the
procurement of supplies and services from business segments that meet
the definition of ``nontraditional defense contractor'' even though
they have been established under traditional defense contractors. The
decision to apply commercial item procedures to the procurement of
supplies and services from nontraditional defense contractors does not
require a commercial item determination and does not mean the item is
commercial.
0
5. Section 212.209 is added to read as follows:
212.209 Determination of price reasonableness.
(a) Market research shall be used, where appropriate, to inform
price reasonableness determinations.
(b) If the contracting officer determines that the information
obtained through market research pursuant to paragraph (a) of this
section, is insufficient to determine the reasonableness of price, the
contracting officer shall consider information submitted by the offeror
of recent purchase prices paid by the Government and commercial
customers for the same or similar commercial items under comparable
terms and conditions in establishing price reasonableness on a
subsequent purchase if the contracting
[[Page 4443]]
officer is satisfied that the prices previously paid remain a valid
reference for comparison. In assessing whether the prices previously
paid remain a valid reference for comparison, the contracting officer
shall consider the totality of other relevant factors such as the time
elapsed since the prior purchase and any differences in the quantities
purchased (10 U.S.C. 2306a(b)).
(c) If the contracting officer determines that the offeror cannot
provide sufficient information as described in paragraph (b) of this
section to determine the reasonableness of price, the contracting
officer should request the offeror to submit information on--
(1) Prices paid for the same or similar items sold under different
terms and conditions;
(2) Prices paid for similar levels of work or effort on related
products or services;
(3) Prices paid for alternative solutions or approaches; and
(4) Other relevant information that can serve as the basis for
determining the reasonableness of price.
(d) Nothing in this section shall be construed to preclude the
contracting officer from requiring the contractor to supply information
that is sufficient to determine the reasonableness of price, regardless
of whether or not the contractor was required to provide such
information in connection with any earlier procurement. If the
contracting officer determines that the pricing information submitted
is not sufficient to determine the reasonableness of price, the
contracting officer may request other relevant information regarding
the basis for price or cost, including uncertified cost data such as
labor costs, material costs, and other direct and indirect costs.
0
6. Amend section 212.301 by adding paragraph (f)(vi)(E) to read as
follows:
212.301 Solicitation provisions and contract clauses for the
acquisition of commercial items.
* * * * *
(f) * * *
(vi) * * *
(E) Use the provision 252.215-7010, Requirements for Certified Cost
or Pricing Data and Data Other Than Certified Cost or Pricing Data, as
prescribed at 215.408(6)(i) to comply with section 831 of the National
Defense Authorization Act for Fiscal Year 2013 (Pub. L. 112-239) and
sections 851 and 853 of the National Defense Authorization Act for
Fiscal Year 2016 (Pub. L. 114-92).
(1) Use the basic provision as prescribed at 215.408(6)(i)(A).
(2) Use the alternate I provision as prescribed at
215.408(6)(i)(B).
* * * * *
0
7. Add subpart 212.70 to read as follows:
Subpart 212.70--Limitation on Conversion of Procurement from Commercial
Acquisition Procedures
Sec.
212.7000 Scope.
212.7001 Procedures.
Subpart 212.70--Limitation on Conversion of Procurement from
Commercial Acquisition Procedures
212.7000 Scope.
This subpart implements section 856 of the National Defense
Authorization Act for Fiscal Year 2016 (Pub. L. 114-92).
212.7001 Procedures.
(a) Limitation. (1) For a procurement valued at more than $1
million, but less than $100 million, previously procured under a prime
contract using FAR part 12 procedures based on a commercial item
determination made by a military department, a defense agency, or
another DoD component, prior to converting the procurement from
commercial acquisition procedures to noncommercial acquisition
procedures under FAR part 15, the head of the contracting activity
shall determine in writing, upon recommendation from the contracting
officer for the procurement that--
(i) The earlier use of commercial acquisition procedures under FAR
part 12 was in error or based on inadequate information; and
(ii) DoD will realize a cost savings compared to the cost of
procuring a similar quantity or level of such item or service using
commercial acquisition procedures.
(2) In the case of a procurement valued at $100 million or more, a
contract may not be awarded pursuant to a conversion of the procurement
described in paragraph (a)(1) of this section until a copy of the head
of contracting activity determination is provided to the Office of the
Under Secretary of Defense for Acquisition, Technology, and Logistics.
(b) In making a determination under paragraph (a) of this section,
the determining official shall, at a minimum, consider the following
factors:
(1) The estimated cost of research and development to be performed
by the existing contractor to improve future products or services.
(2) The costs for DoD and the contractor in assessing and
responding to data requests to support a conversion to noncommercial
acquisition procedures.
(3) Changes in purchase quantities.
(4) Costs associated with potential procurement delays resulting
from the conversion.
(c) The requirements of this subpart terminate November 25, 2020.
PART 215--CONTRACTING BY NEGOTIATION
0
8. Section 215.401 is added to subpart 215.4 to read as follows:
215.401 Definitions.
As used in this subpart--
Market prices means 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.
Relevant sales data means information provided by an offeror of
sales of the same or similar items that can be used to establish price
reasonableness taking into consideration the age, volume, and nature of
the transactions (including any related discounts, refunds, rebates,
offsets, or other adjustments).
0
9. Amend section 215.402 by--
0
a. Redesignating the existing text as paragraph (a)(ii); and
0
b. Adding paragraph (a)(i).
The addition reads as follows:
215.402 Pricing policy.
(a)(i) Pursuant to section 831 of the National Defense
Authorization Act for Fiscal Year 2013 (Pub. L. 112-239)--
(A) The contracting officer is responsible for determining if the
information provided by the offeror is sufficient to determine price
reasonableness. This responsibility includes determining whether
information on the prices at which the same or similar items have
previously been sold is adequate for evaluating the reasonableness of
price, and determining the extent of uncertified cost data that should
be required in cases in which price information is not adequate;
(B) The contracting officer shall not limit the Government's
ability to obtain any data that may be necessary to support a
determination of fair and reasonable pricing by agreeing to contract
terms that preclude obtaining necessary supporting information; and
(C) When obtaining uncertified cost data, the contracting officer
shall require
[[Page 4444]]
the offeror to provide the information in the form in which it is
regularly maintained in the offeror's business operations.
* * * * *
0
10. Amend section 215.403-1 by adding paragraph (c)(3)(C) to read as
follows:
215.403-1 Prohibition on obtaining certified cost or pricing data (10
U.S.C. 2306a and 41 U.S.C. chapter 35).
* * * * *
(c) * * *
(3) * * *
(C) When applying the commercial item exception under FAR 15.403-
1(b)(3), see 212.102(a)(ii) regarding prior commercial item
determinations.
* * * * *
0
11. Amend section 215.404-1 by--
0
a. Redesignating paragraphs (1), (2), and (2)(i) through (iv) as
paragraphs (a)(i), (a)(ii), and (a)(ii)(A) through (D), respectively;
0
b. Adding a paragraph (a) heading; and
0
c. Adding paragraph (b).
The additions read as follows:
215.404-1 Proposal analysis techniques.
(a) General. (i) * * *
* * * * *
(b) Price analysis for commercial and noncommercial items. (i) In
the absence of adequate price competition in response to the
solicitation, pricing based on market prices is the preferred method to
establish a fair and reasonable price (see PGI 215.404-1(b)(i)).
(ii) If the contracting officer determines that the information
obtained through market research is insufficient to determine the
reasonableness of price, the contracting officer shall consider
information submitted by the offeror of recent purchase prices paid by
the Government and commercial customers for the same or similar
commercial items under comparable terms and conditions in establishing
price reasonableness on a subsequent purchase if the contracting
officer is satisfied that the prices previously paid remain a valid
reference for comparison. The contracting officer shall consider the
totality of other relevant factors such as the time elapsed since the
prior purchase and any differences in the quantities purchased (section
853 of the National Defense Authorization Act for Fiscal Year 2016
(Pub. L. 114-92)).
(iii) If the contracting officer determines that the offeror cannot
provide sufficient information as described in paragraph (b)(ii) of
this section to determine the reasonableness of price, the contracting
officer should request the offeror to submit information on--
(A) Prices paid for the same or similar items sold under different
terms and conditions;
(B) Prices paid for similar levels of work or effort on related
products or services;
(C) Prices paid for alternative solutions or approaches; and
(D) Other relevant information that can serve as the basis for
determining the reasonableness of price.
(iv) If the contracting officer determines that the pricing
information submitted is not sufficient to determine the reasonableness
of price, the contracting officer shall request other relevant
information, to include cost data. However, no cost data may be
required in any case in which there are sufficient non-Government sales
of the same item to establish reasonableness of price (section 831 of
the National Defense Authorization Act for Fiscal Year 2013 (Pub. L.
112-239)).
(v) When evaluating pricing data, the contracting officer shall
consider materially differing terms and conditions, quantities, and
market and economic factors. For similar items, the contracting officer
shall also consider material differences between the similar item and
the item being procured (see FAR 15.404-1(b)(2)(ii)(B) and PGI 215.404-
1(b)(v)). Material differences are those that could reasonably be
expected to influence the contracting officer's determination of price
reasonableness. The contracting officer shall consider the following
factors when evaluating the relevance of the information available:
(A) Market prices.
(B) Age of data.
(1) Whether data is too old to be relevant depends on the industry
(e.g., rapidly evolving technologies), product maturity (e.g., stable),
economic factors (e.g., new sellers in the marketplace), and various
other considerations.
(2) A pending sale may be relevant if, in the judgement of the
contracting officer, it is probable at the anticipated price, and the
sale could reasonably be expected to materially influence the
contracting officer's determination of price reasonableness. The
contracting officer may consult with the cognizant administrative
contracting officers (ACOs) as they may have information about pending
sales.
(C) Volume and completeness of transaction data. Data must include
a sufficient number of transactions to represent the range of relevant
sales to all types of customers. The data must also include key
information, such as date, quantity sold, part number, part
nomenclature, sales price, and customer. If the number of transactions
is insufficient or the data is incomplete, the contracting officer
shall request additional sales data to evaluate price reasonableness.
If the contractor cannot provide sufficient sales data, the contracting
officer shall request other relevant information.
(D) Nature of transactions. The nature of a sales transaction
includes the information necessary to understand the transaction, such
as terms and conditions, date, quantity sold, sale price, unique
requirements, the type of customer (government, distributor, retail
end-user, etc.), and related agreements. It also includes warranties,
key product technical specifications, maintenance agreements, and
preferred customer rewards.
(vi) The contracting officer shall consider catalog prices to be
reliable when they are regularly maintained and supported by relevant
sales data (including any related discounts, refunds, rebates, offsets,
or other adjustments). The contracting officer may request that the
offeror support differences between the proposed price(s), catalog
price(s), and relevant sales data.
(vii) The contracting officer may consult with the DoD cadre of
experts who are available to provide expert advice to the acquisition
workforce in assisting with commercial item and price reasonableness
determinations. The DoD cadre of experts is identified at PGI 215.404-
1(b)(vii).
0
12. Amend section 215.408 by--
0
a. In paragraph (3)(i)(A) introductory text, removing ``Requirement for
Data'' and adding ``Requirement for Submission of Data'' in its place;
0
b. In paragraph (3)(i)(A)(1) introductory text, removing ``FAR 52.215-
20, Requirement for'' and adding ``DFARS 252.215-7010, Requirements for
Certified Cost or Pricing Data and'' in its place;
0
c. In paragraph (3)(i)(A)(2), removing ``FAR 52.215-20'' and adding
``DFARS 252.215-7010'' in its place;
0
d. Revising paragraph (3)(i)(B);
0
e. In paragraph (3)(ii)(A) introductory text, removing ``Requirement
for Data'' and adding ``Requirement for Submission of Data'' in its
place; and
0
f. Adding paragraphs (6) and (7).
The revision and additions read as follows:
215.408 Solicitation provisions and contract clauses.
* * * * *
(3) * * *
[[Page 4445]]
(i) * * *
(B) Do not use 252.225-7003 in lieu of DFARS 252.215-7010 in
competitive acquisitions; and
* * * * *
(6) When reasonably certain that the submission of certified cost
or pricing data or data other than certified cost or pricing data will
be required--
(i) Use the basic or alternate of the provision at 252.215-7010,
Requirements for Certified Cost or Pricing Data and Data Other Than
Certified Cost or Pricing Data, in lieu of the provision at FAR 52.215-
20, Requirements for Certified Cost or Pricing Data and Data Other Than
Certified Cost or Pricing Data, in solicitations, including
solicitations using FAR part 12 procedures for the acquisition of
commercial items.
(A) Use the basic provision when submission of certified cost or
pricing data is required to be in the FAR Table 15-2 format, or if it
is anticipated, at the time of solicitation, that the submission of
certified cost or pricing data may not be required.
(B) Use the alternate I provision to specify a format for certified
cost or pricing data other than the format required by FAR Table 15-2;
(ii) Use the provision at 252.215-7011, Requirements for Submission
of Proposals to the Administrative Contracting Officer and Contract
Auditor, when using the basic or alternate of the provision at 252.215-
7010 and copies of the proposal are to be sent to the ACO and contract
auditor; and
(iii) Use the provision at 252.215-7012, Requirements for
Submission of Proposals via Electronic Media, when using the basic or
alternate of the provision at 252.215-7010 and submission via
electronic media is required.
(7) Use the provision at 252.215-7013, Supplies and Services
Provided by Nontraditional Defense Contractors, in all solicitations.
PART 234--MAJOR SYSTEM ACQUISITION
0
13. Amend section 234.7002 by--
0
a. In paragraph (a)(1)(i)(B), adding the word ``and'' after the
semicolon;
0
b. Removing paragraph (a)(1)(ii);
0
c. Redesignating paragraph (a)(1)(iii) as paragraph (a)(1)(ii);
0
d. In paragraph (b) introductory text, removing ``may'' and adding
``shall'' in its place, and removing ``only if--'' and adding ``if--''
in its place;
0
e. Revising paragraph (b)(2);
0
f. In paragraph (c)(1) introductory text, removing ``only if--'' and
adding ``if--'' in its place;
0
g. Revising paragraph (c)(1)(ii); and
0
h. Revising paragraph (d).
The revisions read as follows:
234.7002 Policy.
* * * * *
(b) * * *
(2) The contracting officer determines in writing that the
subsystem is a commercial item.
(c) * * *
(1) * * *
(ii) The contracting officer determines in writing that the
component or spare part is a commercial item.
* * * * *
(d) Relevant information. This section implements 10 U.S.C. 2379.
(1) To the extent necessary to make a determination of price
reasonableness, the contracting officer shall require the offeror to
submit prices paid for the same or similar commercial items under
comparable terms and conditions by both Government and commercial
customers.
(2) If the contracting officer determines that the offeror cannot
provide sufficient information described in paragraph (d)(1) of this
section to determine the reasonableness of price, the contracting
officer shall request the offeror to submit information on--
(i) Prices paid for the same or similar items under different terms
and conditions;
(ii) Prices paid for similar levels of work or effort on related
products or services;
(iii) Prices paid for alternative solutions or approaches; and
(iv) Other relevant information that can serve as the basis for a
price reasonableness determination.
(3) If the contracting officer determines that the information
submitted pursuant to paragraphs (d)(1) and (2) of this section is not
sufficient to determine the reasonableness of price, the contracting
officer shall request the offeror to submit other relevant information,
including uncertified cost data. However, no uncertified cost data may
be required in any case in which there are sufficient non-Government
sales of the same item to establish reasonableness of price.
(4) An offeror shall not be required to submit information
described in paragraph (d)(3) of this section with regard to a
commercially available off-the-shelf item. An offeror may be required
to submit such information with regard to any other item that was
developed exclusively at private expense only after the head of the
contracting activity determines in writing that the information
submitted pursuant to paragraphs (d)(1) and (2) of this section is not
sufficient to determine the reasonableness of price.
PART 239--ACQUISITION OF INFORMATION TECHNOLOGY
0
14. Revise section 239.101 to read as follows:
239.101 Policy.
(1) A contracting officer may not enter into a contract in excess
of the simplified acquisition threshold for information technology
products or services that are not commercial items unless the head of
the contracting activity determines in writing that no commercial items
are suitable to meet the agency's needs, as determined through the use
of market research appropriate to the circumstances (see FAR
10.001(a)(3)) (section 855 of the National Defense Authorization Act
for Fiscal Year 2016 (Pub. L. 114-92)).
(2) See subpart 208.74 when acquiring commercial software or
software maintenance.
(3) See 227.7202 for policy on the acquisition of commercial
computer software and commercial computer software documentation.
PART 252--ACQUISITION OF INFORMATION TECHNOLOGY
0
15. Add section 252.215-7010 to read as follows:
252.215-7010 Requirements for Certified Cost or Pricing Data and Data
Other Than Certified Cost or Pricing Data.
Basic. As prescribed in 215.408(6)(i) and (6)(i)(A), use the
following provision:
Requirements for Certified Cost or Pricing Data and Data Other Than
Certified Cost or Pricing Data--Basic (Jan 2018)
(a) Definitions. As used in this provision--
Market prices means 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.
Non-Government sales means sales of the supplies or services to
non-Governmental entities for purposes other than governmental
purposes.
Relevant sales data means information provided by an offeror on
sales of the same or similar items that can be used to establish
price reasonableness taking into consideration the age, volume, and
nature of the transactions (including any related discounts,
refunds, rebates, offsets, or other adjustments).
Sufficient non-Government sales means relevant sales data that
reflects market pricing and contains enough information to
[[Page 4446]]
make adjustments covered by FAR 15.404-1(b)(2)(ii)(B).
Uncertified cost data means the subset of ``data other than
certified cost or pricing data'' (see FAR 2.101) that relates to
cost.
(b) Exceptions from certified cost or pricing data. (1) In lieu
of submitting certified cost or pricing data, the Offeror may submit
a written request for exception by submitting the information
described in paragraphs (b)(1)(i) and (ii) of this provision. The
Contracting Officer may require additional supporting information,
but only to the extent necessary to determine whether an exception
should be granted and whether the price is fair and reasonable.
(i) Exception for prices set by law or regulation--
Identification of the law or regulation establishing the prices
offered. If the prices are controlled under law by periodic rulings,
reviews, or similar actions of a governmental body, attach a copy of
the controlling document, unless it was previously submitted to the
contracting office.
(ii) Commercial item exception. For a commercial item exception,
the Offeror shall submit, at a minimum, information that is adequate
for evaluating the reasonableness of the price for this acquisition,
including prices at which the same item or similar items have been
sold in the commercial market. Such information shall include--
(A) For items previously determined to be commercial, the
contract number and military department, defense agency, or other
DoD component that rendered such determination, and if available, a
Government point of contact;
(B) For items priced based on a catalog--
(1) A copy of or identification of the Offeror's current catalog
showing the price for that item; and
(2) If the catalog pricing provided with this proposal is not
consistent with all relevant sales data, a detailed description of
differences or inconsistencies between or among the relevant sales
data, the proposed price, and the catalog price (including any
related discounts, refunds, rebates, offsets, or other adjustments);
(C) For items priced based on market pricing, a description of
the nature of the commercial market, the methodology used to
establish a market price, and all relevant sales data. The
description shall be adequate to permit the DoD to verify the
accuracy of the description;
(D) For items included on an active Federal Supply Service
Multiple Award Schedule contract, proof that an exception has been
granted for the schedule item; or
(E) For items provided by nontraditional defense contractors, a
statement that the entity is not currently performing and has not
performed, for at least the 1-year period preceding the solicitation
of sources by DoD for the procurement or transaction, any contract
or subcontract for DoD that is subject to full coverage under the
cost accounting standards prescribed pursuant to 41 U.S.C. 1502 and
the regulations implementing such section.
(2) The Offeror grants the Contracting Officer or an authorized
representative the right to examine, at any time before award,
books, records, documents, or other directly pertinent records to
verify any request for an exception under this provision, and to
determine the reasonableness of price.
(c) Requirements for certified cost or pricing data. If the
Offeror is not granted an exception from the requirement to submit
certified cost or pricing data, the following applies:
(1) The Offeror shall prepare and submit certified cost or
pricing data and supporting attachments in accordance with the
instructions contained in Table 15-2 of FAR 15.408, which is
incorporated by reference with the same force and effect as though
it were inserted here in full text. The instructions in Table 15-2
are incorporated as a mandatory format to be used in any resultant
contract, unless the Contracting Officer and the Offeror agree to a
different format and change this provision to use Alternate I.
(2) As soon as practicable after agreement on price, but before
contract award (except for unpriced actions such as letter
contracts), the Offeror shall submit a Certificate of Current Cost
or Pricing Data, as prescribed by FAR 15.406-2.
(d) Requirements for data other than certified cost or pricing
data. (1) Data other than certified cost or pricing data submitted
in accordance with this provision shall include the minimum
information necessary to permit a determination that the proposed
price is fair and reasonable, to include the requirements in DFARS
215.402(a)(i) and 215.404-1(b).
(2) In cases in which uncertified cost data is required, the
information shall be provided in the form in which it is regularly
maintained by the Offeror or prospective subcontractor in its
business operations.
(3) Within 10 days of a written request from the Contracting
Officer for additional information to permit an adequate evaluation
of the proposed price in accordance with FAR 15.403-3, the Offeror
shall provide either the requested information, or a written
explanation for the inability to fully comply.
(4) Subcontract price evaluation. (i) Offerors shall obtain from
subcontractors the minimum information necessary to support a
determination of price reasonableness, as described in FAR part 15
and DFARS part 215.
(ii) No cost data may be required from a prospective
subcontractor in any case in which there are sufficient non-
Government sales of the same item to establish reasonableness of
price.
(iii) If the Offeror relies on relevant sales data for similar
items to determine the price is reasonable, the Offeror shall obtain
only that technical information necessary--
(A) To support the conclusion that items are technically
similar; and
(B) To explain any technical differences that account for
variances between the proposed prices and the sales data presented.
(e) Subcontracts. The Offeror shall insert the substance of this
provision, including this paragraph (e), in subcontracts exceeding
the simplified acquisition threshold defined in FAR part 2. The
Offeror shall require prospective subcontractors to adhere to the
requirements of--
(1) Paragraphs (c) and (d) of this provision for subcontracts
above the threshold for submission of certified cost or pricing data
in FAR 15.403-4; and
(2) Paragraph (d) of this provision for subcontracts exceeding
the simplified acquisition threshold defined in FAR part 2.
(End of provision)
Alternate I. As prescribed in 215.408(6)(i) and (6)(i)(B), use the
following provision, which includes a different paragraph (c)(1).
Requirements for Certified Cost or Pricing Data and Data Other Than
Certified Cost or Pricing Data--Alternate I (Jan 2018)
(a) Definitions. As used in this provision--
Market prices means 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.
Non-Government sales means sales of the supplies or services to
non-Governmental entities for purposes other than governmental
purposes.
Relevant sales data means information provided by an offeror on
sales of the same or similar items that can be used to establish
price reasonableness taking into consideration the age, volume, and
nature of the transactions (including any related discounts,
refunds, rebates, offsets, or other adjustments).
Sufficient non-Government sales means relevant sales data that
reflects market pricing and contains enough information to make
adjustments covered by FAR 15.404-1(b)(2)(ii)(B).
Uncertified cost data means the subset of ``data other than
certified cost or pricing data'' (see FAR 2.101) that relates to
cost.
(b) Exceptions from certified cost or pricing data. (1) In lieu
of submitting certified cost or pricing data, the Offeror may submit
a written request for exception by submitting the information
described in paragraphs (b)(1)(i) and (ii) of this provision. The
Contracting Officer may require additional supporting information,
but only to the extent necessary to determine whether an exception
should be granted and whether the price is fair and reasonable.
(i) Exception for price set by law or regulation--Identification
of the law or regulation establishing the price offered. If the
price is controlled under law by periodic rulings, reviews, or
similar actions of a governmental body, attach a copy of the
controlling document, unless it was previously submitted to the
contracting office.
(ii) Commercial item exception. For a commercial item exception,
the Offeror shall submit, at a minimum, information that is adequate
for evaluating the reasonableness of the price for this acquisition,
including prices at which the same item or similar items have been
sold in the commercial market. Such information shall include--
(A) For items previously determined to be commercial, the
contract number and
[[Page 4447]]
military department, defense agency, or other DoD component that
rendered such determination, and if available, a Government point of
contact;
(B) For items priced based on a catalog--
(1) A copy of or identification of the Offeror's current catalog
showing the price for that item; and
(2) If the catalog pricing provided with this proposal is not
consistent with all relevant sales data, a detailed description of
differences or inconsistencies between or among the relevant sales
data, the proposed price, and the catalog price (including any
related discounts, refunds, rebates, offsets, or other adjustments);
(C) For items priced based on market pricing, a description of
the nature of the commercial market, the methodology used to
establish a market price, and all relevant sales data. The
description shall be adequate to permit the DoD to verify the
accuracy of the description;
(D) For items included on an active Federal Supply Service
Multiple Award Schedule contract, proof that an exception has been
granted for the schedule item; or
(E) For items provided by nontraditional defense contractors, a
statement that the entity is not currently performing and has not
performed, for at least the 1-year period preceding the solicitation
of sources by the DoD for the procurement or transaction, any
contract or subcontract for the DoD that is subject to full coverage
under the cost accounting standards prescribed pursuant to 41 U.S.C.
1502 and the regulations implementing such section.
(2) The Offeror grants the Contracting Officer or an authorized
representative the right to examine, at any time before award,
books, records, documents, or other directly pertinent records to
verify any request for an exception under this provision, and to
determine the reasonableness of price.
(c) Requirements for certified cost or pricing data. If the
Offeror is not granted an exception from the requirement to submit
certified cost or pricing data, the following applies:
(1) The Offeror shall submit certified cost or pricing data and
supporting attachments in the following format: [Insert description
of the data and format that are required, and include access to
records necessary to permit an adequate evaluation of the proposed
price in accordance with FAR 15.408, Table 15-2, Note 2. The
Contracting Officer shall insert the description at the time of
issuing the solicitation or specify that the format regularly
maintained by the offeror or prospective subcontractor in its
business operations will be acceptable. The Contracting Officer may
amend the description as the result of negotiations.]
(2) As soon as practicable after agreement on price, but before
contract award (except for unpriced actions such as letter
contracts), the Offeror shall submit a Certificate of Current Cost
or Pricing Data, as prescribed by FAR 15.406-2.
(d) Requirements for data other than certified cost or pricing
data. (1) Data other than certified cost or pricing data submitted
in accordance with this provision shall include all data necessary
to permit a determination that the proposed price is fair and
reasonable, to include the requirements in DFARS 215.402(a)(i) and
215.404-1(b).
(2) In cases in which uncertified cost data is required, the
information shall be provided in the form in which it is regularly
maintained by the Offeror or prospective subcontractor in its
business operations.
(3) The Offeror shall provide information described as follows:
[Insert description of the data and the format that are required,
including access to records necessary to permit an adequate
evaluation of the proposed price in accordance with FAR 15.403-3.]
(4) Within 10 days of a written request from the Contracting
Officer for additional information to support proposal analysis, the
Offeror shall provide either the requested information, or a written
explanation for the inability to fully comply.
(5) Subcontract price evaluation. (i) Offerors shall obtain from
subcontractors the information necessary to support a determination
of price reasonableness, as described in FAR part 15 and DFARS part
215.
(ii) No cost information may be required from a prospective
subcontractor in any case in which there are sufficient non-
Government sales of the same item to establish reasonableness of
price.
(iii) If the Offeror relies on relevant sales data for similar
items to determine the price is reasonable, the Offeror shall obtain
only that technical information necessary--
(A) To support the conclusion that items are technically
similar; and
(B) To explain any technical differences that account for
variances between the proposed prices and the sales data presented.
(e) Subcontracts. The Offeror shall insert the substance of this
provision, including this paragraph (e), in all subcontracts
exceeding the simplified acquisition threshold defined in FAR part
2. The Offeror shall require prospective subcontractors to adhere to
the requirements of--
(1) Paragraph (c) and (d) of this provision for subcontracts
above the threshold for submission of certified cost or pricing data
in FAR 15.403-4; and
(2) Paragraph (d) of this provision for subcontracts exceeding
the simplified acquisition threshold defined in FAR part 2.
(End of provision)
0
16. Add section 252.215-7011 to read as follows:
252.215-7011 Requirements for Submission of Proposals to the
Administrative Contracting Officer and Contract Auditor.
As prescribed in 215.408(6)(ii), use the following provision:
Requirements for Submission of Proposals to the Administrative
Contracting Officer and Contract Auditor (Jan 2018)
When the proposal is submitted, the Offeror shall also submit
one copy each to--
(a) The Administrative Contracting Officer; and
(b) The Contract Auditor.
(End of provision)
0
17. Add section 252.215-7012 to read as follows:
252.215-7012 Requirements for Submission of Proposals via Electronic
Media.
As prescribed in 215.408(6)(iii), use the following provision:
Requirements for Submission of Proposals Via Electronic Media (Jan
2018)
The Offeror shall submit the cost portion of the proposal via
the following electronic media: [Insert media format, e.g.,
electronic spreadsheet format, electronic mail, etc.]
(End of provision)
0
18. Add section 252.215-7013 to read as follows:
252.215-7013 Supplies and Services Provided by Nontraditional Defense
Contractors.
As prescribed in 215.408(7), use the following provision:
Supples and Services Provided by Nontraditional Defense Contractors
(Jan 2018)
Offerors are advised that in accordance with 10 U.S.C. 2380a,
supplies and services provided by a nontraditional defense
contractor, as defined in DFARS 212.001, may be treated as
commercial items. The decision to apply commercial item procedures
to the procurement of supplies and services from a nontraditional
defense contractor does not require a commercial item determination
and does not mean the supplies or services are commercial.
(End of provision)
[FR Doc. 2018-01781 Filed 1-30-18; 8:45 am]
BILLING CODE 5001-06-P