[Federal Register Volume 84, Number 91 (Friday, May 10, 2019)]
[Proposed Rules]
[Pages 20607-20609]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-09703]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Part 2
[FAR Case 2018-008; Docket No. 2018-0008, Sequence No. 1]
RIN 9000-AN68
Federal Acquisition Regulation: Definition of ``Commercial Item''
AGENCY: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Proposed rule.
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SUMMARY: DoD, GSA and NASA are proposing to amend the Federal
Acquisition Regulation (FAR) to implement a section of the National
Defense Authorization Act for Fiscal Year 2018 to revise the definition
of a ``commercial item.''
DATES: Interested parties should submit comments to the Regulatory
Secretariat Division at one of the addresses shown below on or before
July 9, 2019 to be considered in the formulation of a final rule.
ADDRESSES: Submit comments in response to FAR Case 2018-008 by any of
the following methods:
Regulations.gov: http://www.regulations.gov.
Submit comments via the Federal eRulemaking portal by entering
``FAR Case 2018-008'' under the heading ``Enter Keyword or ID'' and
selecting ``Search.'' Select the link ``Comment Now'' that corresponds
with ``FAR Case 2018-008.'' Follow the instructions provided on the
screen. Please include your name, company name (if any), and ``FAR Case
2018-008'' on your attached document.
Mail: General Services Administration, Regulatory
Secretariat Division (MVCB), ATTN: Ms. Lois Mandell, 1800 F Street NW,
2nd floor, Washington, DC 20405.
Instructions: Please submit comments only and cite ``FAR case 2018-
008'' in all correspondence related to this case. All comments received
will be posted without change to http://www.regulations.gov, including
any personal and/or business confidential information provided. To
confirm receipt of your comment(s), please check www.regulations.gov,
approximately two to three days after submission to verify posting
(except allow 30 days for posting of comments submitted by mail).
FOR FURTHER INFORMATION CONTACT: For clarification of content, contact
Ms. Zenaida Delgado, Procurement Analyst, at 202-969-7207. For
information pertaining to status or publication schedules, contact the
Regulatory Secretariat Division at 202-501-4755. Please cite ``FAR Case
2018-008.''
SUPPLEMENTARY INFORMATION:
I. Background
DoD, GSA, and NASA are proposing to amend the Federal Acquisition
Regulation (FAR) to change the definition of ``commercial item'' at FAR
2.101, so that the regulatory definition conforms to statutory changes
made to the definition by section 847 of the National Defense
Authorization Act (NDAA) for Fiscal Year (FY) 2018 (Pub. L. 115-91,
enacted December 12, 2017). The rule would broaden the definition to
allow certain additional items developed exclusively at private expense
to qualify for the benefits associated with being treated as a
commercial item. Section 847 amends the definition of ``commercial
item'' at 41 U.S.C. 103(8) to expand the universe of nondevelopmental
items (NDIs) that qualify as commercial items to include items sold in
substantial quantities on a competitive basis to multiple foreign
governments.
The statutory and regulatory definition of ``commercial item'' is
broad and covers a wide range of products and services. It includes:
Products, other than real property, that have been offered
for sale, lease, or license to the public. Possible indications that an
item is commercial are a commercial sales history, listing in catalogs
or brochures, an established price, and distributors. Examples of
commercial items bought by agencies are transport aircraft, computers,
medicine, and fuel. The commercial market is global; commercial items
are not limited to the domestic commercial market.
Products that evolved through advances in technology or
performance and will be available in the commercial market in time to
meet the delivery requirements of the solicitation. Examples of such
items are product updates, model changes, and product improvements such
as new versions of software.
Products that have received minor modifications to meet
agency requirements. To be considered minor, a modification may not
significantly alter the product's nongovernmental function or essential
physical
[[Page 20608]]
characteristics. In determining whether a modification is minor,
agencies should consider the value and size of the modification and the
comparative value and size of the final product.
Products that were created by integrating commercial
subsystems and components into a unique system. For example, a computer
system composed of commercial subsystems would be considered a
commercial item. Another example is industrial plant equipment that
combines commercial components into a unique item based on customer
needs.
Installation services, maintenance services, repair
services, training services, and other services procured to support a
commercial product. Help desks, call centers, warranty repair services,
user training, equipment installation, and other services related to
item support are examples.
Standalone services offered and sold competitively, in
substantial quantities, in the commercial marketplace based on
established catalog or market prices for specific tasks performed and
under standard commercial terms and conditions. Construction, research
and development (R&D), warehousing, garbage collection, and
transportation of household goods are examples.
NDIs, if the procuring agency determines the item was
developed exclusively at private expense and sold in substantial
quantities, on a competitive basis, to multiple State and local
governments. NDI is defined separately in FAR 2.101. An NDI includes an
item of supply used exclusively for governmental purposes by a Federal
agency, a State or local government, or a foreign government with which
the United States has a mutual defense cooperation agreement. Examples
include--
[cir] Protective vests used by police departments and rescue
equipment used by fire and rescue units;
[cir] Defense products previously developed by defense agencies of
U.S. allies and used exclusively for governmental purposes by Federal
agencies, state or local governments, or a foreign government;
[cir] Items that require only minor modifications to meet the
requirements of the procuring agency; and
[cir] A mechanical dereefer (mechanism for releasing parachute
reefing lines) used with the U.S. Army's cargo parachutes that was
developed for and first used by the Canadian Army.
II. Discussion and Analysis
This proposed rule will amend the definition of commercial item in
FAR part 2 to reflect the statutory change made by section 847.
Specifically, the rule would add the phrase ``or to multiple foreign
governments'' at the end of paragraph (8).
III. Expected Impact of the Proposed Rule
This rule allows for more transactions to follow requirements for
commercial items. This simplifies the transaction in terms of fewer
Government reporting requirements and should decrease the cost per
transaction for both the Government and the contractor. Under the
proposed rule, for the first time, NDIs that are developed exclusively
at private expense and sold in substantial quantities to multiple
foreign governments may be treated as commercial items.
Because commercial items, which include commercially available off-
the-shelf items, are sold to the Government in the same way as NDIs,
the Government can take advantage of the previous testing and general
acceptance of the product in the commercial marketplace or by a state,
local, or foreign government.
To promote the Government's acquisition of commercial items, the
law and FAR part 12 create a preference for buying commercial items and
provide relief from certain record-keeping, reporting, and compliance
requirements. According to an analysis published by the Section 809
Panel in its May 2017 Interim Report, commercial item acquisitions are
subject to up to 138 contract clauses, while acquisitions for NDIs that
do not meet the commercial item definition as well as acquisitions for
non-commercial items could be subject to nearly 500 clauses, depending
on the principal type and purpose of the contract. For example, a
commercial firm selling an NDI today to multiple foreign governments in
substantial quantities could face compliance costs with the Truth In
Negotiations Act (TINA), which requires implementation of government-
specific business systems for any modifications to competitively
awarded items. Policies governing commercial item acquisitions favor
reliance on commercial sector business practices and use of standard
commercial terms and conditions to the maximum extent practicable. Each
of these dimensions of the commercial item framework contributes to
more simplified and less costly transactions.
DoD, GSA, and NASA are unable to monetize the cost savings, because
procurement data is not captured in a manner that enables a
determination to be made regarding how many NDIs developed exclusively
at private expense have been sold or are expected to be sold to
multiple foreign governments in substantial quantities, that are not
also sold in substantial quantities to multiple State and local
governments.
Accordingly, DoD, GSA, and NASA welcome feedback, especially from
respondents who would expressly benefit from this rulemaking, such as:
(i) Identification of any transactional information (e.g., Procurement
Instrument Identifiers (PIIDs)) associated with contracts awarded in
the past 10 years that would have benefitted from the rule had it been
in effect; (ii) any information that might help the regulatory drafters
better understand--both qualitatively and quantitatively--the savings
and/or cost avoidance that the rule will provide; and (iii) -potential
burden reductions associated with future regulatory actions that
facilitate broader acquisition of commercial items. In responding to
item (ii), respondents are encouraged to discuss, to the extent
possible, specific components of savings and cost-avoidance (e.g.,
identify savings and/or cost-avoidance associated with specific clauses
that would no longer be required as a result of this regulatory
change).
IV. Applicability To Contract At or Below the Simplified Acquisition
Threshold and for Commercial Items, Including Commercially Available
Off-the-Shelf Items
This rule proposes to amend the FAR to change the definition of
``commercial item''. The revision does not add any new solicitation
provisions or clauses, or impact any existing provisions or clauses.
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 rule is not a significant regulatory action and therefore, this
rule was not subject to the review of the Office of Information and
Regulatory Affairs (OIRA) under section 6(b) of E.O. 12866. This rule
is not a major rule under 5 U.S.C. 804.
[[Page 20609]]
VI. Executive Order 13771
This proposed rule is expected to be an E.O. 13771 deregulatory
action. Details are provided in section III of this preamble.
VII. Regulatory Flexibility Act
DoD, GSA, and NASA do not expect this rule to have a significant
economic impact on a substantial number of small entities within the
meaning of the Regulatory Flexibility Act 5 U.S.C. 601 et seq. However,
an Initial Regulatory Flexibility Analysis (IRFA) has been performed
and is summarized as follows:
DoD, GSA, and NASA are proposing to amend the Federal
Acquisition Regulation (FAR) to change the definition of
``commercial item'' so that NDIs that are developed exclusively at
private expense and sold in substantial quantities to multiple
foreign governments may be treated as commercial items.
The objective is to implement section 847 of the NDAA for FY18.
The legal basis for this rule is 41 U.S.C. 103(8).
The proposed rule impacts all entities who do business with the
Federal Government, including the over 327,458 small business
registrants in the System for Award Management database. This
proposed rule expands the definition of ``commercial item'' for
nondevelopmental items (NDIs) to include those sold to multiple
foreign governments. This change will allow more acquisitions to
fall under the definition of commercial item procurements and use
standard commercial terms and conditions to the maximum extent
practicable. This will result in a reduction of statutory and
regulatory requirements as FAR part 12 contract actions are exempt
at the prime or subcontract level from various statutes, policies,
and contracting requirements unique to the federal procurement
process. Therefore, small businesses would benefit from the
streamlined processes.
The proposed rule does not include additional reporting or
record keeping requirements.
The rule does not duplicate, overlap, or conflict with any other
Federal rules.
There are no available alternatives to the proposed rule to
accomplish the desired objective of the statute. Small businesses
will benefit from the streamlined commercial acquisition procedures.
The Regulatory Secretariat Division has submitted a copy of the
IRFA to the Chief Counsel for Advocacy of the Small Business
Administration. A copy of the IRFA may be obtained from the Regulatory
Secretariat Division. DoD, GSA and NASA invite comments from small
business concerns and other interested parties on the expected impact
of this rule on small entities.
DoD, GSA, and NASA will also consider comments from small entities
concerning the existing regulations in subparts affected by this rule
consistent with 5 U.S.C. 610. Interested parties must submit such
comments separately and should cite 5 U.S.C. 610 (FAR Case 2018-008) in
correspondence.
VIII. Paperwork Reduction Act
This 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 Part 2
Government procurement.
Dated: April 22, 2019.
William F. Clark,
Director, Office of Government-wide Acquisition Policy, Office of
Acquisition Policy, Office of Government-wide Policy.
Therefore, DoD, GSA, and NASA are proposing to amend 48 CFR part 2
as set forth below:
PART 2--DEFINITIONS OF WORDS AND TERMS
0
1. The authority citation for 48 CFR part 2 continues to read as
follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51
U.S.C. 20113.
2.101 [Amended]
0
2. In paragraph (b)(2), amend paragraph (8) in the definition of
``Commercial item'' by removing ``local governments'' and adding in its
place ``local governments or to multiple foreign governments''.
[FR Doc. 2019-09703 Filed 5-9-19; 8:45 am]
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