[Federal Register Volume 84, Number 197 (Thursday, October 10, 2019)]
[Rules and Regulations]
[Pages 54760-54762]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-21847]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Part 2
[FAC 2020-01; FAR Case 2018-008; Docket No. FAR-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: Final rule.
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SUMMARY: DoD, GSA and NASA are issuing a final rule 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: Effective: November 12, 2019.
FOR FURTHER INFORMATION CONTACT: Ms. Zenaida Delgado, Procurement
Analyst, at 202-969-7207 or [email protected] for clarification
of content. For information pertaining to status or publication
schedules, contact the Regulatory Secretariat Division at 202-501-4755.
Please cite FAC 2020-01, FAR Case 2018-008.
SUPPLEMENTARY INFORMATION:
I. Background
DoD, GSA, and NASA published a proposed rule in the Federal
Register at 84 FR 20607 on May 10, 2019, to implement the statutory
changes made to the definition of ``commercial item'' 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 expands 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. Three respondents submitted comments
on the proposed rule.
II. Discussion and Analysis
The Civilian Agency Acquisition Council and the Defense Acquisition
Regulations Council (the Councils) reviewed the public comments in the
development of the final rule. A discussion of the comments is provided
as follows:
A. Summary of Changes
This final rule amends the definition of commercial item in FAR
part 2 to reflect the statutory change made by section 847.
Specifically, the rule adds the phrase ``or to multiple foreign
governments'' at the end of paragraph (8). There are no changes as a
result of comments on the proposed rule.
B. Analysis of Public Comments
1. Supports the proposed rule.
Comment: One respondent stated that the proposed rule accurately
and effectively implements section 847.
Response: Noted.
2. Does not support the proposed rule.
Comment: One respondent stated that the rule is unnecessary, clouds
the definition of what a commercial item is, and sets the stage for
contracting officers
[[Page 54761]]
to lose the ability to require contractors to provide certified cost or
pricing data.
Response: The rule is necessary to implement section 847 of the
NDAA for FY 2018. The Councils do not agree that the implementing rule
will complicate the definition of commercial item and note that the
transactions, which will now become subject to FAR part 12, will be
more simplified and less costly as a result of the reduced number of
government-unique requirements that will be applied.
3. Potential burden reductions associated with future regulatory
actions that facilitate broader acquisition of commercial items.
Comment: One respondent, in response to a request for feedback in
the Federal Register notice for the proposed rule, provided
recommendations with regard to potential burden reductions associated
with future regulatory actions that facilitate broader acquisition of
commercial items, and cited policies that restrict the commercial item
acquisition process and pose a serious threat to the Government's
access to the commercial industrial base.
Response: These comments are outside the scope of this case, but
will be considered in relation to future regulatory actions.
4. Other expansion of the definition of ``commercial item.''
Comment: One respondent recommended expanding the definition of
``commercial item'' to include ``spare assemblies or piece parts which
are a component of the higher level commercial item.''
Response: This recommendation is outside the scope of this case,
and the Councils do not believe there is a need for additional
regulatory clarification of this nature.
III. Expected Impact on the Public
Implementation of this rule allows for an increased number of
transactions to benefit from the less burdensome requirements
associated with rules governing commercial items. Under this 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 technological advances without the
need for costly, time-consuming, Government-sponsored research and
development programs. All of this is made possible due to 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 recordkeeping, reporting, and compliance
requirements. According to an analysis published by the Section 809
Panel at page 23 of its ``May 2017 Interim Report,'' available at
https://section809panel.org/wp-content/uploads/2017/05/Sec809Panel_Interim-Report_May2017_FINAL-for-web.pdf, 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 noncommercial 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. TINA has long been
recognized under analyses performed in accordance with the Paperwork
Reduction Act as one of the most costly statutes and regulations in
Federal procurement. In addition, 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. For these reasons and though the public comment period did
not provide data to monetize savings, this rule is considered
deregulatory.
IV. Applicability to Contracts At or Below the Simplified Acquisition
Threshold (SAT) and for Commercial Items, Including Commercially
Available Off-the-Shelf (COTS) Items
This rule amends 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 was not subject to
the review of the Office of Information and Regulatory Affairs under
section 6(b) of E.O. 12866. This rule is not a major rule under 5
U.S.C. 804.
VI. Executive Order 13771
This final rule is an E.O. 13771 deregulatory action per the
discussion found in Section III, Expected Impact on the Public, of this
preamble.
VII. Regulatory Flexibility Act
DoD, GSA, and NASA have prepared a Final Regulatory Flexibility
Analysis (FRFA) consistent with the Regulatory Flexibility Act, 5
U.S.C. 601, et seq. The FRFA is summarized as follows:
This rule is required to implement section 847 of the NDAA for
FY 2018. The objective is to treat nondevelopmental items, developed
at private expense, that have been sold to multiple foreign
governments, as commercial items.
There were no significant issues raised by the public in
response to the initial regulatory flexibility analysis.
This rule will impact any entities offering to the Federal
Government a nondevelopmental item, developed at private expense,
that has been sold to multiple foreign governments, but did not
otherwise qualify as a commercial item. There are over 327,458 small
business registrants in the System for Award Management database,
but it is unknown how many of those registrants may offer to the
Government a nondevelopmental item, developed at private expense,
that has been sold to multiple foreign governments, but does not
otherwise qualify as a commercial item. It is not expected that this
rule will have a significant economic impact on a substantial number
of small entities, because the number of affected entities is not
expected to be substantial, and any impact will be beneficial, due
to the treatment of additional nondevelopmental items as commercial
items.
The rule does not include additional reporting or recordkeeping
requirements.
There are no available alternatives to the rule to accomplish
the desired objective of
[[Page 54762]]
the statute. Small businesses would benefit from the streamlined
commercial acquisition procedures.
Interested parties may obtain a copy of the FRFA from the
Regulatory Secretariat Division. The Regulatory Secretariat Division
has submitted a copy of the FRFA to the Chief Counsel for Advocacy of
the Small Business Administration.
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.
William F. Clark,
Director, Office of Government-wide Acquisition Policy, Office of
Acquisition Policy, Office of Government-wide Policy.
Therefore, GSA, DoD, and NASA amend 48 CFR part 2 as follows:
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.
0
2. Amend section 2.101, in paragraph (b)(2), in the definition of
``commercial item'', by revising paragraph (8), to read as follows:
2.101 Definitions.
* * * * *
Commercial item * * *
(8) A nondevelopmental item, 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 or to multiple foreign governments.
* * * * *
[FR Doc. 2019-21847 Filed 10-9-19; 8:45 am]
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