[Federal Register Volume 85, Number 226 (Monday, November 23, 2020)]
[Proposed Rules]
[Pages 74636-74638]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-25430]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Part 212

[Docket DARS-2020-0044]
RIN 0750-AL19


Defense Federal Acquisition Regulation Supplement: Commercial 
Item Determinations (DFARS Case 2020-D033)

AGENCY: Defense Acquisition Regulations System, Department of Defense 
(DoD).

ACTION: Proposed rule.

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SUMMARY: DoD is proposing to amend the Defense Federal Acquisition 
Regulation Supplement (DFARS) to further implement a section of the 
National Defense Authorization Act for Fiscal Year 2018 that provides 
that a contract for an item using Federal Acquisition Regulation (FAR) 
part 12 procedures shall serve as a prior commercial item 
determination.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before January 22, 2021, to be considered 
in the formation of a final rule.

ADDRESSES: Submit comments identified by DFARS Case 2020-D033, using 
any of the following methods:
    [cir] Regulations.gov: http://www.regulations.gov. Search for 
``DFARS Case 2020-D033''. Select ``Submit a Comment Now'' and follow 
the instructions provided to submit a Comment. Please ``DFARS Case 
2020-D033'' on any attached document.
    [cir] Email: [email protected]. Include DFARS Case 2020-D033 in 
the subject line of the message.
    [cir] Mail: Defense Acquisition Regulations System, Attn: Ms. 
Heather Kitchens, OUSD(A&S)DPC/DARS, Room 3B938, 3060 Defense Pentagon, 
Washington, DC 20301-3060.
    Comments received generally will be posted without change to http://www.regulations.gov, including any personal 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: Ms. Heather Kitchens, telephone 571-
372-6104.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD published a proposed rule in the Federal Register at 84 FR 
65322 on November 27, 2019, under DFARS Case 2019-D029 to implement 
sections 877 and 878 of the National Defense Authorization Act (NDAA) 
for Fiscal Year (FY) 2017 (Pub. L. 114-328) and further implement 
section 848 of the NDAA for FY 2018 (Pub. L. 115-91). DoD is publishing 
a second proposed rule under DFARS Case 2020-D033 to further implement 
section 848, because of substantial changes from the first proposed 
rule. Section 848 modifies 10 U.S.C. 2380(b) to provide that a contract 
for an item using FAR part 12 procedures shall serve as a prior 
commercial item determination, unless the appropriate official 
determines in writing that the use of such procedures was improper or 
that it is no longer appropriate to acquire the item using commercial 
item acquisition procedures. This rule also proposes to remove the 
procedures at DFARS subpart 212.70, established pursuant to section 856 
of the NDAA for FY 2016 (Pub. L. 114-92), which apply to procurements 
of more than $1 million previously procured under a prime contract 
using FAR part 12 procedures. The authority for these procedures 
expires on November 25, 2020.

II. Discussion and Analysis

    One respondent submitted public comments with regard to prior use 
of part 12 procedures and commercial item determinations in response to 
the first proposed rule. DoD reviewed the public comments in the 
development of this second proposed rule. A discussion of the comments 
and the changes made to the rule as a result of those comments is 
provided, as follows:

A. Summary of Significant Changes From the Proposed Rule

    1. Moves to paragraph 212.102(a)(ii) the coverage on prior 
commercial item determinations proposed originally at paragraph 
212.102(a)(iii), in order to precede the paragraph on commercial item 
determinations.
    2. Rewrites the coverage at 212.102(a)(ii) to shift emphasis to 
prior use of commercial item determinations.
    3. Changes the applicability of the proposed paragraph on 
commercial item determinations at 212.102(a)(iii) to apply to 
acquisitions at any dollar value, not just those that exceed $1 
million.

B. Analysis of Public Comments

    Comment: One respondent recommended revision of the proposed rule 
to direct contracting officers to rely on prior use of FAR part 12 
procedures or prior commercial item determinations and only request 
waivers on a case-by-case basis. The respondent believed that the 
proposed rule, as written, would undermine this policy objective, and 
recommended rewrite of proposed DFARS 212.102(a)(ii)(A) and 
(a)(iii)(B)(2).
    Response: DoD has increased the emphasis on the requirement to rely 
on prior use of FAR part 12 procedures. However, some recommendations 
were not accepted, such as removal of the limited applicability to 
acquisition of commercial items pursuant to 212.102(a)(i)(A), and the 
requirement of higher-level approvals for certain commercial item 
determinations. The following are responses to specific aspects of the 
respondent's comments on the first proposed rule:
    1. Applicability to statutory exceptions (212.102(a)(i)(B)). 10 
U.S.C. 2380(b)(1) requirement with regard to prior use of FAR part 12 
procedures

[[Page 74637]]

serving as prior commercial item determination does not apply to items 
purchased using FAR part 12 procedures that are not commercial items, 
but only treated as commercial items (i.e., 41 U.S.C. 1903 and 10 
U.S.C. 2380a). It does not make sense to infer a commercial item 
determination for acquisitions of items that may not be commercial 
items, and do not require a commercial item determination. Further, 
applicability of these statutory exceptions to treat certain items as 
commercial items is not dependent on the particular items being 
purchased, but on circumstances peculiar to a particular acquisition, 
that cannot be extrapolated to other acquisitions of the same item. DoD 
concluded that the 10 U.S.C. 2380(b)(1) statement ``shall serve as a 
prior commercial item determinations for such item for purposes of this 
chapter'' is applicable only if a commercial item determination is 
applicable to the item.
    2. Applicability at all dollar values. According to 10 U.S.C. 2380, 
as amended by section 848 of the NDAA for FY 2018, unless certain 
determinations are made, a contract for an item acquired using 
commercial item acquisition procedures under part 12 of the Federal 
Acquisition Regulation shall serve as a prior commercial item 
determination with respect to such item for purposes of this chapter. 
This law does not distinguish between acquisitions above or below $1 
million. DoD concluded that it, therefore, applies regardless of dollar 
value.
    3. Prior use of FAR part 12 procedures (212.102(a)(ii)). Due to 
amendment of 10 U.S.C. 2380 by section 848 of the NDAA for FY 2019, the 
consideration of whether FAR part 12 procedures have been previously 
used should be the next step in the decision-making process (after 
determining that a statutory exception does not apply). Therefore, 
these paragraphs have been relocated from 212.102(a)(iii) to 
212.102(a)(ii), because prior use of part 12 procedures needs to be 
considered prior to the need for a new commercial item determination. 
In order to determine whether part 12 procedures have been previously 
used, the contracting officer shall review the Commercial Item 
Determination Database, or may utilize other available evidence. The 
contracting officer shall document the file accordingly.
    This proposed rule limits to DoD contracts the requirement that 
prior use of part 12 procedures shall serve as a commercial item 
determination, because this is a DoD statute, implemented in the DFARS, 
and DoD does not control how civilian agencies make commercial item 
determinations and use FAR part 12 procedures, nor does it have the 
data on civilian agency commercial item determinations in its 
commercial item determination database.
    DoD has not accepted all of the recommended changes to the prior 
use of FAR part 12 procedures, because there are nuances relating to 
other statutes that need to be addressed; this rule also addresses 10 
U.S.C. 2306a(b)(4) and 10 U.S.C. 2380b. This rule also retains the 
delegation to the head of the contracting activity of the function 
assigned in the statute to the senior procurement executive.
    4. Million dollar threshold for commercial item determinations 
(when there is no evidence of prior use of FAR part 12 procedures for 
the acquisition of commercial items (212.102(a)(iii)). The million 
dollar threshold was based on policy, to avoid overly burdensome 
requirements on lower dollar value acquisitions. If contracting 
officers are accepting prior use of part 12 procedures, even below $1 
million, as commercial item determinations for subsequent buys, then it 
is necessary to apply the same standards at any dollar value, since 
these determinations can form the basis for much larger acquisitions.

C. Other Changes

    The rule proposes to delete, add, or amend some of the pointers to 
DFARS Procedures, Guidance, and Information (PGI) to conform to the 
current PGI.

III. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold and for Commercial Items, Including Commercially Available 
Off-the-Shelf Items

    This rule does not create any new solicitation provisions or 
contract clauses, or amend any existing provisions or clauses.

IV. 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.

V. Executive Order 13771

    This rule is not expected to be subject to E.O. 13771, because this 
rule is not a significant regulatory action under E.O. 12866.

VI. Regulatory Flexibility Act

    DoD does not expect this proposed rule to have a significant 
economic impact on a substantial number of small entities within the 
meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. 
However, an initial regulatory flexibility analysis has been performed 
and is summarized as follows:
    This proposed rule is necessary in order to further implement 
section 848 of the National Defense Authorization Act (NDAA) for Fiscal 
Fear (FY) 2018 (10 U.S.C. 2380(b)).
    The objective of this rule is to address the use of FAR part 12 
procedures and commercial item determinations. If the Commercial Item 
Determination Database contains a prior commerciality determination, or 
the contracting officer has other evidence that an item has previously 
been acquired by DoD using commercial item acquisition procedures under 
FAR part 12, the prior contract shall serve as a prior determination 
that an item is a commercial item, as defined in FAR 2.101. The legal 
basis for the rule is the NDAA section cited as the reason for the 
action.
    DoD awarded contracts to an average of 40,689 unique entities 
(including 30,806 small businesses) each year from FY 2016 through FY 
2018. This rule impacts the procedures for commercial item 
determinations for products and services offered to the Government.
    This rule does not impose any new reporting, recordkeeping, or 
other compliance requirements.
    The rule does not duplicate, overlap, or conflict with any other 
Federal rules.
    DoD did not identify any significant alternatives that would 
minimize or reduce the significant economic impact on small entities, 
because there is no significant impact on small entities. Any impact is 
expected to be beneficial.
    DoD invites comments from small business concerns and other 
interested parties on the expected impact of this rule on small 
entities.
    DoD will also consider comments from small entities concerning the 
existing regulations in subparts affected by this rule in accordance 
with 5 U.S.C. 610. Interested parties must submit such comments 
separately and should cite 5 U.S.C. 610 (DFARS Case 2020-D033), in 
correspondence.

[[Page 74638]]

VII. Paperwork Reduction Act

    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).

List of Subjects in 48 CFR Part 212

    Government procurement.

Jennifer D. Johnson,
Regulatory Control Officer, Defense Acquisition Regulations System.

    Therefore, 48 CFR part 212 is proposed to be amended as follows:

PART 212--ACQUISITION OF COMMERCIAL ITEMS

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1. The authority citation for part 212 continues to read as follows:

    Authority: 41 U.S.C. 1303 and 48 chapter 1.

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2. Revise section 212.102 to read as follows:


212.102  Applicability.

    (a)(i) Use of FAR part 12 procedures. Use of FAR part 12 procedures 
is based on--
    (A) A determination that an item is a commercial item, as defined 
in FAR 2.101 (see paragraph (a)(iii) of this section); or
    (B) Applicability of one of the following statutes that provide for 
treatment as a commercial item and use of part 12 procedures, even 
though the item may not meet the definition of ``commercial item'' at 
FAR 2.101 and does not require a commercial item determination:
    (1) 41 U.S.C. 1903--Supplies or services to be used to facilitate 
defense against or recovery from cyber, nuclear, biological, chemical, 
or radiological attack pursuant to FAR 12.102(f); or
    (2) 10 U.S.C. 2380a--Supplies or services from nontraditional 
defense contractors pursuant to 212.102(a)(iv).
    (ii) Prior use of FAR part 12 procedures. (A) Pursuant to 10 U.S.C. 
2380(b), except as provided in paragraph (a)(ii)(B) of this section or 
unless the item was acquired pursuant to paragraph (a)(i)(B) of this 
section, if the Commercial Item Determination (CID) Database (for 
website see PGI 212.102(a)(iii)(3)) contains a prior commerciality 
determination, or the contracting officer has other evidence that an 
item has been acquired previously by DoD using commercial item 
acquisition procedures under FAR part 12, then the prior contract shall 
serve as a determination that an item is a commercial item, as defined 
in FAR 2.101. The contracting officer shall document the file 
accordingly.
    (B)(1) If the item to be acquired meets the criteria in paragraph 
(a)(ii)(A) of this section the item may not be acquired using other 
than FAR part 12 procedures unless the head of a contracting activity 
issues a determination as specified in paragraph (a)(ii)(B)(2)(ii) of 
this section.
    (2) Pursuant to 10 U.S.C. 2306a(b)(4)(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. In accordance with 10 U.S.C. 2306a(b)(4) and 10 U.S.C. 2380(b), 
if the contracting officer questions a prior determination to use part 
12 procedures and instead chooses to proceed with a procurement of an 
item previously determined to be a commercial item using procedures 
other than FAR part 12 procedures, the contracting officer shall 
request a review by the head of the contracting activity that will 
conduct the procurement. Not later than 30 days after receiving a 
request for review, the head of a contracting activity shall--
    (i) Confirm that the prior use of FAR part 12 procedures was 
appropriate and still applicable; or
    (ii) 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.
    (iii) Commercial item determination. Unless the procedures in 
paragraph (a)(ii) of this section are applicable, when using FAR part 
12 procedures for acquisitions of commercial items pursuant to 
212.102(a)(i)(A), the contracting officer shall--
    (A) Determine in writing that the acquisition meets the commercial 
item definition in FAR 2.101;
    (B) Include the written determination in the contract file;
    (C) Obtain approval at one level above the contracting officer when 
a commercial item determination relies on paragraphs (1)(ii), (3), (4), 
or (6) of the ``commercial item'' definition at FAR 2.101; and
    (D) Follow the procedures and guidance at PGI 212.102(a)(iii) 
regarding file documentation and commercial item determinations.
    (iv) Nontraditional defense contractors. In accordance with 10 
U.S.C. 2380a, contracting officers--
    (A) Except as provided in paragraph (a)(iii)(B) of this section, 
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;
    (B) Shall treat services provided by a business unit that is a 
nontraditional defense contractor as commercial items, to the extent 
that such services use the same pool of employees as used for 
commercial customers and are priced using methodology similar to 
methodology used for commercial pricing; and
    (C) Shall document the file when treating supplies or services from 
a nontraditional defense contractor as commercial items in accordance 
with paragraph (a)(iii)(A) or (B) of this section.
    (v) Commercial item guidebook. For a link to the commercial item 
guidebook, see PGI 212.102(a)(iii)(4).

Subpart 212.70 [Removed and reserved]

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3. Remove and reserve subpart 212.70, consisting of sections 212.7000 
and 212.7001.

[FR Doc. 2020-25430 Filed 11-20-20; 8:45 am]
BILLING CODE 5001-06-P