Commercial item determination opportunity – act now for future success

Over the past several years, DCMA’s Commercial Item Group (CIG) has stood at the forefront of a push to make contracting less complex for DoD and its commercial suppliers. In late March, the CIG once again leaned in and issued a class Commercial Item Determination (CID) for select products and services that may be used to meet urgent national needs in response to the COVID-19 pandemic. Many applauded the CIG’s quick work to navigate DoD’s acquisition workforce toward the streamlined acquisition methods afforded to it under FAR Part 12.

As it turns out, the CIG was not done.

On April 10, the CIG took the unprecedented step of releasing a Request for Information (RFI) on beta.sam.gov that allows contractors to request a CID for their product(s), ahead of government solicitation. This will allow certain contractors to engage directly with the forward-thinking minds at the CIG. Their judgments were previously reserved for requests that came directly from DoD contracting officers.

As a backdrop, the last several years have seen a significant push from Congress, DoD leadership, and others for an increased focus on commercial item acquisition, with a primary goal of increasing access to innovative companies and their products, services, and solutions. The CIG has been a key part of this push, providing specialized resources to assist Contracting Officers with analyzing products and services and assessing their commerciality. This RFI represents a huge opportunity for a specific subset of entities who may not have typically sold their products to DoD customers due to the burdens and complexities that come with entering into a government contract governed by FAR Part 15, FAR Part 31, or the Cost Accounting Standards.

Contractors who are considering responding to this RFI should review the requirements and assess their product offering to determine if a CID would better position them for future DoD procurements. Below are some thoughts on the RFI, in addition to a discussion of some common issues that interested companies should bear in mind:

RFI specifics:

1. Nontraditional defense contractors: This is only intended for nontraditional defense contractors as defined in 10 U.S.C. 2302(9), meaning entities that are not currently performing and have not recently (within past year) performed on full CAS-covered contracts. This will exclude some established contractors who hold large cost-type contracts.
2. Products only: As written, this RFI is limited to products and excludes services. Commercial Item Determinations for services have always been more difficult, since services are often tailored to each customer’s needs and may include unique terms and conditions. We hope that commercial services are considered for future efforts. We understand the potential difficulties associated with defining services for unknown efforts as commercial; however, we think there could be some opportunities to define specific types of services for specific companies as commercial, with some thought given to the process.
3. New, high-value items: The CIG is currently only looking for items that are not already being procured by DoD as commercial items, with unit prices or potential extended value over the TINA threshold of $2 million. As one would expect, the CIG is looking to maximize its return on investment, but even contractors with lower priced items (based on unit price) should consider this opportunity if there is an upcoming requirement or a potential demand that would lead to over $2 million in total value.
4. Due date of May 18, 2020: Responses are due to the CIG by May 18, 2020, and the review time will depend on the overall workload of the CIG, with normal (DoD customer) requests taking precedence.

Key themes for successful CIDs:

1. Follow the regulation language: The required documentation for this RFI starts with a statement of which part of the FAR definition of a commercial item the product satisfies, which in turn dictates the necessary types of commerciality support. When making a commerciality assertion and preparing the support package, contractors should look to the specific language in the definition as well as other government resources like the DoD Guidebook for Acquiring Commercial items for ideas on how to support that assertion. Modified items (part three of the definition) may need additional details on the scope and price of the minor modification, whereas items that are “of a type” sold commercially may need more side-by-side comparisons of technical specs (more on that below).
2. Compare form, fit, and function: When asserting that your products are of a type sold commercially, the CIG required documentation discusses side-by-side comparisons to assist with their review. Specifically, some of the suggested comparisons align with what we have historically seen as best practices for supporting commerciality, including a look at the essential physical characteristics, performance characteristics, functions, and visual representations of the proposed item and the comparable item sold commercially. These types of comparisons, which are similar to the “form, fit, and function” criteria described in DoD’s Guidebook for Acquiring Commercial Items, are critical for contractors arguing the “of a type” part of the commercial item definition.
3. Address price differences: In practice, we have seen that many commerciality discussions still hit snags on price differences between the proposed item and similar items sold commercially. As opposed to shying away from these discussions, contractors should proactively address the price differences, using multiple approaches if necessary to develop the narrative for price reasonableness. Some topics that may require attention include:

• Key price drivers for customized products, or the overall pricing process for similar products
• Premium pricing for various features or functionality
• Impact of the location of production or design
• Market comparisons to similar items
• Prior government purchases of similar items

Conclusion:

DCMA’s CIG have been at the forefront of commercial item acquisition innovation, and this RFI further demonstrates their willingness to engage with industry and leverage nontraditional companies to increase access to innovative products. Nontraditional contractors who have been looking for inroads into the commercial item acquisition space should carefully review this opportunity, as a favorable CID now will set them up for streamlined procurements of their items in the future.