Am I missing anything or the CO is doing it incorrectly?
The best course of action is to ask the contracting officer directly for his/her justification for not following the requirement at FAR 15.403-1(b)(3). One possible explanation is the contracting officer originally believed the item was a commercial item but made a different determination as a result of information discovered during actual negotiations (FAR 15.403-1(c)(3)). Again, it’s best to ask the contracting officer directly for his/her justification and FAR reference, "for you own edification."
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