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Commercial Contracting

ACON 010

DAU GLOSSARY DEFINITION

Any item, other than real property, that is of a type customarily used for nongovernmental purposes and that has been sold, leased, or licensed to the general public, or has been offered for sale, lease, or license to the general public; items evolved from these items that are not yet available in the commercial market but will be in time to meet the delivery requirements of a solicitation.

Alternate Definition

Commercial contracting refers to the procedures used to purchase commercial items. A commercial item is any item, other than real property, that is of a type customarily used by the general public or by non-governmental entities for purposes other than governmental purposes, and has been sold, leased, or licensed to the general public, or offered for sale, lease, or license to the general public. Items that are available to the general public that have minor modifications are also considered commercial items. Services such as installation, maintenance, repair, and training are also commercial items if they are offered to the general public or used in support of a commercial item.

General Information

Since the passage of the Federal Acquisition Streamlining Act of 1994 (FASA), the preference within the Federal Government has shifted from the acquisition of items developed exclusively for the Government to the acquisition of commercial items. This change was necessary to take full advantage of available and evolving technological innovations in the commercial sector. The Government's increased reliance on commercial items is essential for providing solutions that increase war fighter capabilities. Moreover, the competitive pricing of the commercial marketplace is advantageous to the Government.

The implementation of FAR Part 12 permitted streamlining the solicitation for commercial items. Under streamlined solicitation procedures, the contracting officer can combine the synopsis and solicitation into a single document, thus reducing time to solicit and award contracts. Agencies may allow less than the 30-day response time for receipt of bids or proposals from the date of solicitation issuance which is required for non-commercial items (FAR 12.205(c)). The Standard Form 1449 was developed specifically for commercial contracting, and is required for commercial item acquisitions above the simplified acquisition threshold. Either a firm-fixed-price or firm-fixed-price with economic price adjustment contract type arrangement must be used for commercial contracting. In some cases, a time-and-materials or labor-hour contract type may also be used (FAR 12.207).

Fewer specialty clauses from the FAR and DFARS are required for commercial contracting, as such clauses are not customarily used in the commercial marketplace. Since commercial items are purchased by a variety of businesses and individuals, there are generally commercially available warranties or replacement procedures in place for non-conforming items. Government contracts for these same products are also covered under commercially available protections. Commercial contracts also treat contract terminations differently. For example, the termination clause for commercial contracts at FAR 52.212-4(l) does not permit the Government to audit the terminated contractor’s records for settlement purposes as does the non-commercial contract termination clause. However, the Government’s termination rights include all the remedies available to other buyers in the marketplace.

In 1996, Congress authorized the Test Program for Certain Commercial Items which permitted the use of simplified procedures for the acquisition of supplies and services in amounts not to exceed $5.5 million. The test program vested Government contracting officers with additional procedural discretion and flexibility so that commercial item acquisitions in this dollar range may be solicited, offered, evaluated, and awarded in an expeditious manner to maximize efficiency and minimize the burden and administrative cost to both the Government and industry. The program has been made permanent and applies to acquisitions not exceeding $7.5 million. The threshold is $15 million for:

    (1) The acquisition is for commercial products or commercial services that, as determined by the head of the agency, are to be used in support of a contingency operation; to facilitate the defense against or recovery from cyber, nuclear, biological, chemical, or radiological attack; to support a request from the Secretary of State or the Administrator of the United States Agency for International Development to facilitate provision of international disaster assistance; or to support response to an emergency or major disaster, or

    (2) The acquisition will be treated as an acquisition of commercial products or commercial services in accordance with 12.102(f)(1).

Details can be found at FAR subpart 13.5.

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