December 10, 2020
FAR UPDATE: PROPOSED COMMERCIAL ACQUISITION RULE SETS OUT NEWLY DEFINED "COMMERCIAL PRODUCTS" AND "COMMERCIAL SERVICES" TERMS

On October 15, 2020, the Department of Defense (DoD), the General Services Administration (GSA), and the National Aeronautics and Space Administration (NASA) published a Proposed Rule that replaces the term “Commercial Item” in the Federal Acquisition Regulation (FAR) with two newly defined terms - “Commercial Product” and “Commercial Service.”  As the public comment period draws to a close on December 14, we take this opportunity to take a quick look at the FAR changes implemented by the Proposed Rule.

FAR Part 12 sets out the procedures that control federal government procurements for commercial products and services.  These procedures are supposed to more closely resemble acquisition practices in the general commercial marketplace.  So solicitations and contracts for commercial acquisitions typically contain fewer FAR clauses and mandatory flow-down clauses.  Moreover, subpart 12.6 sets out optional streamlined and abbreviated procedures that contracting officers can apply in order to simplify even further the solicitation and evaluation process.

Under existing FAR provisions, the rules for commercial acquisitions use the term “commercial item” when describing those things that are covered by Part 12.  As defined currently in FAR 2.101, “commercial items” are either “items” used by the general public or non-government entities for non-governmental purposes or “services” in support of such items or that are offered in the commercial marketplace.  Thus, the term encompasses both items and services.

The Proposed Rule, however, eliminates the term “commercial item” from FAR and replaces it with two new terms – “commercial product” and “commercial service.”  The Proposed Rule defines the new terms by splitting the current definition of “commercial item” so that the provisions relating to “items” now fall under the definition for the term “commercial product” (except that the term “item” is replaced with the term “product”) while the provisions relating to “services” now fall under the definition for the term “commercial service.”  The Proposed Rule also amends Part 12 by generally substituting the term "commercial item" with the term "commercial product and commercial service."  Consequently, since collectively the two newly defined terms largely mirror the term “commercial item,” for now at least, the scope of what is covered under Part 12 has not changed.

According to the preamble for the Proposed Rule, splitting the term “commercial item” into the two defined terms better reflects the significant role that commercial services play in government procurements and is supposed to provide more clarity to government acquisition personnel with the goal of encouraging greater engagement in the commercial marketplace.  It seems reasonable to anticipate that splitting the definition into two terms will inevitably result in future regulation amendments that (1) further refine what constitutes a “commercial product” and what constitutes a “commercial service,” and (2) set out diverging acquisition procedures under Part 12 that are more narrowly tailored to each kind of item.  Contractors that offer commercial goods or services to the federal government should remain on alert for any future developments.

To read or obtain a copy of the Proposed Rule go here.

To read other articles from The GovCon Bulletin™ go here.