A commercial item determination should define the item or service, document market research, identify the FAR 2.101 Commercial Item definition, and include a “determination” that the item is commercial. Sounds easy right!
Identifying the Item/Service
An important step in the process is defining the item or service. A commercial item determination should clearly document the description of the item/service, part number and National Stock Number (NSN) if available, and include the purpose and overall form, fit, and function. It is difficult for a buyer to perform market research or understand the market if there is not a good understanding of what is being purchased.
For example, a buyer is making a commercial item determination on a “Filter” for a military plane. The filter is not sold in the commercial market. The description “Filter” is too general. What kind of filter? There are a variety of filters including air, fuel, fluid, and hydraulic filters on an aircraft. Even if it was defined as an air filter, is there only one air filter on a plane? No, it could be an air intake filter for an engine or an air filter for the cabin. The buyer determines the item is a cabin air filter. So, what is the function or purpose of a cabin air filter. It is a device that is used to capture and remove impurities from the air. Information on the form, fit, physical, and performance specifications (e.g., size of the filter, filtration level, type of material used, etc.) of the proposed item should be documented.
Documenting the details of the specific filter you are going out to purchase is important. The fact the proposed filter, due to size and filtration level, is only used on military aircraft does not change the fact that cabin air filters of all sizes and filtration levels are sold to the general public for use in most commercial aircrafts.
Time to Perform Market Research
Now that the item and function is defined, it is time to consider your on-going market research for the category/commodity the item fits in and potentially perform some additional specific market research. Market research is the process of collecting and analyzing information within the market. DFARS 244.402 addresses the expectation that contractors conduct market research when making determinations. Through market research the buyer identifies a “similar to” cabin air filter that is used in commercial planes. Both filters have the same functionality – to capture and remove impurities from the air.
A comparison of the physical characteristics/technical differences between the proposed and similar to item should be documented. The proposed part for the military plane may be a different size, different filtration level, or made of a stronger material for the government. However, this does not change the overall functionality of the proposed filter; it is the same as the commercial cabin air filters. Remember, the proposed item/service does not have to be used by the general public, however, in order to meet the commercial item definition, there should be a similar item customarily used by the general public identified.
Which Definition Applies?
The determination should identify which one of the 8 definitions in FAR 2.101 Commercial Items applies. In this example, a cabin air filter meets FAR 2.101 Commercial Item, Paragraph 1, of a type customarily used by the general public.
What Documentation Should be Included?
Documentation supporting the commercial item determination should include market research such as datasheets, catalogs, and websites. Whether market research is successful or unsuccessful, all effort performed should be documented. For sole source items, the subcontractor may need to provide additional information on its commercial sales. Market research can be summarized in the determination or attached. We have seen some contractor’s commercial item determination forms have a small amount of space on the form to document market research, and as a result, minimal information is included. This can be a big problem for contractors. DCMA CPSR teams review purchase order files and cite the practice as inadequate when commercial item determinations do not include market research.
Do not forget to properly reference, document, and maintain on-going category or commodity market research that the buyers should be doing.
Commercial Item Determination
The commercial item determination should tell the story, include market research, the FAR 2.101 definition and a “determination” that the item is commercial. Commercial item determinations should be approved in accordance with the company’s policy. A well written CID may be relied on by the government and alleviate additional questions and requests for data.
Can I Rely on the Prior Commercial Item Determination?
Yes. Once an item or service has been determined commercial by your purchasing department, additional determinations for future buys of the same item or service do not need to be performed. Just like the Government, your buyers can rely on prior determination, but you need to maintain an audit trail back to the original documentation. A best practice is to create a database of parts determined commercial and a separate file where a copy of the original determination can be maintained so when the PO files are archived or dispositioned when closed, the determination is not lost over time.
Redstone GCI assists contractors throughout the U.S. and internationally with understanding the Government’s expectations in making a Commercial Item Determination.
Lynne is a Director with Redstone Government Consulting, Inc. providing government contract consulting services to our clients primarily related to Commercial Item Determinations and support, Cost Accounting Standards, DFARS Business System Audits, Proposals, and Incurred Cost. Prior to joining Redstone Government Consulting, Lynne served in several capacities with DCAA and DCMA for over 35 years. Professional Experience Lynne began her career working with DCAA in the Honeywell Resident Office, Clearwater, FL in 1984. Lynne’s experience included various positions which involved conducting or reviewing forward proposals or rate audits, financial capability audits, progress payments, accounting and estimating systems, cost accounting standards, claims and disclosure statement reviews. She is an expert in FAR, DFARS, CAS and testified as an expert witness. Lynne assisted in drafting the commercial item guidance for DCAA Headquarters. Lynne was assigned as a Regional Technical Specialist where she provided guidance to 20 field offices on highly complex or technical issues relative to forward pricing, financial capability or progress payment issues. As an Assistant for Quality, she was involved in reviewing and ensuring audit reports were in compliance with policy and GAGAS as well as made NASBA certified presentations to the staff including but not limited to billing reviews, CAS, unallowable cost and progress payments. To enhance her experience in government contracting, Lynne accepted a position with DCMA in 2015 as part of the newly organized DCMA Cadre of Experts in the Commercial Item Group. This included performing reviews of prime contractor’s assertions and/or commercial item determinations as well as performing price analyses. Lynne was a project lead and later became a lead analyst where she engaged with the buying commands on requests and reviewed price analysis reviews performed by a team of 5 analysts. She also assisted the DCMA CPSR team relative to commercial items and co-instructed the Commercial Item Training presented to DCMA. Education Lynne earned a Bachelor of Science Degree in Accounting from the University of Central Florida. Certifications State of Florida Certified Public Accountant State of Alabama Certified Public Accountant Defense Acquisition Workforce Improvement Act (DAWIA) Level III- Auditing DAWIA Level III – Contracting