Our Commercial Item Expert, Lynne Nalley, discusses and clarifies common questions and issues associated with commercial items and Commercial Item Determinations (CID).
What is a Commercial Determination (or Commercial Item Determination)?
A Commercial Determination (commonly referred to as a Commercial Item Determination) is a document that identifies whether a proposed item or service meets one of the eight definitions in FAR 2.101 Commercial Items (but there is more to it). It is not as easy as having a document listing the eight definitions and placing a checkmark next to one of the definitions. You need to demonstrate your knowledge of the item or service and explain WHY it is commercial.
What Information is Included in a Commercial Determination?The commercial determination should:
- Describe the item/service, including its form, fit, and function.
- State whether the item/service has been sold or offered for sale to the general public or non-government end users (so a non-government end user is an end user that is not a state, local, federal, or foreign government).
- Identify a similar item or service if the proposed item has not been sold to the general public.
- Include sales data to the general public and government for the proposed item or similar item if available.
- Include similarities and differences between the proposed and similar-to items.
- Identify modifications and whether the modification is customarily available in the marketplace or specifically required for the federal government.
- Include market research per FAR Part 10 (VERY IMPORTANT)
- Technical analysis support should be requested when the proposed item is “of a type” FAR 2.101 definition 1, “evolved” definition 2, or “modified” definition 3.
- If it is a service, identify whether it supports a commercial item or a competitive service.
- Identify whether services have terms and conditions similar to commercial terms and conditions.
- Include a “determination” that the item and/or service is commercial (IMPORTANT)
- Be signed by the buyer and approved.
How Does a Contractor Know if They Need to Make a Commercial Determination on a Subcontract Item and/or Service?
When a solicitation or contract includes FAR 52.244-6 Subcontracts for Commercial Items, there is a requirement that contractors use commercially available items or services to the extent possible.
DFARS 244.402(a) states contractors are required to determine whether a subcontract item meets the definition of a commercial item. There is no threshold in the FAR/DFARS for documenting a commercial determination on a subcontract item/service. A commercial determination is not required on a completed subcontract item; however, you can still make a commercial determination and limit the number of clauses that you flow down to the subcontract.
Do Contractors Have to Make a New Commercial Determination Every Time They Bid the Same Commercial Item?
No. You can rely on a prior commercial determination on the same part or service but should document reliance on the prior commercial determination in the proposal.
What is the Impact of Changes to the Item or Service in the Marketplace?
It depends. If you rely on your prior commercial determination, you need to identify the changes between the old and new part numbers. For example, did it change from a dash 1 to a dash 2, was it a color change, or was an upgraded component included? You need to provide a clear understanding of the changes to the item and/or service in conjunction with reliance on the prior determination.
Can You Leverage Commercial Determinations Made by the Government?
Yes. Did you sell the exact item or service to the government under a FAR 12 contract? If so, the FAR 12 contract should serve as a commercial determination unless the contract was issued to a non-traditional defense contractor using commercial procedures.
Another thing to consider is whether the contracting officer or DCMA made a commercial determination on the exact commercial item and/or service in a previous proposal you submitted to the government or prime? If so, refer to the commercial determination in your proposal. There are two databases with commercial determinations on DCMA’s webpage. One database only allows for DoD Access, and the other one is a public-facing database called the Excel Repository (DOD & Public Access).
You can search by part number or description and see if a Commercial Determination exists. If so, you can screenshot or reference the database in your proposal. We would like to see the government make the commercial determination information more accessible to the industry since a Government Commercial Determination can and should be relied on by the industry.
Is a Contracting Officer Required to Make a Commercial Determination on a Subcontract?
No. There is no requirement in the FAR for a contracting officer to make a commercial determination on a subcontract. A Contracting Officer may take exception to your commercial determination, in which case you would need to provide additional support so they understand your determination. While there is no requirement to do so, the Contracting Officer can decide to make a commercial determination on a subcontract or ask DCMA to make the determination.
Conclusion
When preparing a commercial determination, make sure it is well documented, describes the item or service, includes a statement that you are making a commercial determination, which FAR 2.101 definition is applicable, includes market research, and is signed/approved.
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