Hold On, My Company Can Submit a Commercial Quote on a Government or Prime Solicitation?

My commercial company wants to increase business with the Federal Government – but not with all those requirements the Government follows when buying under FAR Part 15 rules (Contracting by Negotiation). Is that even possible? The answer is “absolutely”.

Let’s define a few basic concepts for context:

• FAR Part 12: addresses the acquisition of commercial products or services under prime contracts where the Government negotiates a fair and reasonable price with the least amount of Government requirements.
• FAR Part 15: addresses the acquisition of goods and services under prime or subcontracts where the offeror provides detailed cost-based data, which is analyzed by the Government to negotiate a fair and reasonable price. Contracts under FAR Part 15 carry with them extensive Government requirements based on the type of contract.

Did you know that a company that sells commercial products or services to the general public can still submit a quote for a commercial product or service in response to a FAR 15 solicitation from the Government or the prime contractor? In fact, the government or prime contractor should have already identified commercial products in the marketplace before issuing the solicitation. However, neither contracting officers nor prime buyers do a good job with this requirement and tend to treat most government purchases as a negotiated purchase under FAR Part 15.

FAR 10.001(a)(2) requires contracting officers to conduct market research, and prime contractors are required to conduct market research under FAR 52.210-1. FAR 52.210-1 Market Research is included in most solicitations and states:

(b) Before awarding subcontracts for other than commercial acquisitions, where the subcontracts are over the simplified acquisition threshold, as defined in FAR 2.101 on the date of subcontract award, the Contractor shall conduct market research to—

(1) Determine if commercial products, commercial services, or, to the extent commercial products suitable to meet the agency’s needs are not available, non-developmental items are available that–

(i) Meet the agency’s requirements;

(ii) Could be modified to meet the agency’s requirements; or

(iii) Could meet the agency’s requirements if those requirements were modified to a reasonable extent; and

(2) Determine the extent to which commercial products, commercial services, or non-developmental items could be incorporated at the component level.

The Government and the prime are supposed to perform market research to determine whether any contractors/subcontractors with commercial products or services meet the solicitation requirements. This is not always performed, and by not keeping up with market research, they do not always know when a new supplier enters the market. So, they continue to issue FAR 15 solicitations requiring certified cost or pricing data.

Common Misconceptions

If the Government or prime contractor issues a FAR 15 solicitation for certified cost or pricing data, does that mean my company must submit a proposal with certified cost or pricing data?

This is incorrect. Any company that sells a commercial product/service can submit a quote with pricing and assert commerciality. Government and prime contractor FAR 15 solicitations should include FAR 52.215-20 that states in (a)(1), “In lieu of submitting certified cost or pricing data, offerors may submit a written request for exception ...” The Government/prime contractor will be required to make a commercial determination based on the data you submit.

But the Government’s solicitation requires a modification to my commercial product, so now my company must submit a FAR 15 compliant proposal.

This is also incorrect. As stated above, the Government is required to perform market research and determine if they can modify the requirements and use your commercial product or if you can modify your product to meet the requirements. One of the commercial product definitions in FAR 2.101 allows for two types of modifications. This can all be part of the data you submit to request an exception under FAR 52.215-20.

The first allowable modification in FAR 2.101 commercial product (3)(i) is a modification customarily available in the marketplace available to the general public. The modifications do not have to be sold in the commercial market; they are just customarily available. An example of this is when the government buys bearings. The Government will purchase bearings made of the highest grade/strongest steel. However, the general public doesn’t need the strongest steel for the bearings in their product, nor do they want to pay a higher price. Since stronger steel is customarily available to the general public, it would be considered an allowable modification under this definition.

The second allowable modification in FAR 2.101 commercial product (3)(ii) is a minor modification that is not customarily available in the commercial marketplace but does not significantly alter the nongovernmental function or change the purpose of a process. This is a requirement that only the Federal Government uses or needs. Since “minor” is in the eyes of the beholder and the modification is not customarily available in the marketplace, this second allowable modification requires a lot more documentation on the contractor’s part as it is sometimes hard to pass a government review.

What are the Pros of Remaining a Commercial Company and Entering the Government Market by Selling Commercial Products and Services?

Some of the benefits of proposing a quote for commercial products and services vs. submitting compliant FAR 15 proposals are that the company is not required to:

• submit a FAR 15 compliant proposal by cost element with certified cost or pricing data
• have a robust timekeeping system unless you have a commercial Time & Material contract
• support questions/audit on a cost analysis by the Government or negotiate costs by cost element (however, you will have to support price analysis).
• Payment structure is simplified (milestones, T&M invoices, deliverables, or advance payments if this is your standard commercial practice)

In addition, there is less monitoring by the Government and prime after the award of a FAR 12 prime contract or commercial subcontract respectively. FAR Part 12 contracts/commercial subcontracts will have less Government flowdowns. Although the flowdowns are significantly less than a FAR 15-based contract, they are increasing due to cyber security and prohibited equipment requirements.

Commercial companies will submit pricing data to support the commercial product/service. Standard commercial pricing may need to be increased for government requirements such as supply chain and cyber security that are being added to even commercial off-the-shelf (COTS) products. These requirements are not free of cost.

Takeaways

Commercial companies that only sell to the general public can enter the Government market and retain their products and services as commercial as the definition of commercial is broad. Companies can submit a commercial quote with supporting information in response to a Government FAR 15 solicitation. Commercial products can be modified to meet the Government/prime contractor’s requirement and still meet the definition of commercial in FAR 2.101. The best practice is to have a detailed commercial assertion describing your product, similar products or services you or others sell, and any modifications customarily available in the marketplace. Before you try to enter the government market by way of FAR 15 proposals and have to meet all the requirements, we recommend you reach out to us for help.

Redstone GCI assists contractors throughout the U.S. and internationally with understanding the Government’s expectations. This includes assisting contractors with performing market research, drafting commercial assertions or commercial determinations, policies and procedures, or training. We would be happy to be part of your team.