The National Defense Authorization Act (NDAA) 2023, Section 803 amended the data that contractors are required to supply for commercial products at the subsystem, component and spare-part levels for major weapons system. While a DFARS proposed rule is being drafted, we expect Contracting Officers and DCMA Commercial Item Group (CIG) to begin requiring this information for proposed commercial products in advance of the DFARS proposed rule.
The NDAA requires contractors that submit subsystems, components and spare parts as a commercial product to:
- Identify comparable products sold commercially or to nongovernment entities to support an “of a type” assertion.
- Provide a side by side comparison of the physical characteristics of the subsystem, component or spare part and the comparable commercial product.
- Notify the contracting officer, if the company has no commercial sales of the proposed or similar product in the commercial marketplace and provide the most comparable commercial product in the marketplace.
It appears Congress cannot get the contracting officers to do the required market research per FAR Part 10, so the answer must be to require the contractors to do it for them. While we do not agree moving the requirement for market research is appropriate, we have long recommended developing documentation to assist the contracting officer.
Identifying a comparable product or service is usually not an issue for contractors and the side by side comparison is really just matching form, fit and function. The NDAA provides that a comparison of the physical characteristics is required. The government will also expect the comparison to include performance and technical characteristics. It is important that contractors identify that the functionality of the product is similar to a product that is customarily used by the general public, in conjunction with the side by side comparison because identifying all the characteristics of the proposed product to the similar to product can be difficult.
Section 803 of the NDAA also addresses the uncertified cost and pricing information required for Contracting Officers to determine reasonableness of the price of subsystems, components and spare parts of major weapons systems. This includes:
- Prices paid for the same or similar commercial products under similar terms and conditions;
- Prices paid for similar products sold under different terms and conditions and those terms and conditions;
- If the Contracting officer is unable to determine the price reasonableness, the offeror must submit other uncertified cost and pricing information which can include labor costs, material costs and overhead rates.
Although this data was always requested by the government when reviewing a commercial determination, it was not mandatory. We believe the Government will default to requesting uncertified cost and pricing data. The DFARS proposed rule is expected to be issued June 21, 2023, and contractors should provide comments now.
Redstone recommends contractors or subcontractors that are submitting commercial assertions or making commercial item determinations, include a side by side comparison of the proposed and similar to commercial products including physical characteristics and technical/performance characteristics if they are not already doing so. Companies that sell the products to commercial end users will have sales data for analyzing pricing of the proposed part. When relying on similar products in the marketplace, sales data from competitors is generally not available, or sales for similar products will not be an exact comparison because technical judgement can be required in pricing a similar product. Contractors should be prepared as we believe the government is going to use the easy button and request uncertified cost data if sales data is not available or exact.
If your product/service has been determined commercial by a government agency we recommend obtaining a copy of the commercial determination to support future proposals. While the government should rely on a previous determination by another Government agency, they will not rely on a prime contractor’s commercial determination. DFARS 212.102 was revised to state Contracting Officer must rely on commercial determinations included in the Commercial Item Database or where DoD previously acquired the products/services on a FAR Part 12 contracts as “commercial” on future procurements of products/services. Contracting Officers cannot rely on FAR 12 contracts for products/services procured by a nontraditional defense contractor or on an Other Transaction Agreement where commercial practices are applied, because the product or service was not determined as commercial.
Redstone GCI is available to assist contractors in preparing commercial item assertions and making commercial item determinations. This includes describing the item and its functionality, performing market research for similar items, selection of the appropriate definition, and data to help support your proposed price.