OMB Directs Agencies to Buy Commercial or Justify Non-Commercial Acquisitions

OMB’s new guidance directs agencies to expand commercial acquisitions and justify non-commercial awards. Government contractors may see closer review of commerciality, pricing, option periods, and cost-reimbursement contracts, making support for market research and contract decisions more important.

Highlights

• OMB Guidance. OMB issued Memorandum M-26-12 on April 17, 2026, directing agencies to expand the use of commercial products and services.
• Non-Commercial Justifications. Agencies must provide stronger justification when pursuing non-commercial acquisitions, including certain pending and planned awards.
• Contractor Impact. Government contractors may see increased scrutiny of commerciality assertions, pricing support, and cost-reimbursement contracts.
• Market Research. Contractors should expect greater emphasis on market research, price reasonableness, and documentation supporting commercial or non-commercial acquisition decisions.
• Acquisition Shift. The guidance supports a broader move toward commercial buying strategies, with potential effects on solicitations, option periods, and recompetes.

On April 17, 2026, the Office of Management and Budget (OMB) issued Memorandum M‑26‑12 directing federal agencies to expand the use of commercial products and services in acquisitions, strengthen oversight of non‑commercial buys, and provide detailed reporting and justification whenever an agency makes a non‑commercial acquisition.

The memorandum implements the President’s April 2025 EO 14271, Ensuring Commercial, Cost‑Effective Solutions in Federal Contracts. It reinforces long‑standing policy under the Federal Acquisition Streamlining Act (FASA), implemented in the 1990’s, which established a preference for purchasing commercial products and services whenever possible. FASA also sought to shift agencies toward emphasizing performance and measurable outcomes rather than relying on military-unique specifications and standards, though in practice, that shift never fully materialized.

While agencies have always been required to document whether a product or service is commercial, OMB’s new guidance goes further by requiring agencies to justify why a non-commercial acquisition is being pursued rather than a commercial one.

What Did OMB Find?

OMB found that more than two‑thirds of all federal contract spending in FY 2024 went toward non‑commercial products and services. This included approximately $130 billion in acquisitions “of non-commercial contracting for common services, such as professional support services, information technology and telecom services, and operation of facilities,” many of which were awarded under cost-reimbursement contracts, a contract vehicle that increases financial risk to the Government.

OMB Requirements Going Forward

OMB has issued guidance directing agencies to implement requirements to strengthen agency management and oversight of non-commercial product and service acquisitions. Agencies must also report all non-commercial awards made between April and September 2025, any non-commercial actions still in process through March 2026 and planned future awards and provide justification for why a non-commercial procurement was used or planned. Going forward, each agency must strengthen the responsibility of the agency competition advocate to maximize the acquisition of commercial products and services.

OMB also recommends that agencies improve internal practices to maximize commercial acquisitions, including:

• Promoting centralized market research and sharing.
• Supporting efficient commercial determinations.
• Promoting best practices for price reasonableness in commercial acquisitions.
• Encouraging buying strategies aligned with commercial practices.
• Preventing unnecessary use of cost reimbursement contracts, which limit the use of FAR Part 12 commercial procedures.

We believe these will become expectations for prime contractors as well.

These are great recommendations, and centralizing market research is a positive improvement. However, it remains to be seen whether this effort will extend beyond sharing information within a single buying command. Notably, the guidance does not establish a government-wide portal or process for buying commands to share market research and pricing data. As a result, government contractors selling the same or similar products to multiple commands often must start from scratch each time, re-submitting commercial assertions and market research that have already been submitted to a different agency.

Reducing Barriers to Entry

The shift toward commercial acquisitions also creates new opportunities for both new entrants and existing contractors that already offer commercial products or services, particularly in areas such as cybersecurity, cloud, aircraft components, logistics and facilities. The FY 2026 National Defense Authorization Act, Section 1826, Exemptions for nontraditional defense contractors, further accelerates this trend by removing many compliance requirements for non-traditional defense contractors. A non-traditional defense contractor is defined as an entity that is not currently performing or has not performed a DoD contract or subcontract subject to full Cost Accounting Standards (CAS) coverage for at least one year prior to the solicitation. This includes new entrants and small and medium-sized companies, though this exception applies only to DoD efforts.

Whether entering the DoD market as a new entrant and/or non-traditional defense contractor, entities will face significantly reduced compliance burdens when pursuing commercial contracts and subcontracts. This aligns with OMB’s broader push to make federal procurement more accessible, more commercial and more cost-effective.

What Will Government Contractors See?

Government contractors should expect to see changes in how agencies structure, justify and oversee non-commercial acquisition. Because OMB now requires agencies to justify any non-commercial award over $10 million, government contractors will likely see agencies:

• Scrutinize non-commercial awards more closely, particularly cost-reimbursement contracts, which carry higher risk for the Government.
• Asking contractors for support of agency-written justifications explaining why commercial solutions cannot meet the requirement.
• Restructure solicitations toward fixed-price or commercial solutions.
• Reevaluate option periods on existing cost reimbursable contracts.
• Decline to exercise option periods when a requirement can be shifted to a commercial solution.
• Request additional support for commerciality assertions/determinations, including submission of uncertified cost or pricing data when needed.
• Require contractors to demonstrate commercial pricing benchmarks through market research or comparable sales data.
• Recompete requirements as commercial when feasible.
• Reduce scope or shift to commercial integrators who can deliver commercial solutions more efficiently.

Although the guidance is directed at federal agencies, the impact will be felt by both contractors and subcontractors, especially those holding cost-reimbursement contracts or non-commercial awards with option periods. The shift signals a broader move toward commercial acquisition strategies, increased scrutiny of non-commercial justifications, and a stronger expectation that government contractors be prepared to substantiate commerciality and pricing with credible market evidence.

Takeaways

Government contractors should begin preparing now for the increased scrutiny that will accompany OMB’s commercial direction. We recommend contractors review their products and services and identify those that can be asserted as commercial or commercial of a type. Contractors will need to ensure they provide adequate support by demonstrating that a product or service is commercial or, alternatively, that no commercial alternative exists, to help agencies meet their documentation requirements for non-commercial determinations.

Although agencies are required to conduct their own market research, government contractors often have a better understanding of their competitive environment. We expect agencies to increasingly rely on contractors to provide robust, defensible market research packages to support commerciality and pricing.

Contractors should also prepare for contract reviews, particularly if any option periods are approaching. Agencies may be reluctant to exercise options on non-commercial or cost-reimbursement contracts unless the government contractor can provide a strong justification package for continuing a non-commercial acquisition.

Government price analysts have historically struggled with price analyses on commercial products or services. As agencies shift toward commercial acquisitions, contractors should be ready to provide a comprehensive pricing justification, including market pricing, sales history and other evidence supporting commercial pricing.

Preparing for Commercial Acquisition Expectations

As agencies place greater emphasis on commercial acquisitions and stronger justification for non-commercial awards, government contractors should be prepared to support commerciality, pricing, and related documentation before these issues affect solicitations, option periods, or contract negotiations. Redstone GCI assists contractors with understanding FAR commercial item definitions, drafting and reviewing commercial assertions or determinations, reviewing contract clauses and subcontract flowdowns, assessing FAR 52.244-6 compliance, and providing staff training on these requirements. This support can help contractors better understand the Government’s expectations and prepare the documentation agencies may request when evaluating commercial products and services, price reasonableness, and the continued use of non-commercial acquisition approaches.

Frequently Asked Questions (FAQs)

• What did OMB change? OMB directed federal agencies to place greater emphasis on buying commercial products and services when possible. Agencies must also provide stronger support when they decide to use a non-commercial acquisition approach.
• What is a commercial acquisition? A commercial acquisition generally involves buying products or services that are available in the commercial marketplace. The article focuses on the Government’s renewed emphasis on using those types of purchases rather than creating government-specific requirements when a commercial option can meet the need.
• Why does this matter to government contractors? Contractors may see agencies ask more questions about whether a product or service is commercial. Contractors may also need to provide stronger support for pricing, market research, and why a commercial or non-commercial approach is appropriate.
• Who is most likely to be affected? Contractors with non-commercial awards, cost-reimbursement contracts, or upcoming option periods may be subject to closer review. New entrants and non-traditional defense contractors may also see opportunities as agencies seek more commercial procurement options.
• What kind of documentation may contractors need? Contractors may need to support commerciality assertions, provide market research, show comparable sales or pricing information, and help agencies understand whether commercial alternatives exist.
• Does this guidance only affect agencies? The guidance is directed at federal agencies, but contractors and subcontractors may feel the impact through solicitations, contract reviews, option decisions, and pricing support requests.