Federal Acquisition Regulation: Definition of “Commercial Item”, 54760-54762 [2019-21847]

Agencies

• DEPARTMENT OF DEFENSE
• General Services Administration
• National Aeronautics and Space Administration

[Federal Register Volume 84, Number 197 (Thursday, October 10, 2019)]
[Rules and Regulations]
[Pages 54760-54762]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-21847]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Part 2

[FAC 2020-01; FAR Case 2018-008; Docket No. FAR-2018-0008; Sequence No. 
1]
RIN 9000-AN68


Federal Acquisition Regulation: Definition of ``Commercial Item''

AGENCY: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: DoD, GSA and NASA are issuing a final rule to amend the 
Federal Acquisition Regulation (FAR) to implement a section of the 
National Defense Authorization Act for Fiscal Year 2018 to revise the 
definition of a ``commercial item.''

DATES: Effective: November 12, 2019.

FOR FURTHER INFORMATION CONTACT: Ms. Zenaida Delgado, Procurement 
Analyst, at 202-969-7207 or [email protected] for clarification 
of content. For information pertaining to status or publication 
schedules, contact the Regulatory Secretariat Division at 202-501-4755. 
Please cite FAC 2020-01, FAR Case 2018-008.

SUPPLEMENTARY INFORMATION: 

I. Background

    DoD, GSA, and NASA published a proposed rule in the Federal 
Register at 84 FR 20607 on May 10, 2019, to implement the statutory 
changes made to the definition of ``commercial item'' by section 847 of 
the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2018 
(Pub. L. 115-91, enacted December 12, 2017). The rule would broaden the 
definition to allow certain additional items developed exclusively at 
private expense to qualify for the benefits associated with being 
treated as a commercial item. Section 847 expands the universe of 
nondevelopmental items (NDIs) that qualify as commercial items to 
include items sold, in substantial quantities on a competitive basis, 
to multiple foreign governments. Three respondents submitted comments 
on the proposed rule.

II. Discussion and Analysis

    The Civilian Agency Acquisition Council and the Defense Acquisition 
Regulations Council (the Councils) reviewed the public comments in the 
development of the final rule. A discussion of the comments is provided 
as follows:

A. Summary of Changes

    This final rule amends the definition of commercial item in FAR 
part 2 to reflect the statutory change made by section 847. 
Specifically, the rule adds the phrase ``or to multiple foreign 
governments'' at the end of paragraph (8). There are no changes as a 
result of comments on the proposed rule.

B. Analysis of Public Comments

    1. Supports the proposed rule.
    Comment: One respondent stated that the proposed rule accurately 
and effectively implements section 847.
    Response: Noted.
    2. Does not support the proposed rule.
    Comment: One respondent stated that the rule is unnecessary, clouds 
the definition of what a commercial item is, and sets the stage for 
contracting officers

[[Page 54761]]

to lose the ability to require contractors to provide certified cost or 
pricing data.
    Response: The rule is necessary to implement section 847 of the 
NDAA for FY 2018. The Councils do not agree that the implementing rule 
will complicate the definition of commercial item and note that the 
transactions, which will now become subject to FAR part 12, will be 
more simplified and less costly as a result of the reduced number of 
government-unique requirements that will be applied.
    3. Potential burden reductions associated with future regulatory 
actions that facilitate broader acquisition of commercial items.
    Comment: One respondent, in response to a request for feedback in 
the Federal Register notice for the proposed rule, provided 
recommendations with regard to potential burden reductions associated 
with future regulatory actions that facilitate broader acquisition of 
commercial items, and cited policies that restrict the commercial item 
acquisition process and pose a serious threat to the Government's 
access to the commercial industrial base.
    Response: These comments are outside the scope of this case, but 
will be considered in relation to future regulatory actions.
    4. Other expansion of the definition of ``commercial item.''
    Comment: One respondent recommended expanding the definition of 
``commercial item'' to include ``spare assemblies or piece parts which 
are a component of the higher level commercial item.''
    Response: This recommendation is outside the scope of this case, 
and the Councils do not believe there is a need for additional 
regulatory clarification of this nature.

III. Expected Impact on the Public

    Implementation of this rule allows for an increased number of 
transactions to benefit from the less burdensome requirements 
associated with rules governing commercial items. Under this rule, for 
the first time, NDIs that are developed exclusively at private expense 
and sold in substantial quantities to multiple foreign governments may 
be treated as commercial items.
    Because commercial items, which include commercially available off-
the-shelf items, are sold to the Government in the same way as NDIs, 
the Government can take advantage of technological advances without the 
need for costly, time-consuming, Government-sponsored research and 
development programs. All of this is made possible due to previous 
testing and general acceptance of the product in the commercial 
marketplace or by a state, local, or foreign government.
    To promote the Government's acquisition of commercial items, the 
law and FAR part 12 create a preference for buying commercial items and 
provide relief from certain recordkeeping, reporting, and compliance 
requirements. According to an analysis published by the Section 809 
Panel at page 23 of its ``May 2017 Interim Report,'' available at 
https://section809panel.org/wp-content/uploads/2017/05/Sec809Panel_Interim-Report_May2017_FINAL-for-web.pdf, commercial item 
acquisitions are subject to up to 138 contract clauses, while 
acquisitions for NDIs that do not meet the commercial item definition 
as well as acquisitions for noncommercial items could be subject to 
nearly 500 clauses, depending on the principal type and purpose of the 
contract. For example, a commercial firm selling an NDI today to 
multiple foreign governments in substantial quantities could face 
compliance costs with the Truth in Negotiations Act (TINA), which 
requires implementation of Government-specific business systems for any 
modifications to competitively awarded items. TINA has long been 
recognized under analyses performed in accordance with the Paperwork 
Reduction Act as one of the most costly statutes and regulations in 
Federal procurement. In addition, policies governing commercial item 
acquisitions favor reliance on commercial sector business practices and 
use of standard commercial terms and conditions to the maximum extent 
practicable. Each of these dimensions of the commercial item framework 
contributes to more simplified and less costly transactions.
    DoD, GSA, and NASA are unable to monetize the cost savings, because 
procurement data is not captured in a manner that enables a 
determination to be made regarding how many NDIs developed exclusively 
at private expense have been sold or are expected to be sold to 
multiple foreign governments in substantial quantities, that are not 
also sold in substantial quantities to multiple State and local 
governments. For these reasons and though the public comment period did 
not provide data to monetize savings, this rule is considered 
deregulatory.

IV. Applicability to Contracts At or Below the Simplified Acquisition 
Threshold (SAT) and for Commercial Items, Including Commercially 
Available Off-the-Shelf (COTS) Items

    This rule amends the FAR to change the definition of ``commercial 
item''. The revision does not add any new solicitation provisions or 
clauses, or impact any existing provisions or clauses.

V. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This rule is not a significant regulatory action and was not subject to 
the review of the Office of Information and Regulatory Affairs under 
section 6(b) of E.O. 12866. This rule is not a major rule under 5 
U.S.C. 804.

VI. Executive Order 13771

    This final rule is an E.O. 13771 deregulatory action per the 
discussion found in Section III, Expected Impact on the Public, of this 
preamble.

VII. Regulatory Flexibility Act

    DoD, GSA, and NASA have prepared a Final Regulatory Flexibility 
Analysis (FRFA) consistent with the Regulatory Flexibility Act, 5 
U.S.C. 601, et seq. The FRFA is summarized as follows:

    This rule is required to implement section 847 of the NDAA for 
FY 2018. The objective is to treat nondevelopmental items, developed 
at private expense, that have been sold to multiple foreign 
governments, as commercial items.
    There were no significant issues raised by the public in 
response to the initial regulatory flexibility analysis.
    This rule will impact any entities offering to the Federal 
Government a nondevelopmental item, developed at private expense, 
that has been sold to multiple foreign governments, but did not 
otherwise qualify as a commercial item. There are over 327,458 small 
business registrants in the System for Award Management database, 
but it is unknown how many of those registrants may offer to the 
Government a nondevelopmental item, developed at private expense, 
that has been sold to multiple foreign governments, but does not 
otherwise qualify as a commercial item. It is not expected that this 
rule will have a significant economic impact on a substantial number 
of small entities, because the number of affected entities is not 
expected to be substantial, and any impact will be beneficial, due 
to the treatment of additional nondevelopmental items as commercial 
items.
    The rule does not include additional reporting or recordkeeping 
requirements.
    There are no available alternatives to the rule to accomplish 
the desired objective of

[[Page 54762]]

the statute. Small businesses would benefit from the streamlined 
commercial acquisition procedures.

    Interested parties may obtain a copy of the FRFA from the 
Regulatory Secretariat Division. The Regulatory Secretariat Division 
has submitted a copy of the FRFA to the Chief Counsel for Advocacy of 
the Small Business Administration.

VIII. Paperwork Reduction Act

    This rule does not contain any information collection requirements 
that require the approval of the Office of Management and Budget under 
the Paperwork Reduction Act (44 U.S.C. chapter 35).

List of Subjects in 48 CFR Part 2

    Government procurement.

William F. Clark,
Director, Office of Government-wide Acquisition Policy, Office of 
Acquisition Policy, Office of Government-wide Policy.

    Therefore, GSA, DoD, and NASA amend 48 CFR part 2 as follows:

PART 2--DEFINITIONS OF WORDS AND TERMS

0
1. The authority citation for 48 CFR part 2 continues to read as 
follows:

    Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 
U.S.C. 20113.


0
2. Amend section 2.101, in paragraph (b)(2), in the definition of 
``commercial item'', by revising paragraph (8), to read as follows:


2.101   Definitions.

* * * * *
    Commercial item * * *
    (8) A nondevelopmental item, if the procuring agency determines the 
item was developed exclusively at private expense and sold in 
substantial quantities, on a competitive basis, to multiple State and 
local governments or to multiple foreign governments.
* * * * *
[FR Doc. 2019-21847 Filed 10-9-19; 8:45 am]
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