Acquisition abuse drives DOD to reassess commercial purchase rules

Commercial of-a-type purchases were designed to make it easier for the government to buy everyday items similar to those sold in the private sector, but abuse of the system is driving the Defense Department to push for a change in the rules.

DOD wants to change language in the U.S. Federal Acquisition Regulation to narrow the definition of what can be bought as of-a-type purchases because of pricing issues. Of-a-type commercial contracts aren’t required to have the same amount of pricing data as other contracts and are exempt from some auditing requirements, according to a Defense News report.

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As a result, it’s difficult for DOD acquisition officials to determine how much they should be paying for a given item.

“The overly broad definition of commercial item currently in effect affords items which are not truly commercial items and which are not sold to the general public to qualify as commercial items and as a result, contracting officers are unable to acquire the necessary data to make the price reasonableness determination,” DOD spokesperson Cheryl Irwin told Defense News in an e-mail.

It’s become a huge issue for defense contracting officers, Shay Assad, DOD director of defense pricing, confirmed April 27 at a Coalition for Government Procurement event in Falls Church, Va.

“This is the number one topic that I get from contracting officers in the field. They’re very frustrated that they’re getting claims from, frankly, non-traditional commercial companies claiming to have commercial of-a-type service or products, and then not being able to substantiate with any pricing information of why the price is legit,” Assad said. “We’re addressing this in Congress. We think there should be a change in that definition.”

Some high-profile programs fraught with cost-overruns and controversy started out commercial and illustrate how the issue can spin out of control – including the Navy’s Littoral combat ship and the canceled AW101 presidential helicopter.

But according to Stan Soloway, president and CEO of the Professional Services Council, changing the language could prevent government agencies from accessing critical goods and technologies currently available because of the flexibility of-a-type offers to businesses.

In a letter to House Armed Services Committee chairman Rep. Howard McKeon and ranking member Rep. Adam Smith, Soloway used the government’s adoption of cloud technology as a prime example of important commercial services that would no longer qualify under the proposed rule-changes.

“As the government migrates to a cloud computing environment, it seeks to capitalize on world-class commercial capabilities in that arena. Yet the government also has certain unique needs, particularly in terms of security, that are not precisely the same as those required by most consumers of cloud services,” Soloway wrote. “Under the current statutory construct, such services are properly considered ‘commercial’ and the marketplace includes an array of providers. Under the proposed definitional change, such services would no longer be considered ‘commercial’ and many providers would have little choice but to exit significant portions of the market.”