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Jennifer Schaus & Associates SERVICES FOR US FEDERAL GOVERNMENT CONTRACTORS

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2018 - WASHINGTON DC

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Join Us for Our 2018 Series of Complimentary Webinars on various US Federal Government Contracting Topics. Presenters are industry experts sharing knowledge about the competitive government contracting sector. Find all of our Govt Contracting webinars (free download) at www.JenniferSchaus.com

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2018 - WASHINGTON DC

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ABOUT JENNIFER SCHAUS & ASSOCIATES: - Based in downtown Washington, DC; -

A la carte services for Federal Contractors;

Proposal Writing to GSA Schedules, 8a Cert and Contract Administration, etc.; Educational webinars; -

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2018 - WASHINGTON DC

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ABOUT OUR SPEAKER: David Dempsey Amherst College (1972) University of South Carolina Law School (1977) Federal procurement lawyer – 40 years Partner: Dempsey Fontana, PLLC

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2018 - WASHINGTON DC

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Commercial Item Contracting with Department of Defense: The New Rules Wednesday, June 13 , 2018

Presenter Logo here Disclaimer: The information contained herein is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.


Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2018 - WASHINGTON DC

COMMERCIAL ITEM CONTRACTING WITH DEPARTMENT OF DEFENSE: THE NEW RULES

TOPICS: 1.

The January 31, 2018 regulation changes

2. The new DOD guidance from DPAP – CIDs and Price Reasonableness 3.

The Role of DCMA

4.

Observations

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2018 - WASHINGTON DC

COMMERCIAL ITEM CONTRACTING WITH DEPARTMENT OF DEFENSE: THE NEW RULES The January 31, 2018 regulation changes Background: Preference for commercial items (41 U.S.C. 3307(b)) Sections of the following NDAAs generated the January 2018 DFARS changes 

2013 NDAA (P.L. 112-239)

2016 NDAA (P.L. 114-92)

2018 NDAA (P.L. 115-91)

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2018 - WASHINGTON DC

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COMMERCIAL ITEM CONTRACTING WITH DEPARTMENT OF DEFENSE: THE NEW RULES The January 31, 2018 regulation changes Background (cont.) The 2017 NDAA (P.L. 114-328) appears to have been overlooked despite having 10 provisions (§§871-880) relating to commercial items including: §876: Preference for commercial services (facilities services, knowledge- based service – but not engineering services – construction services, medical services, transportation services); §878: Treatment of services from nontraditional contractors as commercial items; §872: “Value analysis” for price reasonableness (“what’s it worth” to a CO for the of a commercial product

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specific use


Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2018 - WASHINGTON DC

COMMERCIAL ITEM CONTRACTING WITH DEPARTMENT OF DEFENSE: THE NEW RULES The January 31, 2018 regulation changes Here is what Industry wanted:

Here is what Industry got:

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2018 - WASHINGTON DC

COMMERCIAL ITEM CONTRACTING WITH DEPARTMENT OF DEFENSE: THE NEW RULES The January 31, 2018 regulation changes ► New DOD commercial item definitions appear at 83 Fed. Reg. 4431-4447 (Jan. 31, 2018

effective date)

► Definitions supposedly in DFARS 212.001: “Market research” means a review of existing systems, subsystems, capabilities and technologies that are available or could be made available to meet the needs of DoD in whole or in part. Market research shall include “at a minimum” contacting knowledgeable industry and government persons [i.e., the DCMA Commercial Items Group] for a review of capabilities that are or could be made available and pricing information; and may include techniques provided in FAR 10.002(b)(2) [Fed. Reg. at 4442] See http://www.dcma.mil/commercial-item-group/ Compare: FAR 2.101 “market research” means “collecting and analyzing information about capabilities within the market to satisfy agency needs”

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2018 - WASHINGTON DC

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COMMERCIAL ITEM CONTRACTING WITH DEPARTMENT OF DEFENSE: THE NEW RULES The January 31, 2018 regulation changes ► Definitions in DFARS 212.001 (cont.): “nontraditional defense contractor” (has not performed a full coverage CAS-covered contract or subcontract within the past year preceding the solicitation of sources by DOD) [Fed. Reg. at 4442] See also: DFARS 212.102(a)(iii): CO’s may treat supplies and services from a nontraditional defense contractor (“NDC”) as commercial items DFARS 252.215-7010(b)(1)(ii)(E): [commercial item exception to submission of “certified cost or pricing data”] requires a statement from the “NDC” that the NDC meets the above definition currently in the Federal Register DFARS 252.215-7013: “supplies and services from a nontraditional defense contractor may be treated as commercial items”

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2018 - WASHINGTON DC

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COMMERCIAL ITEM CONTRACTING WITH DEPARTMENT OF DEFENSE: THE NEW RULES The January 31, 2018 regulation changes ► Definitions (cont.):

DFARS 252.215-7010, Requirements for Certified Cost or Pricing Data and Other than Certified Cost or Pricing Data – Basic “market prices” – current prices substantiated through competition or from sources independent of the offerors” “Non-government sales” – sales of the supplies or services to non-Governmental entities “for non-Government purposes” “Relevant sales data” – means offeror information on sales of the same or similar items used to establish price reasonableness (accounting for the age, volume, and nature of the transactions (including discounts, refunds, rebates, offsets, other adjustments) See DFARS 215.401 showing that CIDs appear closely related to price reasonableness “Market prices” means current prices that are established in the course of ordinary trade between buyers and sellers free to bargain and that can be substantiated through competition or from sources independent of the offerors.” FAR 2.101

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2018 - WASHINGTON DC

COMMERCIAL ITEM CONTRACTING WITH DEPARTMENT OF DEFENSE: THE NEW RULES The January 31, 2018 regulation changes ► Definitions (cont.) DFARS 252.215-2010, Requirements for Certified Cost or Pricing Data and Other than Certified Cost or Pricing Data – Basic “Sufficient non-Government sales” – relevant data that reflects market pricing and contains enough information to make adjustments covered by FAR 15.404-1(b) (2)(ii)(B) “Uncertified cost data” – that subset of “data other than certified cost or pricing data” that relates to cost (BTW: “data other than certified cost or pricing data means cost data that is not certified – FAR 2.101) See also https://www.acq.osd.mil/dpap/cpic/cp/docs/Guidebook_Part_A_Commercial _Item_Determination_20180129.pdf at 6-8

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2018 - WASHINGTON DC

COMMERCIAL ITEM CONTRACTING WITH DEPARTMENT OF DEFENSE: THE NEW RULES The January 31, 2018 regulation changes ► Definitions (cont.) Other definitional changes: ♥♥ FAR 2.101 – “Commercial item” means … (8) A non-developmental 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 (2018 NDAA, § 847 which amended 41 U.S.C. §103) ♥♥ If an item has been previously purchased using commercial item acquisition procedures, that contract constitutes a “prior commercial item determination” ● unless the HCA determines in writing that it is no longer appropriate to acquire such item using commercial item acquisition procedures (2018 NDAA, § 848 which amends 10 U.S.C. § 2306a); see also DFARS 212.7001(a) explaining regulatory resistance to converting from commercial to noncommercial acquisitions

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2018 - WASHINGTON DC

COMMERCIAL ITEM CONTRACTING WITH DEPARTMENT OF DEFENSE: THE NEW RULES Other regulation changes Other recent and relevant changes impacting commercial item acquisitions: ♥♥ SAT threshold (basic) – from $150,000 to $250,000 (2018 NDAA, § 805; DARC Class Deviation dated April 13, 2018) ♥♥ Micro-purchase threshold (basic) – from $3,000 to $5,000 (2018 NDAA, § 821; DFARS 202.101) ♥♥ Truth-in-Negotiations Act threshold – from $750,000 to $2,000,000 for contracts and contract modification after July 1, 2018, (2018 NDAA, § 811; CAAC Class Deviation dated May 3, 2018; DARC Class Deviation dated April 13, 2018)

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2018 - WASHINGTON DC

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COMMERCIAL ITEM CONTRACTING WITH DEPARTMENT OF DEFENSE: THE NEW RULES The January 31, 2018 regulation changes

► Making Commercial Item Determinations (CIDs) DFARS 212.102(a)(i)(D) refers to PGI 212.102(a)(i)(1) which requires full and adequate documentation and rationale “supporting the conclusion that the commercial item definition in FAR 2.101 has been satisfied.” ● e.g., carefully document CIDs involving “modifications of a type customarily available in the commercial marketplace and “items offered for sale, etc. to the general public but no actual sales, etc. have been made” PGI 212.102(a)(i)(2):review DPAP’s Guidebook for Acquiring Commercial Items: Commercial Item Determination Guidebook Part A Commercial Item Pricing Guidebook Part B https://www.acq.osd.mil/dpap/cpic/cp/commercial item guide.html

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2018 - WASHINGTON DC

COMMERCIAL ITEM CONTRACTING WITH DEPARTMENT OF DEFENSE: THE NEW RULES The January 31, 2018 regulation changes ► Price Reasonableness Determination: DFARS 215.402, Pricing Policy: focuses on CO’s responsibility to assess available price information obtained from offerors plus the market research techniques in FAR 10.002(b)(1), (2) and DFARS 215.404-1(b) on “price analysis” ● prices paid for same/similar items sold under what circumstances ● prices paid for similar levels of effort ● prices paid for alternate solutions ● catalog prices ● other “relevant information” from offeror, including [uncertified] cost data ♦ market data, age of pricing data, pending sales, volume and completeness of transaction data, nature of transactions

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2018 - WASHINGTON DC

COMMERCIAL ITEM CONTRACTING WITH DEPARTMENT OF DEFENSE: THE NEW RULES The January 31, 2018 regulation changes ► Price Reasonableness Determination (cont.) DFARS 252.215-7010(d): Submission of data other than certified cost data is supposed to be the minimum necessary to permit a price reasonableness determination As discussed, companies seek an exemption to the submission of certified cost pricing data ● confirm applicability of the relevant threshold ($2M or $750K) ● if applicable, focus on available pricing data because submission of the offer authorizes a government to conduct an audit before award

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or

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2018 - WASHINGTON DC

COMMERCIAL ITEM CONTRACTING WITH DEPARTMENT OF DEFENSE: THE NEW RULES ► Information and methods to obtain Commercial item determinations

DOD’s CID Guidebook – Part A DOD’s Pricing Guidebook – Part B

► Focus on the Guidebook’s “interpretations” of discrete elements in the FAR 2.101 definition of commercial items: ● “of a type” ● “items evolved from Commercial Item supply or service” ● “modified items” ● “combination of commercial items” ● “services of a type” ● “interdivisional transfers” (FAR 31.201-26(e), (f) on “material costs”) ● “non-developmental item (product)

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2018 - WASHINGTON DC

COMMERCIAL ITEM CONTRACTING WITH DEPARTMENT OF DEFENSE: THE NEW RULES The DOD CID Guidebook – Part A ► “Services of a type: ● Guidebook says most critical element is that services must be offered and sold competitively in substantial quantities in the commercial marketplace under “standard” terms (e.g., catalog price, current market prices) ● stringent tests for services – anticipates services such as construction, medical, “knowledge-based, transportation (see Slide 10 regarding the 2017 NDAA) ► Is DPAP using “price reasonableness” as a determinant of “commerciality”

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2018 - WASHINGTON DC

COMMERCIAL ITEM CONTRACTING WITH DEPARTMENT OF DEFENSE: THE NEW RULES The DOD CID Guidebook – Part A ► Non-developmental Item (Services) ► “developed at private expense” a critical element of the “non-developmental” CID exercise ● but independent IR&D costs reimbursed by the government or customers through OH/G&A allocations is still considered “developed expense” (see FAR 31.201-18 on IR&D / B&P costs) ● also substantial sales to State and local government and foreign with a reciprocal procurement agreement with the US

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at private governments

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2018 - WASHINGTON DC

COMMERCIAL ITEM CONTRACTING WITH DEPARTMENT OF DEFENSE: THE NEW RULES The DOD Pricing Guidebook – Part B ► Price Reasonableness Determination ● Focus on “market research” and “pricing analysis” ● Price analysis: Guidance covers process, techniques and adjustments ► My conclusion: when there is a question about the commercial item determination, the price analysis is the more influential element in the CID decision See https://www.acq.osd.mil/dpap/cpic/cp/docs/Guidebook_Part_B_Commercial_Item_ Pricing_20180126.pdf

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2018 - WASHINGTON DC

COMMERCIAL ITEM CONTRACTING WITH DEPARTMENT OF DEFENSE: THE NEW RULES DCMA’s Role in Commercial Item Determinations ► DCMA’s Commercial Item Group has been around since 2016 ► DCMA has a useful website (http://www.dcma.mil/commercial-item-group/) focused on commercial item products, but not much on commercial item services ● e.g., the “helpful links” is 3 pages of links to databases on products ● DCMA’s FAQ link is informative and fairly up to date

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SERVICES FOR US FEDERAL CONTRACTORS

OFFICE: 2 0 2 – 3 6 5 – 0 5 9 8

FED GOV CON - Commercial Item Qualifications and Determinations  

Please join Jennifer Schaus & Associates every Wednesday in 2018 for a complimentary Wednesday series. For full audio of this presentation p...

FED GOV CON - Commercial Item Qualifications and Determinations  

Please join Jennifer Schaus & Associates every Wednesday in 2018 for a complimentary Wednesday series. For full audio of this presentation p...

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