A recent update to DFARS 234.7002 clarifies the data requirements for contractors to assert commerciality for major weapon systems, subsystems, components, or spare parts.
The U.S. Department of Defense (DoD) issued a final rule in May 2024, modifying the DFARS and 10 U.S.C. 3455 to implement section 803 of the James M. Inhofe National Defense Authorization Act (NDAA) for fiscal year (FY) 2023. The update to the provision at DFARS 252.215-7010 emphasizes the evaluation of commercial products and incentivizes the offeror to provide targeted documentation supporting contracting officer efforts to determine the commerciality of proposed products in solicitations for weapon systems, subsystems, components, and spare parts. For detailed instructions, the provision points to DFARS 234.7002, Acquisition of Major Weapon Systems as Commercial Products – Policy.
Why Does This Matter to DoD Contractors?
There is now clear direction to simplify and expedite a determination of commerciality by the government for weapon systems, subsystems, components, and spare parts that can benefit all parties, including subcontractors.
A simple explanation of commercial products is they are similar to those used by the general public and may include minor modifications to those products available in the commercial marketplace. For more detail, please refer to FAR 2.101, Commercial Product paragraphs (1) through (5).
Prime contractors and subcontractors can create efficiencies in the acquisition process by helping the contracting officer determine commerciality of such subsystems, components, or spare parts. If a commerciality exemption does not apply and the government requires certified cost or pricing data for all prime contracts and subcontracts over $2 million, major delays can result from the complexity of these proposals. Because of this, companies should be relieved that there is now a clear method for reducing complex requirements such as certified cost or pricing data1 and cost accounting standards2 while developing their major weapon system proposals.
Subcontracting for commercial products can be straightforward and generally allows for increased competition, better pricing, and reduced oversight. Another upside for procuring commercial products is DFARS 252.244-7000 now limits the flow-down of clauses to only those specified at FAR 52.244-6(b)(1) or FAR 52.212-5(e)(1), plus only those DFARS clauses required by regulation. This limited set of FAR/DFARS flow-down clauses simplifies compliance for the supply chain and contractor alike.
How Does the DoD Contractor Respond?
Commerciality Support
If the major weapon system, subsystem, component, or spare part has not yet been determined to be a commercial product, the offeror has an opportunity to provide specific evidence to the contracting officer supporting the commerciality of the product.
For contractors that sell the same or similar product to the general public or nongovernmental entities for other than governmental purposes, they should:
- Identify the comparable product they sell to the public.
- Provide a comparison of the fit (physical characteristics) and function of the proposed product and the commercially sold product.
- Include the national stock number (NSN) of the comparable subsystem, component, or spare part if one is assigned.
If the offeror does not sell a comparable product to the public, they can still provide documentation to demonstrate commerciality but will need to follow the instructions provided under DFARS 234.7002(d)(4).
Pricing Support
For the contracting officer to determine whether proposed pricing is fair and reasonable for asserted commercial products, they need pricing support from the contractor. This support includes a representative sample of prices paid for the same or similar commercial products and evidence of comparable terms and conditions between those sold to commercial customers and those sold to government customers. If these terms and conditions are not similar, the contracting officer may require access to the actual terms and conditions, even if they are different between sales.
If the evidence for prices paid is not sufficient for the contracting officer to determine the proposed prices as reasonable, the contracting officer may request further information as allowed by the DFARS.
Benefits Realized by DoD Contractors
The May 2024 updates to the DFARS allow the offeror to simplify submitted proposals and the contracting officer to streamline the evaluation of those proposals through straightforward documentation instructions. The contractor can help streamline the process for successful commerciality determinations, acceptance of proposed pricing, and limit audit exposure by understanding the contracting officer’s direction and providing suitable objective evidence with their offer. For more information, learn more about our government contracting team, or contact a professional at Forvis Mazars with any questions.