FAR Part 12 vs. FAR Part 15 – The Prequel

If you’re relatively new to government procurement (and even if you’re not new), as you read one of SpendLogic’s top articles, FAR 12 v. FAR 15: A Tale of Two Documentation Requirements, it might be helpful to understand a few basics about FAR 2.101 commercial products and service and the affect it has on government contractors. We will go over commercial determinations, price and cost analysis, as well as documentation requirements relative to the acquisition of commercial products and services in an effort to ensure your process is efficient, effective, and compliant.

First, FAR Part 12 is not an acquisition method. Rather, FAR Part 12 policies are used in conjunction with FAR Part 13, Simplified Acquisition Procedures; FAR Part 14, Sealed Bidding; or FAR Part 15, Contracting by Negotiation[i]. Clear as mud, right? The government will use the SF1449 Solicitation/Contract/Order for Commercial Products and Commercial Services when the acquisition is:

expected to exceed the simplified acquisition threshold;
a paper solicitation or contract is being issued; and
the procedures at FAR 12.603 (Streamlined Solicitation for Commercial Products or Services) are not being used.

Alternatively, if the government issued a solicitation for other than commercial products/services, the government still expects the prime contractor “to the maximum extent practicable…incorporate, and require its subcontractors at all tiers to incorporate, commercial products, commercial services, or non-developmental items as components of items to be supplied under the contract.” See FAR 52.244-6(b).

So, What Should You do as a Buyer?

First and foremost, follow your company’s procurement policies and procedures regarding the acquisition of commercial items. Although sales of commercial products and services under FAR Part 12 are excluded from the CPSR universe, ensuring compliance with company and regulatory requirements is of utmost importance.

SpendLogic also recommends that if your prime contract is for commercial products/services or is for other than commercial products/services and contains FAR 52.244-6, the request for quote/proposal issued to a supplier should request the supplier certify that the products or services being proposed meet the FAR 2.101 definition of commercial product or service.

SpendLogic recommends using the supplier’s assertion of commerciality, in conjunction with the prime contractor’s own market research, to conduct a commercial determination. Commercial determinations are necessary in order to document exceptions to certain regulatory or contractual requirements.

If your company does not have a commercial assertion/determination process, check out SpendLogic’s Commerciality tool. This tool aligns with the FAR 2.101 definitions for commercial products and services and will walk you through the process and generate your commercial assertion/determination based on the information you provided. SpendLogic also maintains your company’s commercial assertions and determinations in one location on the cloud accessible to anyone in your company.

A few sources to aid in your market research include, but in no way are limited to:

Commercial catalogs and product specification information.
Government and commercial databases such as DCMA’s Commercial Item Group (CIG) database (Commercial Item Group (dcma.mil)); (NOTE: DoD maintains its own database for commercial determinations to which the public does not have access.
Industry and trade associations.
Input from individuals (internally or externally) with expertise and knowledge of the subject product/service.
Formal requests for information (RFI).
Internet research.

IMPORTANT NOTE: A contract for an item using FAR Part 12 procedures may serve as a prior commercial item determination (with exceptions). This applies to all previously awarded contracts using FAR Part 12 procedures. See 87 FR 25141.

It is also important to understand that a “prior FAR Part 12” only exists between the Government and the Prime contractor. Merely because the prime contractor incorporated the subcontractor’s item/service into the deliverable does not extend the “prior FAR Part 12” determination to the subcontractor’s part/service.

Commercial Product/Service Documentation Exemptions

SpendLogic reiterates that you follow your company’s procurement policies and procedures regarding the acquisition of commercial products and services. The following are a few documentation requirements that are likely not applicable to the acquisition of commercial products or services.

FAR 52.244-2, Consent to Subcontract. Pursuant to FAR 44.000(b), consent and advance notification requirements of subpart 44.2 are not applicable to prime contracts for commercial supplies are commercial services acquired pursuant to FAR Part 12. For non-FAR 12 awards, be sure to check the prime contract for FAR 52.244-2 to determine whether prior consent and/or notification are required prior to issuing an award. This requirement depends on whether your company has an approved purchasing system.

Certified Cost or Pricing Data. Pursuant to FAR 15.403-1(b)(3), certified cost or pricing data is not required when a commercial product or service is being acquired (See standards for exception at FAR 15.403(1)(c)(3)).

Cost Analysis. A cost analysis is performed when an exception to the submission of Certified Cost or Pricing does not exist. Accordingly, under FAR 15, since the acquisition of commercial products and services is an exception, a cost analysis is not required. You must, however, conduct a price analysis. SpendLogic’s Price Analysis tool automates the price analysis and generates audit-ready reports complete with citations and automated calculations. You can support products, services, and travel all in a single report. Schedule a no-hassle demonstration now.

Cost Accounting Standards (CAS). CAS does not apply to contracts and subcontracts for the acquisition of commercial products or services when those contracts/subcontracts are firm fixed price or fixed price with economic price adjustment (provided the price adjustment is not based on the actual costs incurred). 48 CFR §9903.201(b)(6) states that CAS does not apply to contracts and subcontracts authorized in 48 CFR 12.207 for the acquisition of commercial items.

Flowdowns. FAR Subpart 12.3 establishes the provisions and clauses to be used when acquiring commercial products or services. Be sure to review your prime contract and follow company guidelines for mandatory and discretionary flowdowns. Alternatively, if your prime contract contains FAR 52.244-6, Subcontracts for Commercial Products and Commercial Services, refer to FAR 52.244-6(c)(1) and (d) for the clauses to be included in subcontracts for commercial products or services.

Documenting your procurement file is critical in maintaining or obtaining DCMA approval of your company’s purchasing system. If understanding what is required and when it is required causes buyers some consternation, let SpendLogic’s SpendFile alleviate that angst. Our logic based automated documentation program aids buyers through what documentation is required.

SpendLogic’s tools simplify report and documentation development. These tools were developed based upon DCMA and DCAA feedback as well as 50+ years of combined industry experience. SpendLogic was built by procurement professionals for procurement professionals. Let SpendLogic ease some of that procurement pain. Schedule a free, no-hassle demonstration today!

[1] FAR 12.102(b) and 12.203(a)

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