Continuing our discussions related to commercial item determinations, we are going to look at the DCMA’s RFI released April 10, 2020, to understand specific documentation requirements that they need to see. These requirements are not only the basis for the DCMA’s review of Primes’ CIDs, but also the CIG’s reviews in CPSRs. Our tips and tricks will help you avoid mistakes that will lead to findings in a CPSR.

Transcript:

Hi, my name is Patrick Mathern. I’m the president of SpendLogic.

And welcome to today’s live stream event. So, if you’re not familiar with this, SpendLogic provides tools and services and training related to procurement compliance basically. You see a list of things on the screen that we focus on. So it’s mainly working with federal contractors, both primes and subs, to help them with their procurement compliance issues.

So, today, I want to get started, and it’s going to be a little bit longer than usual, I feel like. So, what I want to do is talk to you again today about commercial item determinations, CIDs. Today, we’re going to talk about documentation. And really this is the key to the whole thing, right? In the past week, we saw an RFI come out from the CIG. So, RFI, request for information, from the Commercial Item Group.

And the CIG, as you’ll recall, is a group within the DCMA, the Defense Contract Management Agency. This RFI was basically a call to non-traditional defense contractors saying, “Hey, if you want to have your items or services determined to be commercial by the CIG before they ever show up in a proposal, this is an RFI where you can submit your interest and submit your case, and they will, you know, pull these in and do as many commercial item determinations as they can.

Many of you are not going to fit the role of a non-traditional defense contractor. You can’t have a fully cast-covered contract in the past year, and you can’t have one that’s active. But this RFI is still very interesting to all of us and it’s a great example of, you know, the documentation requirements and helps us kind of illustrate what it is that they’re looking for.

So, I’m going to look at this in a little bit more detail. And, you know, kind of to start off with, I’m going to review what we talked about in session one very high-level, and then really get into this. And I’m going to list the high-level requirements and then I’m going to get into some tips and tricks for the, you know, kind of the big ones, the big gotchas.

So let’s get rolling here. Oh, by the way, apparently, people are having trouble logging into the chat functionality, and I don’t know how to fix that. That’s a YouTube thing. But on the screen, you can see our email address, [email protected] If you send me an email, I promise I will get back to you today with an answer.

So if you’re unable to chat and you have a question that you’d like to have answered, just send it in and we’ll get back to you. All right, let’s get rolling. So, basic review on session one is…what we talked about are the eight basic definitions for a commercial item.

If you go to FAR 2.101, you can see those definitions. You can also go to our website and watch this session again under spendlogic.com/events. But, you know, the big hitters here that we talked about last week, and the reason people are getting rejected is what you see on the screen, documentation package is incomplete. Number two, no evidence of commercial sales.

Remember, price analysis and commercial items are different, but they have a very, very strong tie with the commercial sales. And we’re going to talk about that actually again today. Third, the CID written is not specific to the item or service. And number four, the definition relied upon is not identified. Some of these are going to dovetail into what we talk about today and some of them, we’re going to kind of gloss over.

So, go back and watch that one if you haven’t already. But otherwise, let’s get rolling. Okay, so to start with, the DCMA, I noted this earlier on April 10th, about a week ago, a week ago today, they released this RFI. So if you want to see this RFI, there’s a couple ways to get to it. On the screen, you can see the link to beta.sam.gov, that’s the new sam.gov site. And if you search using the term that’s shown on the screen, then you can get to it, you can find it.

You can also look at the description of this video, and there’s a direct link there. Once you get there, you go all the way to the bottom, and you’ll see attachments and links. You can also see there’s a hyperlink on the left-hand side. But once you open that attachment, you’re going to see this document. It’s about a page and a quarter or so. And this is their required documentation.

So, first of all, read the whole RFI, all right? And if it applies to you, great. If it doesn’t, you still should go because this document that you see on your screen here is not just for non-traditional defense contractors. This is the CIG’s guidance on what they want to see with any commercial item determination. So, whether you’re submitting these to the DCMA, the CIG, or you’re just reviewing your subcontractors and you need to train your subcontractors, or you’re submitting to a prime, whatever the case is, if you’re dealing with commercial items, this is a great list to be paying attention to.

I’m not going to go through this in great detail, but what I’m going to do is pull out the big pieces. And I should also say that the rest of this video, when I talk about things, it’s my paraphrasing, okay, of this document. You want to go back to this source document and see it for yourselves. If you have questions on how to implement some of these things, then definitely reach out to us and we can help.

This is what we do every day. We’d be more than happy to help you out with this. Okay, so the highlights of that document, okay, you’re going to hear an echo of what we talked about last week. They need to see definition relied upon. So, you got to…and by the way, I’m going to go into more detail on each of these in the following slides here.

They want to see the definition that you’re talking about. They want to see evidence related to that documentation. Seems obvious, right? They want to see proof of commercial sales, okay? That’s a big one. All right? We’ve talked about it.

There should be a separation between the commercial item and the price analysis. But there is this tie and we’ll get into that, but also there’s more of a discussion on that from last week. So, check that one out. Do a side-by-side comparison. Provide a copy of the proposal if appropriate. It’s not always needed, but if you have it and it’s appropriate, then go ahead and include it.

And also provide a point of contact. So they need to know who they’re going to reach out to. So, very high level, all right? Let’s start out with some tips and tricks here. First and foremost, you have to realize that these are folks, the reviewers that are going to be looking at this, at the DCMA, even if you’re sending it to the DCMA or you’re a sub that’s sending it to a prime, you have to assume they know nothing about your product, okay?

They’ve never seen it. They don’t know what it does. And by the way, just like the rest of us, their desk is completely overloaded with other projects and other packages that they need to review. So, for them, this last point is key. It’s easier to reject than it is to accept, okay? And this holds true across the board.

So, there’s some risk aversion, especially within the government on commercial items. And it has to do with this idea that once it’s declared a commercial item, it’s really hard to remove that and to say that it’s not a commercial item. There’s lots of work that needs to be done on that. So, from their perspective, if something’s missing, or they don’t understand, or something just doesn’t make sense, then they’re going to reject it.

All right. You’re going to have to start all over again. So, by and large, this is the most important key piece of the puzzle here. Figure that they know nothing about this, and so write it for a 10-year-old, okay? Write it super simply. Next, also assume that they’re not going to ask any questions, okay? You got to go into this assuming you get one shot.

Now, there are cases where they will ask you questions, all right? And they will clarify. But it all depends on the person. It all depends on the day. It all depends on these subjective assumptions. So, be as objective and complete as possible. Don’t assume they’re going to know something.

Don’t assume that, “Oh, it logically makes sense if I said this, then they can use logic to assume this other piece.” Don’t assume that at all because they won’t make that assumption. Err on the side of over-divulging, all right? Don’t hold anything back. You know, don’t keep your cards close to your chest, state your case, and make it as clear as possible, and give them everything you possibly can.

This may be your only chance. And last, focus, this is very important. Some companies have policies and procedures in place that say we’re going to show as many ways that we are a commercial item as possible. So, they’ll go through and they’ll provide documentation that covers multiple portions of the definition.

I don’t recommend this. I don’t recommend it with price analysis. I don’t recommend it with commercial item determinations, okay? And this is blasphemy for some of you, I know. But what we’ve seen in practice is the DCMA, the CIG will come back and they’ll say, “You’ve been rejected.” So, sorry, let me back up. Let’s assume that you went in with multiple definitions, okay?

And you said, “Okay, I’m going to define it commercially by this, this, and this.” Okay? And rather than just focusing on one. Well, the reason that you’re probably doing that is because they’re not all that strong, okay? You got to pick your strongest one. What happens in practice is the DCMA looks at the weakest one and then fails it based on that, and just totally doesn’t look at this other stuff, okay?

And I know we have folks within the DCMA that are watching this, and they’re saying, “Oh, we don’t do that.” I’ve seen it ,all right? I’ve experienced it. It’s happened both in price analysis and in commercial item determinations. Your best bet is to find your strongest case and stick with it and go with that to the end. All right?

Okay, so on that list, I’m going to go through a couple of these. I’m not going to hit all of them. But number one, definition relied upon, okay? This is a pretty simple one. You go to the FAR, you figure out within FAR 2.101 which portion of the definition for commercial item or commercial service you’re going to be relying upon.

And you need to specifically state that in your documentation, okay? Write out the specific definition, and then address every fragment of that definition that you’re going to be providing support for. On the screen, you can see an example. This is the first definition. You can call it definition one within 2.101.

But what I’ve done is I’ve tried to break it out to the “fragments” of the definition that are applicable here. So, the first is fragment. Any item other than real property, okay? Seems obvious, this is an item, and it’s other than real property, but I would state it. I would state we’re…you know, and by the way, when I say state it, I would have this portion of the definition written out, and then right after it, I would have your own explanation.

This widget is of X, Y, Z, is not real property, it’s an item or whatever. Next, that is of a type, okay? That’s a very small fragment. But what we’re talking about here is this of a type concept that causes so much trouble in commercial item determinations. If what you’re doing is not a of a type determination or assertion, if you’re actually saying, “This is the actual commercial item,” state it up front, okay?

“This item is not of a type, it is the commercial item that I’m going to be talking about, that I’m going to be providing evidence for.” Third, customarily used by the general public or non-governmental entities for purposes other than governmental purposes, okay?

There’s a lot going on there. And I’m going to talk about this one actually in more detail on the next slide when we talk about evidence. But again, that is one fragment. And then last, you’ve got two choices. It’s either been sold, leased, or licensed, or it’s been offered for sale, lease, or license. So, every single fragment needs to be discussed and talked about. Let’s see.

Sorry, I lost my way here. Okay. There we go.

Sorry, lost my place for a second. So, any evidence that’s related to that definition that you’ve cited, you need to be able to provide that evidence. And again, provide it to the level that has been discussed in your documentation or your assertion there. So, anything that you assert, make sure that you’ve got backup for it, okay? And make sure there’s a direct tie.

If you need to be able to…and this goes back to last week, making an assertion and not being specific to the item or service you’re talking about. If you assert something here today, make sure that any evidence that you provide somehow ties back and you have an explicit explanation as to how it ties back to the item or service that you are asserting.

Okay. So, for an example here, I’m going to take that piece that was in that last example, customarily used, all right? This little snippet has a lot of… carries a lot of weight, okay? And just this one fragment has three pieces. Number one, you need to provide evidence of customarily used, okay? What does it mean to be customarily used?

Right? You’ve got to show that, okay, this isn’t something that could possibly one day be used maybe. You’ve got to show that, okay, this is something that is being used out in public or by non-governmental entities, okay? And you’ve got to show that they’re actually public or non-governmental. And then last, you’ve got to show that its purpose is other than governmental purposes.

So, where this gets pretty sticky is when you have something that there’s no reason that the public couldn’t use it, all right? It’s a widget. We’ve got it on our website, okay? But when only the government is using it, if you trip over this piece showing that it’s customarily used by a public or non-governmental entity, then the chances of you succeeding are very, very low.

Why is this, you ask? Well, it gets to this next point, proof of commercial sales, okay? If you can’t tie in commercial sales, you will not be successful, okay? Again, if you roll back to this last portion of the definition, you’ve made the case, this is customarily used by non-governmental entities or the public and it’s used for purposes that are not governmental purposes.

You can’t say that if you can’t show that…and I’m speaking to you based on the perspective of the DCMA, the CIG. If you’re unable to show me evidence of commercial sales, then I’m not going to be able to make the case that this is used customarily by non-governmental entities for non-governmental purposes. Do you see how the tie works there?

It’s really, really important that you’re able to show that commercial sales or evidence of commercial sales, okay? Really what you have to show is a marketplace. There has to be some tie-to-market forces at play on the price, otherwise, it’s going to fail. That’s just every time that I’ve, you know, worked on one of these, and every conversation I’ve had with the DCMA, CIG, that is in a nutshell just how it goes.

All right? Let’s see, a side-by-side comparison, okay? If you are making the case for a “of a type” item, this is especially important, and it’s important any time you can do this.

So, if you are asserting something that is commercial, okay? And it is truly commercial, you’ve got it on your website, it’s bought and sold every day, you know, government, public, you know, industry, whatever, doesn’t matter. Be prepared to just show this is the part number, and this is the item that I’m offering on my website that I can show there are commercial sales for, and next to it, here’s what I’m offering you.

And by the way, they’re exactly the same down to the part number, down to the color, whatever. Now, if it’s of a type, let’s say I’m selling something that is, okay, it’s not exactly but it’s really, really close. The side-by-side comparison becomes very, very important. And what you do is you say, “Okay, here’s my commercial item.”

This is what’s bought and sold every single day, okay, on the left-hand side or whatever. And then you go down and you show the item that is “of a type” right next to it, and you hit the high points, all right? Show how they’re similar, right? That’s extremely important. Need to know how similar they are.

And then number two, you got to show the differences, all right? Be prepared based on whichever definition that you choose to explain those differences and how they impact the functionality. Again, you know, there’s this idea of price, and they’re going to be looking for how price is impacted. But also, you know, these ideas of modifications and minor modifications, something that’s going to be available to the commercial marketplace but isn’t yet.

You know, those types of things. You’ve got to be able to spell each of those things out. And if you do a side-by-side comparison, you’re going to be way ahead of the game. Note on there, I mentioned photos. This is something that the CIG actually states themselves. If you have photos of these items, that goes a long way. Again, think back to the beginning of this presentation.

They don’t know what you’re selling them. They don’t know anything about it. They don’t know what it looks like. They don’t know what it does. If you can show a photo that says…and they can see, “Oh, geez, these are very clearly the same item, or they are very, very similar form fit and function, whatever,” that’s going to go a long way. So you’re going to be…the better you are at proving that to them and making them believe that, the better off you’re going to be.

So, those are some quick highlights. Let me see here. I’ve got a question. Let’s see. I can’t bring up my chat. That’s okay. So, Michael says, “Is a foreign government sale considered a commercial sale?”

Okay, so this is something that comes up, right? Think back to non-governmental purposes, okay? The DCMA, the CIG is going to look at, you know, is this something that is customarily used by the general public or a non-government agency?

So, you can get into the nitty-gritty details of the definition, and are we talking foreign military sales, FMS sales? Are we talking about true direct commercial sales to foreign entities? Is it a governmental entity? At the end of the day, if government uses it, you’re going to have a harder time proving that it is a commercial sale.

You know, one of the biggest things that weighs into this, and this is a struggle for everybody that deals with commercial items, is the idea that how price figures into this, okay? What the government is doing at the end of the day, and I know I said that a lot here, at the end of the day, everything is at the end of the day, you can tell I live for that.

But what the government is doing is they’re making sure that their bases are covered. Once something is determined commercial, it’s exempt from TINA. So, one of the biggest things that they have to do is make sure that they have their bases covered. They have to be able to determine that there is an active…and that’s a key too, an active commercial marketplace for this item where it is bought and sold and they can go back and trace and make determinations related to price.

Again, if they’re not able to do that, then that implies that it is not customarily used by the general public for non-governmental purposes. There’s that tie there that has to be there and it can’t be broken. If it’s broken, then they’re not going to be very likely to accept your determination of commerciality. I hope that answers your question.

Again, we got the feedback last week that not everybody was able to provide their questions via the chat box. Go ahead and write to us at [email protected] and we’ll get that out to you. We’ll get answers out to you today. So, additional training and resources, they’re on your screen. Again, reach out to us at SpendLogic. If you haven’t gone to WIFCON or the NCMA Collaborate websites, I encourage you to do so.

Reach out to us if you have any questions. Over the past couple of weeks, it’s been great. Some folks, actually, quite a few folks have come to us and asked questions related to the topics that we had that day that maybe weren’t covered in the training or were just related to procurement compliance or CPSR compliance, and we’ve been able to give them some really great feedback, great feedback, in my opinion because I guess we provided it.

But they’ve been very complimentary and grateful for that. So feel free to reach out to us at any time. Especially, like I said, with today, CIDs, if you have issues with that, reach out and we do those as a service too. So, thank you very much for participating today. We’re going to have another one session 3 of 3 next week, and we’re going to be really getting into that of a type discussion because that’s really where people fall down quite a bit.

So, check out our website, spendlogic.com/events, and you can see all of our upcoming webcasts. From there, you can also send yourself a reminder and set up your calendar for every Friday at 10:00 a.m Pacific, 1:00 p.m Eastern Time. Thanks again. And I look forward to seeing you again soon.

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