Federal Acquisition Regulation; Acquisition of Commercial Items

AGENCIES:

Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).

ACTION:

Proposed rule.

SUMMARY:

Federal Acquisition Regulatory Council (FARC) is proposing to amend the Federal Acquisition Regulation (FAR) to implement two statutory changes relevant to the definition of “Commercial Items”: Section 803(a)(2)(D) of the Strom Thurmond National Defense Authorization Act for Fiscal Year 1999 to revise the definition of “commercial item” to provide specific guidance on the meaning and appropriate application of the term “purposes other than government purposes” at 41 U.S.C. 403(12)(A); and Section 805 of the National Defense Authorization Act for Fiscal Year 2000 to clarify the definition of “commercial item” with respect to associated services.

In addition, the FAR Council is proposing other changes related to the acquisition of commercial items, including conforming the coverage regarding contractor liability for property loss or damage to commercial practice.

This proposed rule revises and supersedes the proposed rule FAR case 98-304, Commercial Items—Nongovernmental Purposes, published in the Federal Register at 64 FR 40694, July 27, 1999. As a result, proposed rule 98-304 is hereby withdrawn.

DATES:

Interested parties should submit comments in writing on or before October 27, 2000, to be considered in the formulation of a final rule.

ADDRESSES:

Submit written comments to: General Services Administration, FAR Secretariat (MVRS), 1800 F Street, NW, Room 4035, ATTN: Laurie Duarte, Washington, DC 20405.

Submit electronic comments via the Internet to: farcase.2000-303@gsa.gov.

Please submit comments only and cite FAR case 2000-303 in all correspondence related to this case.

FOR FURTHER INFORMATION CONTACT:

The FAR Secretariat, Room 4035, GS Building, Washington, DC, 20405, at (202) 501-4755 for information pertaining to status or publication schedules. For clarification of content, contact Ms. Victoria Moss, Procurement Analyst, at (202) 501-4764. Please cite FAR case 2000-303.

SUPPLEMENTARY INFORMATION:

A. Background

Federal Acquisition Regulation Part 12, Acquisition of Commercial Items, was developed to implement Title VIII of the Federal Acquisition Streamlining Act of 1994 (FASA) (Pub. L. 103-355). The regulations became effective on October 1, 1995. The FAR Council has identified several areas that need updating and clarification. This rule addresses a number of those changes.

This proposed rule amends the definition of “commercial item” at FAR 2.101 and the definition in the clause at FAR 52.202-1 to implement Section 803(a)(2)(D) of the Strom Thurmond National Defense Authorization Act for Fiscal Year 1999 (Pub. L. 105-261) and Section 805 of the National Defense Authorization Act for Fiscal Year 2000.

Paragraph (a) of the “commercial item” definition at FAR 2.101 is revised to implement Section 803(a)(2)(D) of the Strom Thurmond National Defense Authorization Act for Fiscal Year 1999 (Pub. L. 105-261). Section 803(a)(2)(D) requires that the FAR be revised to provide specific guidance on the meaning and appropriate application of the term “purposes other than Government purposes” in the definition of “commercial item” at 41 U.S.C. 403(12)(A). This proposed language revises and supercedes a proposed rule, published in the Federal Register at 64 FR 40694, July 27, 1999, under FAR case 98-304, that was issued to implement Section 803(a)(2)(D). Eight public comments were received in response to the July 27, 1999, proposed rule. A majority of the public comments were substantive and had a common theme. In general, the public believed that the proposed rule exceeded the scope of the statute, introduced ambiguous terms, created new criteria, and narrowed the definition of a commercial item. This proposed rule addresses those concerns by incorporating language from FASA into the definition.

Paragraph (e) of the commercial item definition at FAR 2.101 has been revised to implement Section 805 of the National Defense Authorization Act for Fiscal Year 2000 (Pub. L. 106-65), (Clarification of Definition of Commercial Items with Respect to Associated Services). Section 805 clarifies that services ancillary to a commercial item, such as installation, maintenance, repair, training, and other support services, are considered a commercial service, regardless of whether the service is provided by the same vendor or at the same time as the item, if the service is provided contemporaneously to the general public under similar terms and conditions. The FAR clause at 52.202-1, Definitions, is similarly revised to make the new definition available to contractors and subcontractors.

Paragraph (f) of the “commercial item” definition at FAR 2.101 is revised to add definitions of “Catalog Price” and “Market Price” to this rule to provide guidance for identifying services that may be acquired under FAR Part 12.

Guidance is added at FAR 12.209 to help make contracting officers aware of customary commercial terms and conditions related to the determination of price reasonableness when pricing commercial items. Additionally, the rule proposes to amend language in Part 46 to reconcile it with the coverage regarding contractor liability for property loss or damage with paragraph (p) in the clause at 52.212-4, and to amend the clause at 52.212-4(p) to conform to commercial practice (i.e., deleting the phrase “or implied” permits industry to take advantage of the latitude provided by the Uniform Commercial Code which allows sellers to exclude the application of an implied warranty through the terms of an express warranty).

This is not a significant regulatory action and, therefore, was not subject to review under Section 6(b) of Executive Order 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

B. Regulatory Flexibility Act

The FAR Council does not expect this proposed rule to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because changes made by the rule will primarily affect large businesses that are more likely than small businesses to have separate workforces for Federal contracts and to be ultimately liable for consequential damages. It clarifies the definition of commercial item to more closely parallel the statutory language and provide guidance for identifying services that may be acquired under FAR Part 12. The rule further conforms language regarding contractor liability to commercial practice. An Initial Regulatory Flexibility Analysis has, therefore, not been performed. We invite comments from small businesses and other interested parties. The Councils will consider comments from small entities concerning the affected FAR parts 2, 12, 46, and 52 in accordance with 5 U.S.C. 610. Interested parties must submit such comments separately and should cite 5 U.S.C. 601, et seq. (FAR case 2000-303), in correspondence.

C. Paperwork Reduction Act

The Paperwork Reduction Act does not apply because the proposed changes to the FAR do not impose information collection requirements that require the approval of the Office of Management and Budget under 44 U.S.C. 3501, et seq.

List of Subjects in 48 CFR Parts 2, 12, 46, and 52

• Government procurement

Therefore, DoD, GSA, and NASA propose that 48 CFR parts 2, 12, 46, and 52 be amended as set forth below:

1. The authority citation for 48 CFR parts, 2, 12, 46, and 52 continues to read as follows:

Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).

PART 2—DEFINITIONS OF WORDS AND TERMS

2. In section 2.101, amend the definition “Commercial item” by revising paragraphs (a), (e), and (f) to read as follows:

PART 12—ACQUISITION OF COMMERCIAL ITEMS

3. Revise section 12.209 to read as follows:

PART 46—QUALITY ASSURANCE

4. In section 46.801, revise the last sentence of paragraph (a) to read as follows:

PART 52—SOLICITATION PROVISIONS AND CONTRACT CLAUSES

6. In section 52.202-1, revise the date of the clause and paragraphs (c)(1), (c)(5), and (c)(6) to read as follows: