2024: The FAR, Federal Acquisition Regulations - Part 12

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2024 Webinar Series
THE FAR
THE FAR – PART 12

2024 Webinar Series
THE FAR
FAR PART #12:
Acquisition Of Commercial Items
SPEAKER: Sam Knowles
FIRM: DLA Piper
EMAIL: sam.knowles@us.dlapiper.com

Agenda
• Overview of Government Procurement
• Commercial Item vs. Non-Commercial Item Procurements
• Preference for Commercial Items
• Fair and Reasonable Price Determination Under Commercial Item Procurements
• Standard FAR Commercial Clauses to be Familiar With
• Tailoring of Standard Commercial Clauses
• Commercial Intellectual Property
• Entering the Government Contracting Market

Overview of Government Procurement
U.S. Government is the largest buyer of products and services in the world
• Over $700 billion in FY 2022
• Significant spending in defense, IT, infrastructure, R&D
• U.S. Government buys a remarkably wide range of products and services … from
pencils to information services to nuclear submarines
• State and local governments in U.S. also have significant procurement
budgets…California is one of the largest economies in the world
• Most U.S. government agencies have independent purchasing authority … so
companies must develop relationships with, and sell to, multiple agencies
• Multiple sales channels—competitive procurements, sole source awards,
“schedule” contracts, subcontract opportunities

Overview of Government Procurement
Government contracts are highly regulated
• Accounting requirements
• Intellectual property and technical data issues
• Socio-economic requirements
• Recordkeeping and reporting requirements
Consequences of non-compliance are severe
• Termination for Default
• Excess Reprocurement Costs
• Adverse Past Performance Rating
• False Claims
• False Statements
• Suspension & Debarment

Commercial Item vs. Non-Commercial Item Procurements
Compliance obligations vary by contract type at the Federal level.
“Commercial Item” Acquisition
• Generally, commercial item means any good or service, other than real property, that is
“of a type” customarily used by the general public or by non-governmental entities for
purposes other than governmental purposes.
• Many vendors can often satisfy this requirement.
• Usually conducted using FAR part 8 or 12 procedures.
Non-“Commercial Item” Acquisition
• Solutions not available commercially, developed specifically for government.
• Ranges in complexity, from advisory and assistance services (i.e., on regulations), and
IT products and software, to Research and Development.
• Usually conducted using FAR part 15 procedures (“Contracting by Negotiation”)

Preference for Commercial Items
• Federal Acquisition Streamlining Act of 1994 (FASA)
 Established a preference for the acquisition of Commercial Items
 Directed the FAR to contain a list of clauses to be included in contracts and
subcontracts for CIs
• CO is responsible for making a commerciality determination
• Advantages of a Commercial Item Procurement:
 Streamlined procurement process
 Limited number of clauses/compliance obligations required
 Closer alignment to commercial practices
• YOUR standard QA program
• YOUR standard warranty
• YOU have to agree to contract changes
• YOU retain IP rights
 Limited Audit Rights by Government

Fair and Reasonable Price Determination Under Commercial Item Procurements
FAR 12.209 states that the Contracting Officer (CO) must establish price
reasonableness in accordance with 13.106-3, 14.408-2, or subpart 15.4, as applicable.
• What techniques can the Government use to determine if a price is fair & reasonable?
 Competition
 Commercial prices (market/catalog prices/market research)
 Previously proposed/purchased prices
 Parametric or rough yardsticks
 Independent government estimate
 Data other than certified cost/price data from offeror

Standard FAR Commercial Clauses
To Be Familiar With
 52.212-1 Instructions to Offerors
 52.212-2 Evaluations
 52.212-3 Representations and Certifications
 52.212-4 Contract Terms and Conditions
 52.212-5 Statutes and Executive Orders

FAR 52.212-4 Contract Terms and Conditions
(a) Inspection/Acceptance
(b) Assignment
(c) Changes
(d) Disputes
(e) Definitions
(f) Excusable Delays
(g) Invoice
(h) Patent Indemnity
(i) Payment
(j) Risk of loss
(k) Taxes
(l) Termination for Government Convenience
(m) Termination for cause
(n) Title
(o) Warranty
(p) Limitation of Liability
(q) Other compliance
(r) Laws unique to Government contracts
(s) Order of precedence
(t) Central Contractor Registration (CCR)

TERMINIATION FOR CONVENIENCE (L)
• USG reserves the right to terminate for its sole convenience
• Settlement is determined by the percentage of the work performed prior to the notice of
termination, plus reasonable charges using its standard record keeping system
• Contractor is not required to comply with the CAS if commercial item under a FFP or FFP w/
EPA contract.
TERMINATION FOR CAUSE (M)
• USG has the right to terminate for default
• USG not liable for supplies or services not accepted
• Contractor is liable for any and all rights and remedies provided by law to include
excess reprocurement costs together with any incidental or consequential damages incurred
because of the termination
• Improper terminations are deemed to be termination for convenience

WARRANTY (O)
• USG retains implied warranties of merchantability and fitness for a particular purpose
• Waiver of Implied Warranties
• Customary in commercial marketplace to exclude or limit the implied warranties
• In such case, CO shall ensure that the express warranty provides for the repair or
replacement of defective items
• Express warranties must:
• Adequately protect USG’s needs in terms of coverage and length of warranty
• Allow USG effective post-award administration of the warranty
• Be cost-effective

COMPLIANCE WITH LAWS UNIQUE TO GOVERNMENT CONTRACTS
Contractor agrees to comply with the following:
• 31 U.S.C. 1352, limitations use of appropriated funds to influence certain Federal
contracts
• 18 U.S.C. 431, officials not to benefit
• 40 U.S.C. chapter 37, Contract Work Hours and Safety Standards
• 41 U.S.C. chapter 87, Kickbacks
• 41 U.S.C. 4712 and 10 U.S.C. 2409, whistle blower protections
• 41 U.S.C. chapter 21, procurement integrity

FAR 52.212-5 Contract Terms and Conditions Required to Implement Statutes
and Executive Orders
Contractor agrees to comply with the limited provisions for commercial items and commercial
services, based on factors including dollar value, place of performance, and deliverable. For
example:
• FAR 52.204-25 Prohibition on Contracting for Certain Telecommunications and Video
Surveillance Services or Equipment
• FAR 52.204-27 Prohibition on a ByteDance Covered Application
• FAR 52.222-26 Equal Opportunity (E.O.11246).
Contractor is required to flow-down to subcontracts only certain specified FAR clauses.
• If the Prime contract is a commercial item contract, FAR 52.212-5(e) identifies the eleven (11)
FAR clauses that must be flowed down to subcontractors.
• If the Prime contract is not a commercial item contract, but the subcontract is: FAR 52.244-6
identifies the ten (10) specific FAR clauses that must be flowed down in subcontracts for the
acquisition of commercial items.

Government Push To Further Streamline Clauses Under Commercial Procurements
Inapplicability of Certain Laws and Regulations to Commercial Items, 88 Fed. Reg. 80462 (Nov. 17,
2023):
• Amends DFARS 252.244-7000 to state that the Contractor “shall not include” (previously, “not
required to flow down”) FAR or DFARS clauses unless:
 For DFARS clauses, it is specified in the particular clause
 For FAR clauses, if the clause is listed at FAR 12.301(d), FAR 52.212-5(e)(1), or FAR 52.244-
6, as applicable.
GSA Federal Supply Schedule Economic Price Adjustment, 88 Fed. Reg. 78710 (Nov. 16, 2023)
 Results in the consolidation of the four existing Schedule EPA clauses into a single Schedule
EPA clause.
 Due to the highest levels of inflation in over 40 years as well as other factors such as supply
chain issues, GSA issued Acquisition Letter MV-22-02 in March 2022 to provide a temporary
moratorium on the enforcement of certain procedural limits contained in the Schedule EPA
clauses, which Relaxed the limits on the frequency, timing, and number of EPA price increase
requests.

Tailoring of Standard Commercial Clauses
• CO may, within limits tailor the provision at 52.212-1 and clause 52.212-4 to adapt
to the market conditions for each acquisition.
• CO shall NOT tailor any clause or include any additional terms or conditions that
is inconsistent with customary commercial practice.
• Tailoring shall be by addenda to the solicitation and contract.

Commercial Intellectual Property
• The agency shall acquire only those rights in technical data, and licenses for
commercial computer software and commercial computer software
documentation customarily provided to the public. FAR 12.211 & 12.212
• Mark it correctly or risk losing it!

Entering The Government Contracting Market
Commercial product and service providers should consider obtaining an applicable FSS or
other GWAC, for example:
All Commercial product/
service providers
GSA’s Federal Supply
Schedule
Information Technology
(“IT”) providers
NITAAC CIS-SP3 GWACs,
NASA SEWP, or GSA Alliant 2
GWAC
8(a) businesses
8(a) STARS III GWAC
Veteran owned small
businesses
VETS 2 GWAC

2024 Webinar Series
THE FAR
THANK YOU FOR ATTENDING!
FAR PART #12:
Acquisition Of Commercial Items
SPEAKER: Sam Knowles
FIRM: DLA Piper
EMAIL: sam.knowles@us.dlapiper.com

2024 Webinar Series
THE FAR
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2024: The FAR, Federal Acquisition Regulations - Part 12

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2024: The FAR, Federal Acquisition Regulations - Part 12