21810 Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 

DEPARTMENT OF DEFENSE 

Defense Acquisition Regulations 

System 

48 CFR Parts 202, 212, and 234 

RIN 0750–AG23 

Defense Federal Acquisition 

Regulation Supplement; Acquisition of 

Commercial Items (DFARS Case 2008– 

D011) 

AGENCY: Department of Defense (DoD). 

ACTION: Final rule. 

SUMMARY: DoD is adopting as final, with 

minor editorial changes, an interim rule 

amending the Defense Federal 

Acquisition Regulation Supplement 

(DFARS) to implement sections 805 and 

815 of the National Defense 

Authorization Act for Fiscal Year 2008. 

DATES: Effective Date: April 19, 2011. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Manuel Quinones, telephone 703–602– 

8383. 

SUPPLEMENTARY INFORMATION: 

I. Background 

DoD published an interim rule at 74 

FR 34263 on July 15, 2009 to implement 

sections 805 and 815 of the National 

Defense Authorization Act (NDAA) for 

Fiscal Year 2008 (Pub. L. 110–181). A 

correction to the interim rule was 

published at 74 FR 35825 on July 21, 

2009, to clarify the types of services to 

which this rule applies, consistent with 

subsections (c)(1)(A) and (c)(1)(C)(i) of 

section 805 of Public Law 110–181. 

Section 805 specified when time-andmaterials or labor-hour contracts may be 

used for commercial item acquisitions. 

Section 815 provided clarification 

regarding situations under which a 

major weapon system, subsystems of 

major weapon systems, or components 

and spare parts for major weapon 

systems may be acquired using 

procedures established for the 

acquisition of commercial items. 

Section 815 also clarified that the terms 

‘‘general public’’ and ‘‘nongovernmental 

entities’’, with regard to sales of 

commercial items, do not include the 

Federal Government or a State, local, or 

foreign government. 

II. Discussion and Analysis 

Three respondents submitted 

comments on the interim rule, which 

are discussed below. 

A. Contracting Officer Guidance for 

Drafting Solicitations 

Comment: One respondent stated that 

the final rule should provide guidance 

on how contracting officers can prepare 

solicitations that maximize the use of 

commercial items while obtaining 

sufficient information to conduct price 

analysis. 

DoD Response: The current provisions 

and clauses at DFARS 212.301 provide 

appropriate guidance to the contracting 

officer to assist with the preparation of 

solicitations and contracts for 

commercial items. Contracting officers 

receive formal instruction and on-going 

assistance regarding how to conduct 

price analysis, to include guidance 

provided at PGI 215.404–1. Therefore, 

additional guidance is not required. 

B. Clarify and Separate Commercial 

Item and Price Determinations 

Comment: One respondent stated that 

the rule should clarify that commercial 

item determinations are separate from 

pricing determinations. 

DoD Response: There is currently 

sufficient coverage in the FAR to assist 

contracting officers with making 

separate commercial and pricing 

determinations. Contracting officers 

have the appropriate tools to establish 

price reasonableness in accordance with 

FAR 13.106–3, FAR 14.408–2, and FAR 

subpart 15.4. The FAR provides 

guidance to allow contracting officers, at 

their discretion, to request the offeror to 

submit prices paid for the same or 

similar commercial items under 

comparable terms and conditions by 

both Government and commercial 

customers. Additionally, to further 

assist the contracting officer when 

making a commercial item 

determination, FAR 12.209 instructs the 

contracting officer to be familiar with 

‘‘customary commercial terms and 

conditions when pricing commercial 

items.’’ 

C. Submission of Pricing Information 

Comment: One respondent stated that 

FAR part 12 solicitations issued on a 

sole-source basis should specify that the 

pricing information is to be submitted 

with the proposal. 

DoD Response: It is at the discretion 

of the contracting officer to specify in 

the solicitation the manner in which 

pricing information is to be submitted. 

Comment: One respondent stated that 

it is not appropriate to issue a FAR part 

15-type solicitation for commercial 

items and require the offeror to request 

an exception to the requirement to 

submit cost and pricing data. 

DoD Response: The contracting officer 

determines the appropriate process to 

utilize when acquiring products and 

services and may use FAR part 15-type 

solicitations for commercial items. 

However, the contracting officer may, at 

his or her discretion, use as appropriate 

the streamlined procedures at FAR 

subpart 12.6 to reduce the time required 

to solicit and award contracts for 

commercial items. 

D. Exemption for CommerciallyAvailable Off-the-Shelf (COTS) Items 

Comment: One respondent agreed that 

COTS items should not be subject to the 

procedures at DFARS 234.7002(b) and 

(c), and recommended adding a more 

explicit statement, as paragraph (e), that 

‘‘COTS items are exempt from the 

requirements of 234.7002.’’ 

DoD Response: DoD maintains that 

the inclusion of the parenthetical 

reference to a COTS is clear to the 

contracting officer and no additional 

statement is needed. 

E. Define Component, Spare Part, 

Subsystem, and No or Negligible Value 

Comment: Three respondents 

requested that the terms ‘‘component’’ 

and ‘‘spare part’’ be defined. Two 

respondents requested that the phrase 

‘‘no or negligible value’’ be defined and 

clarified and one respondent requested 

that the term ‘‘subsystem’’ be defined. 

DoD Response: The term ‘‘component’’ 

is defined at FAR 2.101. The term ‘‘spare 

part’’ is a commonly used term 

understood to mean any item that is 

supplied as a replacement part of an end 

item. The term ‘‘subsystem’’ is also a 

commonly used term throughout the 

FAR and DFARS that denotes a 

functional grouping of lower-tier 

components that combine to perform a 

major function within an end item, such 

as electrical power, altitude control, or 

propulsion. DoD maintains that the 

phrase ‘‘no or negligible value’’ is selfexplanatory and does not require further 

clarification. 

F. Emphasize the Conditions for Limited 

Cost Information 

Comment: Two respondents stated the 

rule closely mirrors the legislative 

language and recommended that the 

final rule be amended to emphasize the 

conditions of the request for limited cost 

information. 

DoD Response: The underlying basis 

for the rule is the legislation, and when 

it is practical to do so, the implementing 

regulations will contain language that is 

drawn from the legislation that does not 

conflict with existing requirements 

established to ensure the government is 

receiving fair and reasonable prices. The 

contracting officer must make a 

determination that a component or 

spare part has been appropriately 

identified as a commercial item. The 

amount of cost information required by 

the contracting officer to make an 

evaluation about the component or 


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Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 21811 

spare part is determined by the 

sufficiency of the information provided 

by the prime contractor. FAR subpart 

15.4 currently provides the contracting 

officer with pricing policy and guidance 

regarding obtaining pricing data. 

Contracting officers will ask for 

information sufficient to determine if 

the price is fair and reasonable. 

Therefore, additional guidance is not 

required. 

G. Exemption From DFARS 234.7002 for 

Previously Acquired of Spare Parts 

Comment: Two respondents requested 

clarification regarding how a 

procurement of spare parts should be 

handled if DoD procured a subsystem as 

a commercial item [using FAR part 12] 

years ago. Additionally, clarification 

was requested that DFARS 234.7002 

does not apply to components or spare 

parts that have been previously 

procured under FAR part 12. 

DoD Response: DoD maintains that an 

item that was previously procured as a 

commercial item, and defined as such, 

will continue to be identified as 

commercial, unless there is a written 

determination by the contracting officer 

that the item no longer meets the 

commercial item definition. Though 

commercial items may evolve through 

technical or performance advances, 

these items are still able to meet the 

commercial item definition. 

H. Price Determination for Subcontracts 

Comment: One respondent asked who 

makes the pricing determination if DoD 

is procuring through the subcontract. 

The respondent recommended that 

language be added that ‘‘the prime 

contractor is responsible for 

determining reasonableness of price for 

components and spare parts under 

subcontracts.’’ 

DoD Response: The rule does not 

change the pricing determination 

procedures for subcontractors used by 

the contracting officer. In accordance 

with DFARS 244.402, prime contractors 

are responsible for determining whether 

a particular subcontract item meets the 

definition of a commercial item. This 

does not affect the contracting officer’s 

responsibilities to determine price 

reasonableness of prime contractors and 

subcontractors at FAR 15.404–3. 

However, the contracting officer may 

provide assistance to prime contractors 

being denied access to lower-tier 

subcontractor records. 

Comment: One respondent suggested 

that applying the rule at lower tiers 

would be impracticable and could cause 

significant delays in the negotiation and 

award of subcontracts that could 

adversely impact performance of the 

prime contract. 

DoD Response: The definition of 

commercial items is not limited solely 

to items supplied directly from prime 

contractors. It also extends to 

commercial items acquired by the prime 

contractor to be sold to the Government 

from subcontractors at all tiers, 

including items transferred from a 

contractor’s division, affiliates, or 

subsidiaries. The prime contractor has 

the responsibility to determine if a 

subcontracted item meets the definition 

of a commercial item, as defined in FAR 

2.101. 

Comment: One respondent stated that 

the rule is in potential conflict with 

DFARS part 244. The respondent stated 

that if the rule applies to subcontracts, 

it would conflict with the language at 

DFARS 244.402(a) that requires 

contractors to determine if the 

subcontract item meets the definition of 

a commercial item. 

DoD Response: The rule aligns with 

DFARS 244.402(a). It further supports 

the contracting officer’s responsibility to 

make the commercial item 

determination for items acquired and 

the prime to flow this requirement 

down to subcontractors. 

I. Procedures for Applying the Rule 

Comment: One respondent 

recommended that there be specific 

procedures for applying the rule. 

DoD Response: DoD maintains that 

the rule is clear in its implementation of 

the statute. It informs the prime 

contractor and the contracting officer of 

the procedures to be followed. 

Comment: One respondent 

recommended that the solicitation and 

contract clauses inform the contractor 

that the rule applies for procurements 

constituting a major weapon system. 

DoD Response: The rule at DFARS 

234.7002(a) instructs the contracting 

officer that the acquisition of a major 

weapon system may be treated as a 

commercial item. The conditions 

required to make this determination are 

outlined in the DFARS for the 

contracting officer. Therefore, additional 

guidance is not required. 

Comment: One respondent requested 

that the contracting officer be prohibited 

from changing the determination unless 

there is a substantial change in the 

nature of the work performed by the 

subcontractor, if the item no longer 

meets the definition of commercial 

items. 

DoD Response: Contracting officers 

are required to fully and adequately 

document the contract file regarding the 

market research performed by the 

contracting officer as required by FAR 

10.002(e). The contracting officer is 

required to provide the rationale 

supporting his or her determination that 

the commercial item definition at FAR 

2.101 was satisfied. Therefore, the 

contracting officer must follow the 

instructions regarding defining a 

commercial item from subcontractors. 

The contracting officer must document 

any changes that warrant the nonapplicability of the definition of 

commercial items. 

J. Reference Procedures in FAR 15.4 and 

DFARS 215.4 

Comment: One respondent 

recommended that references to the 

procedures in FAR part 15.4 and DFARS 

215.4 be included. 

DoD Response: The rule at DFARS 

212.207(b)(iii)(B) refers the contracting 

officer to the procedures at FAR 15.4 if 

the services to be acquired are subject to 

FAR 15.4. 

K. Contracting Officers Make Prompt 

Commercial Item Determination 

Comment: One respondent 

recommended that contracting officers 

be instructed to respond promptly to 

requests for determination if a proposed 

item is a commercial item, and to 

provide the reason if it is determined 

that the item is not commercial, to assist 

the contractor to resolve the matter. 

Another respondent recommended 

encouraging contracting officers and 

contractors to address requirements of 

the rule prior to award of the prime 

contract. 

DoD Response: FAR 2.101 defines a 

commercial item and provides the 

contracting officer instructions 

regarding how to determine whether or 

not an item is commercial. The 

commercial determination is made 

before contract award. This 

determination is based on market 

research, an analysis of the marketplace, 

and the Government’s requirement. FAR 

part 12 provides the contracting officer 

specific guidance, policies, and 

procedures regarding the acquisition of 

commercial items. The contracting 

officer works within the timeframe 

required to procure the item based upon 

the Government’s need for the 

requirement. 

III. Executive Order 12866 and 

Executive Order 13563 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 


jdjones on DSK8KYBLC1PROD with RULES
21812 Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. 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. 

IV. Regulatory Flexibility Act 

DoD certifies that this rule will not 

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 the rule reinforces existing 

requirements for the appropriate use of 

commercial acquisition procedures and 

for ensuring that contract prices are fair 

and reasonable. 

V. Paperwork Reduction Act 

The rule does not impose any 

information collection requirements that 

require the approval of the Office of 

Management and Budget under the 

Paperwork Reduction Act (44 U.S.C. 

chapter 35). 

List of Subjects in 48 CFR Parts 202, 

212, and 234 

Government procurement. 

Mary Overstreet, 

Editor, Defense Acquisition Regulations 

System. 

Therefore, the Defense Acquisition 

Regulations System confirms as final the 

interim rule published at 74 FR 34263 

on July 15, 2009, with the following 

changes: 

■ 1. The authority citation for 48 CFR 

parts 202, 212, and 234 continues to 

read as follows: 

Authority: 41 U.S.C. 1303 and CFR 

chapter 1. 

PART 202—DEFINITIONS OF WORDS 

AND TERMS 

§ 202.101 [Amended] 

■ 2. Section 202.101 is amended in the 

definition for General public and nongovernmental entities by removing 

‘‘Section’’ and adding in its place 

‘‘section’’. 

PART 212—ACQUISITION OF 

COMMERCIAL ITEMS 

§ 212.207 [Amended] 

■ 3. Section 212.207 paragraph (b) 

introductory text is amended by 

removing ‘‘Section’’ and adding in its 

place ‘‘section’’. 

[FR Doc. 2011–8947 Filed 4–18–11; 8:45 am] 

BILLING CODE 5001–08–P 

DEPARTMENT OF DEFENSE 

Defense Acquisition Regulations 

System 

48 CFR Parts 209 and 252 

RIN 0750–AG78 

Defense Federal Acquisition 

Regulation Supplement; Ownership or 

Control by a Foreign Government 

(DFARS Case 2010–D010) 

AGENCY: Defense Acquisition 

Regulations System, Department of 

Defense (DoD). 

ACTION: Final rule. 

SUMMARY: DoD is adopting as a final 

rule, without change, an interim rule 

that implemented revisions to DoD 

Directive-Type Memorandum (DTM) 

09–019, ‘‘Policy Guidance for Foreign 

Ownership, Control, or Influence 

(FOCI).’’ This DTM revises the 

description of communications security 

material that is ‘‘proscribed 

information.’’ 

DATES: Effective date: April 19, 2011. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Julian Thrash, Telephone 703–602– 

0310. 

SUPPLEMENTARY INFORMATION: 

I. Background 

DoD published an interim rule in the 

Federal Register at 75 FR 35684 on June 

23, 2010, to implement changes 

required by Directive-Type 

Memorandum (DTM) 09–019, ‘‘Policy 

Guidance for Foreign Ownership, 

Control, or Influence (FOCI),’’ which 

required conforming changes to the 

DFARS. The public comment period 

closed August 23, 2010, and no public 

comments were received. DoD has 

therefore adopted the interim rule as a 

final rule without change. 

II. Executive Order 12866 and 

Executive Order 13563 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. 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. 

III. Regulatory Flexibility Act 

DoD certifies that this final rule will 

not have a significant economic impact 

on a substantial number of entities 

within the meaning of the Regulatory 

Flexibility Act, 5 U.S.C. 601 et seq., 

because it only impacts companies that 

are owned or controlled by a foreign 

government, and most small entities, as 

defined in the Regulatory Flexibility 

Act, are not owned or controlled by a 

foreign government. 

DoD published an interim rule in the 

Federal Register at 75 FR 35684 on June 

23, 2010, to which there were no public 

comments. 

IV. Paperwork Reduction Act 

The rule does not impose any 

information collection requirements that 

require the approval of the Office of 

Management and Budget under the 

Paperwork Reduction Act (44 U.S.C. 

chapter 35). 

List of Subjects in 48 CFR Parts 209 and 

252 

Government procurement. 

Mary Overstreet, 

Editor, Defense Acquisition Regulations 

System. 

Interim Rule Adopted as Final Without 

Change 

Accordingly, the interim rule 

amending 48 CRF parts 209 and 252 

published at 75 FR 35684 on June 23, 

2010, is adopted as final without 

change. 

[FR Doc. 2011–8953 Filed 4–18–11; 8:45 am] 

BILLING CODE 5001–08–P 


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