FEDERAL 

CONTRACTING

Commercial Item Test 

Program Beneficial, 

but Actions Needed to 

Mitigate Potential 

Risks

Report to Congressional Committees

February 2014

GAO-14-178

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-178, a report to 

congressional committees

February 2014

FEDERAL CONTRACTING

Commercial Item Test Program Beneficial, but 

Actions Needed to Mitigate Potential Risks

Why GAO Did This Study

Federal agencies rely on the 

commercial marketplace for a range of 

goods and services. In 1996, Congress 

authorized the use of simplified 

acquisition procedures for commercial 

items now valued up to $6.5 million 

under the Test Program for Certain 

Commercial Items. The test program is 

currently authorized until January 

2015. However, due to a lack of 

reliable data, Congress has had limited 

insights into the actual use and 

benefits of the test program.

The House Armed Services Committee 

report that accompanied the National 

Defense Authorization Act for Fiscal 

Year 2013 mandated GAO to report on 

the use of the authority provided under 

the test program. This report 

addresses (1) the extent to which 

federal agencies have used the test 

program, and (2) its benefits and risks, 

if any. DOD, DHS, and DOI accounted 

for 74 percent of test program use in 

fiscal year 2011 based on data 

reported in FPDS-NG. For five 

components within these three 

agencies, GAO assessed data, 

reviewed regulations and agency 

policies, analyzed 26 of the largest test 

program contracts, and interviewed 

contracting officials.

What GAO Recommends

GAO recommends that (1) DOD, DHS, 

and DOI collect and assess data to 

evaluate program use; and (2) DHS 

and DOI require a commercial item 

determination for certain acquisitions to 

better manage risk. DOD concurred, 

but DHS and DOI did not, stating that 

current procedures were adequate. 

GAO maintains that both 

recommended actions are still 

warranted for DHS and DOI.

What GAO Found

Federal agencies use the test program for a relatively small portion of all 

commercial items and services bought. In fiscal year 2011, of the $90 billion 

agencies obligated on new awards for commercial items and services, federal 

agencies obligated $1.9 billion or about 2 percent using the test program, based 

on data reported in the Federal Procurement Data System-Next Generation 

(FPDS-NG). Within the largest reported users of the test program—the 

Departments of Defense (DOD), Homeland Security (DHS), and the Interior 

(DOI)—the five components GAO reviewed used the test program for about 9 

percent of obligations, and 12 percent of the components’ new commercial 

awards that fell within test program thresholds in fiscal year 2011. Agency 

officials cited the types of goods and services being acquired, the complexity of 

the acquisition, and the existence of other contracting approaches as factors 

affecting test program use. For example, the Coast Guard’s Aviation Logistics 

Center used the test program for 139 of 370 new awards that fell within test 

program thresholds, whereas its Headquarters Contract Operations used the test 

program for only 3 of 164 new awards. Coast Guard officials explained that the 

commercial nature of the parts and services bought by the Aviation Logistics 

Center lends itself to using the test program, while the headquarters office used 

existing contracts, which can be another means to fulfill recurring needs for 

commercial supplies such as information technology services. DOD, DHS, and 

DOI officials acknowledge that they do not collect or assess data to determine 

whether the test program is used to the maximum extent practicable. As such, its 

limited use may indicate missed opportunities.

GAO found that the test program reduced contracting lead time and 

administrative burdens and generally did not incur additional risks above those 

on other federal acquisition efforts for those contracts GAO reviewed. GAO 

compared agencies’ estimated timeframes for awarding contracts using 

negotiated procedures—which officials reported would be used in the absence of 

the test program—with actual lead times for eight competitively awarded test 

program contracts and found that test program contracts were generally awarded 

in fewer days. For example, the Army awarded a $1.3 million contract for blast 

barriers and bunkers in 20 days, about 160 days less than suggested by 

command guidance. According to officials from the agencies and components 

GAO reviewed, test program contracts are reviewed using existing internal

controls and standard contract review processes. GAO found that contracting 

officers generally documented their efforts to identify commercial sources, but 16 

of the 26 test program contracts GAO reviewed were awarded noncompetitively. 

While these awards were justified and approved in accordance with federal 

regulations when required, GAO and others have found that noncompetitive 

contracting poses risks of not getting the best value because these awards lack a 

direct market mechanism to help establish pricing. In some cases, DOD requires 

contracting officers to prepare a determination that the acquisition meets the 

commercial item definition. Neither DHS nor DOI have a similar requirement, 

potentially increasing their risks. Not ensuring the proper classification of an item 

as commercial can leave the government vulnerable to accepting prices that may 

not be the best value.

View GAO-14-178. For more information, 

contact Timothy J. DiNapoli (202) 512-4841 or 

dinapolit@gao.gov.
Page i GAO-14-178 Commercial Items

Letter 1

Background 3

Test Program Contracts Constitute Small Portion of Commercial 

Buying Activity, but Components Do Not Monitor or Assess Its 

Use 11

Test Program Can Reduce the Time to Award Contracts with 

Manageable Risk 14

Conclusions 20

Recommendations for Executive Action 21

Agency Comments and Our Evaluation 22

Appendix I Objectives, Scope and Methodology 27

Appendix II Summary of Contracts GAO Reviewed 30

Appendix III Comments from the Department of Defense 32

Appendix IV Comments from the Department of Homeland Security 34

Appendix V Comments from the Department of the Interior 37

Appendix VI GAO Contact and Staff Acknowledgments 39

Tables

Table 1: Comparison of Simplified Acquisition and Negotiated 

Procedures for Acquiring Commercial Items 7

Table 2: Test Program Obligations and Number of New Awards 

Valued Between $150,000 and $6.5 million in Fiscal Year 

2011 12

Table 3: Comparison of Estimated Contracting Lead Time for 

Competitively Awarded Negotiated Contracts to Actual 

Contents
Page ii GAO-14-178 Commercial Items

Lead Time for Eight Competitively Awarded Test Program 

Contracts GAO Reviewed 16

Figure

Figure 1: Laws Related to the Commercial Item Test Program 4

Abbreviations

DFARS Defense Federal Acquisition Regulation 

Supplement

DOD Department of Defense

DHS Department of Homeland Security

DOI Department of the Interior

FASA Federal Acquisition Streamlining Act of 1994

FAR Federal Acquisition Regulation

FedBizOpps Federal Business Opportunities

FPDS-NG Federal Procurement Data System-Next 

Generation

OFPP Office of Federal Procurement Policy

SBA Small Business Administration

This is a work of the U.S. government and is not subject to copyright protection in the 

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without further permission from GAO. However, because this work may contain 

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Page 1 GAO-14-178 Commercial Items

441 G St. N.W.

Washington, DC 20548

February 4, 2014

Congressional Committees

Federal agencies rely on the commercial marketplace for a range of 

goods and services to conduct business and meet their mission needs. In 

1996, Congress authorized the use of simplified acquisition procedures—

previously allowed for small purchases—for commercial items not 

exceeding $5 million under the Test Program for Certain Commercial 

Items (test program).1 Based on the premise that market forces would 

ensure reasonable prices for commercial items, the test program aimed to 

simplify the contracting process by providing contracting officers with 

additional procedural discretion and flexibility for the acquisition of 

commercial items. Further, effective and efficient access to commercial 

products and services can help agencies achieve their missions and save 

time and administrative costs in an era of constrained budgets. The test 

program authority was initially only 3 years but has been repeatedly 

extended. The most recent extension expired on January 1, 2012, and 

the authority was not extended at that time. In January 2013, Congress 

extended the authority for use of the test program, retroactively from 

January 1, 2012, to January 1, 2015.2

The House Armed Services Committee report that accompanied the 

National Defense Authorization Act for Fiscal Year 2013 mandated GAO 

to report on the use of the authority provided under the test program.3

To determine the extent to which federal agencies have used the test 

program, we analyzed data on contract actions awarded using the 

authority from the Federal Procurement Data System-Next 

This report addresses (1) the extent to which federal agencies have used 

the test program, and (2) its benefits and risks, if any.

 1

Clinger-Cohen Act of 1996, Pub. L. No. 104-106, § 4202, 110 Stat. 186, 652.

2

The National Defense Authorization Act for Fiscal Year 2013, Pub. L. No. 112-239, § 

822(a).

3

H.R. Rep. No. 112-479, at 190 (2012).
Page 2 GAO-14-178 Commercial Items

Generation (FPDS-NG).4

We assessed the reliability of the FPDS-NG data by randomly selecting a 

generalizable sample of 243 contracts with obligations in fiscal year 2011 

that were coded as having used the test program. We obtained evidence 

from the contract files to verify that the contracts had been awarded using 

the test program and determined the FPDS-NG data were sufficiently 

reliable to identify the minimum extent to which the five components used 

the test program. We did not sample contracts that were identified as not 

using the test program, and as such, did not assess the extent to which 

test program actions and obligations may be underreported. We also 

analyzed the number of new awards for commercial items and services in 

fiscal year 2011 and identified the percentage that used the test program. 

We did not assess the test program’s higher threshold of $12 million 

when used in support of a contingency operation or to facilitate the 

defense against or recovery from nuclear, biological, chemical, or 

radiological attack since we determined that these contracts accounted 

for only 2 percent of fiscal year 2011 obligations made by the components 

in our review. We interviewed contracting officials from each department 

and component to determine the factors that influenced whether or not 

the test program was used.

We used fiscal year 2011 data from FPDS-NG 

because it was the most recent fiscal year with complete data available 

when we began our review due to the authority’s expiration in 2012. 

Based on reported obligations, we determined that the departments of 

Defense (DOD), Homeland Security (DHS), and the Interior (DOI) 

collectively accounted for about 74 percent of all test program obligations. 

Within these departments, we focused on the five components reporting 

the greatest use of the test program as follows: DOD’s Army Materiel 

Command, Naval Supply Systems Command, and Air Force Materiel 

Command; DHS’ U.S. Coast Guard; and DOI’s Acquisition Services 

Directorate.

To determine the benefits and risks of using the test program, we 

reviewed relevant legislation, applicable Federal Acquisition Regulation 

(FAR) provisions, and agency guidance. We also selected a nonrandom, 

nongeneralizable sample of at least four of the largest test program 

 4

FPDS-NG is the government’s central repository for contracting data. FPDS, the 

predecessor to FPDS-NG, first began collecting procurement data for fiscal year 1979. 

FPDS-NG became operational in October 2003. Hence, some of the references in this 

report will be to the predecessor system.
Page 3 GAO-14-178 Commercial Items

contracts from each of the five components for a total of 26 contracts. For 

the 26 contracts sampled, we reviewed the contract and other relevant 

documents, such as acquisition plans, market research documentation 

and solicitations, and interviewed contracting officials to determine how 

the test program was used and to obtain their views on the benefits and 

risks of its use. For eight competitively awarded test program contracts, 

we also compared the actual number of days from solicitation issuance to 

award with the estimated number of days from solicitation issuance to 

award of a contract using competitive negotiated procedures, based on 

agency guidance. Appendix I provides additional details on our scope and 

methodology. Appendix II provides information on the 26 contracts we 

reviewed.

We conducted this performance audit from March 2013 to February 2014 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

The acquisition reforms of the mid-1990s resulted in a number of 

regulatory changes that promoted the acquisition of commercial items 

and services. These reforms grew out of the belief that (1) everincreasing procurement laws and regulations resulted in federal 

contracting processes that were overly burdensome and time consuming; 

and (2) acquiring commercial items would improve quality and cost 

outcomes by leveraging the innovation of the commercial market and 

using market forces to lower prices. Commercial items and services are 

those generally available in the commercial marketplace in contrast with 

items developed to meet specific federal government requirements. 

Figure 1 identifies key laws related to the commercial item test program.

Background
Page 4 GAO-14-178 Commercial Items

Figure 1: Laws Related to the Commercial Item Test Program

a

Contractors are generally required, with certain exceptions, to submit cost or pricing data to the 

government before the award of a negotiated contract and to certify that the data are accurate, 

complete, and current as a way to provide information necessary to protect the government from 

paying excessive prices. 10 U.S.C. § 2306a and 41 U.S.C. §§ 3502, 3503.
Page 5 GAO-14-178 Commercial Items

As part of the acquisition reform efforts, the Federal Acquisition 

Streamlining Act of 1994 (FASA) authorized agencies to use simplified 

procedures for the acquisition of supplies and services not exceeding 

$100,000.5

Additionally, FASA established a statutory preference for the acquisition 

of commercial items and defined the term “commercial item.” For 

example, FASA required agencies to conduct market research to 

determine whether commercial items are available to meet agency needs; 

to define requirements in terms of functions to be performed, performance 

required, or essential physical characteristics so that commercial items 

can be procured; and to acquire commercial items to the maximum extent 

practicable to meet agency needs. The definition of commercial item 

includes items customarily used by and sold (or offered) to the general 

public, including with minor modifications “of a type” not necessarily 

available in the commercial marketplace made to meet federal 

government requirements, or services “of a type” offered and sold 

competitively in substantial quantities in the commercial marketplace.

Simplified procedures for purchasing commercial items allow 

agencies to select contractors using expedited evaluation and selection 

procedures and to keep documentation to a minimum, which can reduce 

the government’s administrative costs. For example, evaluation of a 

contractor’s past performance may be based on one or more of the 

following: the contracting officer’s knowledge and previous experience 

with the supply or service being acquired, customer surveys, and past 

performance questionnaire replies.

6

In 1996, the Clinger-Cohen Act provided additional flexibility for the 

acquisition of commercial items and services by increasing the dollar 

threshold for the use of simplified acquisition procedures for commercial 

items and services up to $5 million. In 2003, a threshold of $10 million 

was established for commercial item acquisitions in support of 

contingency operations or to facilitate defense against or recovery from 

Including “of a type” items allows vendors to make adjustments to 

commercial products so that they meet government requirements even if 

those products have not been sold in a commercial setting or subjected to 

competitive price pressures.

 5

Pub. L. No. 103-355, § 4001. The current threshold for using simplified acquisition 

procedures is generally $150,000.

6

FAR § 2.101.
Page 6 GAO-14-178 Commercial Items

nuclear, biological, chemical, or radiological attack. These thresholds 

have been changed periodically to take inflation into account, resulting in 

the current thresholds of $6.5 million for commercial acquisitions and 

$12 million for commercial acquisitions in support of contingency-related 

operations. The authority lapsed in 2012, but was subsequently 

reauthorized by Congress until January 1, 2015.

Various provisions of the FAR govern the policies and contracting 

methods for commercial item acquisitions. FAR Part 12—Acquisition of 

Commercial Items prescribes the policies unique to the acquisition of 

commercial items. For example, contracting officers can use streamlined 

posting and solicitation procedures, which can reduce the time needed to 

advertise actions and solicit offers, respectively.7 Contracting officers are 

also required to use firm-fixed-price contracts or fixed-price contracts with 

economic adjustments, though the FAR also allows for the use of timeand-materials contracts or labor-hour contracts under certain 

circumstances.8 FAR Part 12 also instructs contracting officers to use the 

policies in conjunction with the solicitation, evaluation, and award policies 

and procedures described in other parts of the FAR, specifically FAR Part 

13—Simplified Acquisition Procedures, FAR Part 14—Sealed Bidding, or 

FAR Part 15—Contracting by Negotiation, that the contracting officer 

believes are most appropriate. As shown in table 1, the combination of 

the procedures provided for under FAR Parts 12 and 13 generally 

constitute the flexibilities provided under test program.9

 7

See FAR §§ 5.203(a)-(c), 12.204(b), 12.205(c).

By contrast, 

8

Fixed-price types of contracts provide for a firm price or an adjustable price. Fixed-price 

contracts providing for an adjustable price may include a ceiling price, a target price 

(including target cost), or both. Unless otherwise specified in the contract, the ceiling price 

or target price is subject to adjustment only by operation of contract clauses providing for 

equitable adjustment or other revision of the contract price under stated circumstances. 

FAR 16.201(a). A time-and-materials contract provides for acquiring supplies or services 

on the basis of—(1) Direct labor hours at specified fixed hourly rates that include wages, 

overhead, general and administrative expenses, and profit; and (2) Actual cost for 

materials, with certain exceptions. FAR 16.601(b). As we reported in 2007, time-andmaterials contracts comprise the highest contract type risk to the government, according 

to the organizations who are responsible for promulgating federal acquisition regulations. 

See GAO, Defense Contracting: Improved Insight and Controls Needed over DOD’s Timeand-Materials Contracts, GAO-07-273 (Washington D.C.: June 29, 2007).

9

Table 1 compares simplified acquisition procedures (FAR Part 13) and negotiated 

procedures (FAR Part 15) but does not include sealed bidding procedures (FAR Part 14).

Regulations Related to 

Commercial Acquisitions
Page 7 GAO-14-178 Commercial Items

contracting by negotiated procedures requires more steps during the 

evaluation process and more detailed contract file documentation, but can 

provide contracting officers with greater visibility into the costs and 

technical capabilities of the offerors, if needed.

Table 1: Comparison of Simplified Acquisition and Negotiated Procedures for Acquiring Commercial Items 

Contracting methods

Procedures

Contracting by simplified acquisition procedures

FAR Part 13

Contracting by negotiated procedures

FAR Part 15

Solicitation All commercial item acquisitions exceeding $25,000 may use streamlined posting and solicitation procedures to 

reduce the time needed to advertise and solicit offers, respectively, as described in FAR Part 12.

Evaluation / 

source selection 

• The contracting officer has broad discretion in 

fashioning suitable evaluation procedures.

• If using price and other factors, contracting officers 

should ensure that quotations or offers can be 

evaluated in an efficient and minimally burdensome 

fashion. Formal evaluation plans and establishing a 

competitive range, conducting discussions, and 

scoring quotations or offers are not required.

• Evaluation of past performance can be based on, 

among other things, the contracting officer’s 

knowledge of and previous experience with the 

supply or service being acquired, or any other 

reasonable basis.

• A formal source selection is required, including an 

evaluation team with expertise tailored for the 

particular acquisition, which will generally evaluate 

cost or price, technical factors, and past 

performance.

• The evaluation factors and significant subfactors 

that apply to an acquisition and their relative 

importance are within the broad discretion of agency 

acquisition officials, subject to certain requirements.

Award • The contracting officer must determine that the 

proposed price is fair and reasonable.

• Whenever possible, price reasonableness should be 

based on competitive quotations or offers. If only 

one response is received, the contracting officer 

must include in the contract file a statement of price 

reasonableness.

• Contracts must be competed to the maximum extent 

practicable. Contracting officers can post proposed 

contract actions over $25,000 to the governmentwide point of entry, located at Federal Business 

Opportunities (FedBizOpps) or solicit sources from 

the local trade area. Noncompetitive awards using 

simplified procedures under the test program are 

permissible if justification, approval, and notice are 

provided when required.

• Source selection decisions are to be based on a 

comparative assessment of proposals against 

source selection criteria.

• After identifying the most highly rated proposals, the 

contracting officer must generally establish a 

competitive range, notify unsuccessful offerors, and 

conduct discussions with offerors in the competitive 

range.

• Full and open competition is generally required 

which means that all responsible sources are 

permitted to compete. The law allows for full and 

open competition after exclusion of sources, and 

noncompetitive awards are permissible under 

certain circumstances. 

Source: GAO analysis of various Federal Acquisition Regulation provisions.
Page 8 GAO-14-178 Commercial Items

The FAR states that contracting activities must use the simplified 

procedures authorized by the test program to the maximum extent 

practicable.10 However, when buying goods and services, federal 

contracting officers are required to procure from or through required 

government supply sources, which are listed in order of priority.11

When using the test program, the FAR also requires competition to the 

maximum extent practicable, which can generally be achieved by posting 

the proposed contract action to the governmentwide point of entry located 

at Federal Business Opportunities (FedBizOpps), or by soliciting sources 

from the local trade area. Noncompetitive awards are permissible under 

certain circumstances such as when only one responsible source and no 

other supplies or services will satisfy agency requirements, or when 

competition is precluded by the terms of an international agreement.

For 

example, one of the required government supply sources for both 

supplies and services is the General Services Administration’s federal 

supply schedule program. The schedule program provides federal 

agencies with a simplified method for procuring various quantities of a 

wide range of commercially available goods and services. Further, 

agencies can use existing indefinite-delivery contracts which allow them 

to issue task orders for services or delivery orders for supplies. Similarly, 

agencies may have pre-existing blanket purchase agreements which also 

provide a simplified method of fulfilling repetitive needs for supplies and 

services. In the absence of a required government supply source, 

contracting officers can generally use existing contracts or award new 

contracts for commercial items using either simplified or negotiated 

procedures within the test program thresholds.

12

Noncompetitive awards are also permissible under Section 8(a) of the 

Small Business Act which authorizes the Small Business Administration 

(SBA) to enter into contracts on a competitive or noncompetitive basis 

with other agencies and award subcontracts for performing those 

contracts to firms eligible for program participation. SBA’s subcontractors 

are referred to as “8(a) contractors.”13

 10FAR § 13.500(b).

11FAR § 8.002.

12FAR § 13.501.

1315 U.S.C. § 637(a); FAR §§ 19.800(a) and (b).
Page 9 GAO-14-178 Commercial Items

Our prior reports on the initial use of the test program found that there 

was limited data to assess its use or benefits. For example, in 2001 we 

reported that the agencies had not collected data to provide a basis for 

measuring whether the test program was maximizing efficiency and 

economy and minimizing administrative burden and cost.14 Similarly, in 

2003, we reported that the test program data reported in FPDS were not 

reliable and recommended that agencies take action to ensure data 

reliability.

15

Our work and that of others has shown that government contracting

officials face risks in using commercial acquisitions in certain 

circumstances. For example, in 2006 we reported that improper 

classification of an item as commercial can leave the government 

vulnerable to accepting prices that may not be the best value if the item is 

not sold in numbers sufficient for the government to determine the 

reasonableness of the vendor’s prices as the government is precluded 

from requesting certified cost or pricing information.

Subsequently, DOD requested a change in 2007 to FPDS-NG 

to improve test program reporting. As a result, FPDS-NG was modified in 

2009 to include a specific, single reporting field to identify test program 

contracts. We also recommended that DOD and the Office of Federal 

Procurement Policy (OFPP), which provides overall direction for 

government-wide procurement policies, develop evaluation mechanisms 

for measuring test program benefits. DOD stated that it would develop a 

methodology to evaluate the benefits of the test program on the basis of 

such metrics as contracting lead time, and share the results with OFPP. 

However, according to DOD and OFPP officials, no action has been 

taken to do so.

16

 14GAO, Contract Management: Benefits of Simplified Acquisition Test Procedures Not 

Clearly Demonstrated, 

The DOD Inspector 

General also issued a report in 2006 that found that contracting officials 

did not adequately justify the commercial nature of the items or services 

being acquired and concluded that the commercial item definition was too 

broad and allowed contracting officials to award contracts for defense 

GAO-01-517 (Washington, D.C.: Apr. 20, 2001). 

15GAO, Contract Management: No Reliable Data to Measure Benefits of Simplified 

Acquisition Test Program, GAO-03-1068 (Washington, D.C.: Sept. 30, 2003).

16GAO, DOD Contracting: Efforts Needed to Address Air Force Commercial Acquisition 

Risk, GAO-06-995 (Washington, D.C.: Sept. 29, 2006); and Contract Management: DOD 

Vulnerabilities to Contracting Fraud, Waste, and Abuse, GAO-06-838R (Washington, 

D.C.: July 7, 2006).

Related Work Identified 

Challenges with Test 

Program Data and 

Commercial Acquisitions
Page 10 GAO-14-178 Commercial Items

systems and subsystems that had no commercial market and no 

meaningful price history. The Inspector General recommended that DOD 

propose a legislative change to tighten the commercial item definition to 

state that the commercial item exception to submission of certified cost or 

pricing data must only apply to the acquisition of commercial items that 

are sold in substantial quantities to the general public. At the time, DOD 

did not concur with the recommendation.17 In January 2007, the 

Acquisition Advisory Panel issued a report that concluded that the 

broadness of the commercial item definition, specifically the “of a type” 

provision for commercial services disadvantages the government in 

pricing, particularly when there is limited or no competition.18

To ensure that an item meets the commercial item definition, DOD 

amended the Defense Federal Acquisition Regulation Supplement 

(DFARS) in 2008 to require DOD contracting officers to include a written 

determination in the contract file that an acquisition meets the definition of 

“commercial item” specified in the FAR when using commercial item 

procedures for acquisitions exceeding $1 million.19

In 2006, we also noted the risks associated with commercial item 

acquisitions in a noncompetitive environment such as when there is only 

one responsible source and there are no other supplies or services that 

will satisfy agency requirements.

DOD amended this 

requirement in 2012 to require approval one level above the contracting 

officer when the commercial item determination is based on the “of a 

type” commercial procurements or items “offered for sale,” but not yet 

sold to the general public.

20

 17Department of Defense Office of Inspector General, Commercial Contracting for the 

Acquisition of Defense Systems, D-2006-115 (Sept. 29, 2006).

We found that similar to misclassifying 

acquisitions as commercial, the lack of market-based competition for 

commercial items for which there is only one responsible source may 

18Report of the Acquisition Advisory Panel to the Office of Federal Procurement Policy 

and the U.S. Congress (January 2007). The Services Acquisition Reform Act of 2003 

established the acquisition advisory panel to review acquisition laws and regulations and 

make recommendations to improve federal acquisition practices. The panel’s final report 

issued in January 2007 made 89 recommendations to improve the acquisition of services 

in several areas, including commercial practices.

19DFARS §§ 212.102(a)(i) (A) and (B).

20GAO-06-995.
Page 11 GAO-14-178 Commercial Items

result in prices that may not be the best value for the government. In 

situations when the government is acquiring a commercial item 

noncompetitively, agencies may use various means to determine that that 

the proposed price is reasonable, such as by comparison with prices 

found reasonable on previous purchases, or comparison with a 

commercial price list. In 2010, we also found that for services supporting 

DOD weapons programs, the government’s lack of access to proprietary 

technical data—information used to define a design and to produce, 

support, maintain or operate an item—and a heavy reliance on specific 

contractors for expertise limit, or even preclude the possibility of, 

competition.21

Federal agencies’ use of the commercial item test program represents a 

relatively small portion of all commercial buying activity. In fiscal year 

2011, of the $90 billion agencies obligated on new awards for commercial 

items and services, federal agencies obligated $1.9 billion or about two 

percent using the test program based on data reported in FPDS-NG. For 

new awards within the test program thresholds of $150,000 to $6.5 

million, test program contracts constituted about 9 percent of obligations 

and 12 percent of awards for the five components we reviewed. Table 2 

summarizes the extent of use of the test program for the five components 

we reviewed.

 21GAO, Federal Contracting: Opportunities Exist to Increase Competition and Assess 

Reasons When Only One Offer Is Received, GAO-10-833, (Washington, D.C., July 26, 

2010).

Test Program 

Contracts Constitute 

Small Portion of 

Commercial Buying 

Activity, but 

Components Do

Not Monitor or

Assess Its Use
Page 12 GAO-14-178 Commercial Items

Table 2: Test Program Obligations and Number of New Awards Valued Between $150,000 and $6.5 million in Fiscal Year 2011

Obligations on new awards

($ in millions) Number of new awards

Agency/component Total

Test 

program 

Percent test 

program Total

Test 

program 

Percent test 

program

Department of Defense

Army Materiel Command $4,764 $269 6% 6,769 468 7%

Naval Supply Systems Command 870 199 23 1,880 488 26

Air Force Materiel Command 1,270 74 6 1,675 108 6

Department of Homeland Security

U.S. Coast Guard 487 84 17 914 222 24

Department of the Interior

Acquisition Services Directorate 241 43 18 343 74 22

Total $7,632 $668 9% 11,581 1,360 12%

Source: GAO analysis of FPDS-NG data.

Note: Total new awards include contracts, purchase orders, task and delivery orders placed against 

indefinite delivery contracts, and calls placed against blanket purchase agreements. Numbers may 

not add due to rounding.

We identified significant variation in test program use between and within 

the components we reviewed which agency and component officials 

attributed to a variety of factors including the types of goods and services 

being acquired, the complexity of the acquisition, and the existence of 

other contracting approaches. For example, within DOD, the Army 

Material Command awarded about 7 percent of its new awards in fiscal 

year 2011 using the test program; by contrast, the Naval Supply System 

Command awarded about 26 percent of its new awards in that year using 

the test program. Similarly, within the Coast Guard, the Aviation Logistics 

Center used the test program for 139 of 370 new commercial awards; in 

contrast, the Coast Guard’s Headquarters Contract Operations used the 

test program for only 3 of 164 new awards. Coast Guard officials 

explained that the nature of the products and services purchased by the 

Aviation Logistics Center—including parts and services for aircraft 

maintenance, upgrades, and repair—lends itself to using the test 

program. By contrast, officials explained that the relatively lower use at 

Coast Guard headquarters is due to the fact that they use pre-existing 

indefinite-delivery order contracts to procure commercial items and 

services within test program thresholds such as information technology 

services. In that regard, we found that 126 of 164 new Coast Guard 

headquarters awards, or 77 percent, were delivery orders.
Page 13 GAO-14-178 Commercial Items

Department and component officials generally believe that the test 

program is used as much as possible, but noted that it is one tool among 

many others in the contracting officer’s tool kit. These officials explained 

that the decision regarding the appropriate contracting method for a 

commercial item is left to the contracting officers’ discretion and may be 

based on factors including the estimated value of the contract at award, 

the urgency of the requirement, the availability of existing contracts or 

vehicles, as well as the nature of the item or service being acquired. 

Further, several officials noted that they would not use the test program 

for complex commercial procurements, regardless of the estimated value, 

if they believed a negotiated procedure was necessary to evaluate the 

costs and technical capabilities of the offerors. Federal internal control 

standards call for managers to measure and assess performance over 

time to ensure effectiveness and efficiency of operations and compliance 

with applicable laws and regulations.22

We also found evidence that test program contracts may be 

underreported. For example, based on data reported in FPDS-NG, the 

Army Materiel Command’s Mission Installation Contracting CommandFort Knox reported that it used the test program for 2 of 538, less than 1 

percent, of new commercial awards in fiscal year 2011 that fell within test 

program thresholds. A Fort Knox contracting official told us that he 

believed actual use of the test program was likely to be much greater and 

attributed the underreporting to how their contract writing system defaults 

to a “non-test program” setting. We did not assess the extent to which test 

program contracts were underreported.

These officials acknowledge, 

however, that their departments or components do not collect or assess 

data to determine whether the test program is used to the maximum 

extent practicable as required by the FAR, which may result in missed 

opportunities to use the test program.

 22GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999).
Page 14 GAO-14-178 Commercial Items

The test program contracts we reviewed were generally awarded more 

quickly and with less administrative burden than had the contracts been 

awarded using negotiated procedures and generally did not incur risks 

above those experienced on other federal acquisition efforts. The 

agencies and components we reviewed reported they generally applied 

their existing internal controls when reviewing and approving test program 

contracts. Further, contracting officers generally documented their efforts 

to identify commercial sources, but nevertheless awarded 16 of the 26 

test program contracts noncompetitively. While these awards were 

justified and approved in accordance with federal regulations when 

required, our work and that of others has found that noncompetitive 

contracting poses risks of overspending because these awards lack a 

direct market mechanism to help establish pricing. DOD regulations 

require a written and approved commercial item determination in some 

cases to mitigate risks associated with misapplication of the commercial 

item definition; neither DHS nor DOI have a similar requirement.

OFPP staff and agency contracting and policy officials we interviewed 

believed the test program provided benefits in terms of reducing lead time 

and administrative workload, however, data are not specifically collected 

to assess test program benefits on the basis of such metrics as 

contracting lead time, according to officials. Officials noted that when the 

test program authority lapsed in 2012, OFPP and DOD requested from 

the civilian agencies and military departments examples of how the test 

program has been used and benefits of its use. Our review of some of the 

responses provided found that contracting activities consider the test 

program a useful tool to manage workload and save resources. For 

example, a Naval Supply Systems Command office prepared a workforce 

analysis that identified the contracting full-time equivalents associated 

with additional processing time which would be required if the test 

program were not available. In the absence of the test program or 

additional funding, the office concluded that the capacity to perform 

contract administration and oversight would likely be negatively impacted.

Based on our review of the test program contracts, the use of the test 

program reduced contracting lead time and administrative burdens in 

comparison to the agencies’ estimated lead times for awarding contracts 

using negotiated procedures. As we reported in 2011, most agencies we 

reviewed have established guidance for contracting lead times that serve 

Test Program Can 

Reduce the Time to 

Award Contracts with 

Manageable Risk

Test Program Can Reduce 

Contracting Lead Time 

and Administrative 

Workload, but Data Are 

Not Specifically Collected 

to Assess Benefits
Page 15 GAO-14-178 Commercial Items

as internal deadlines for contracting offices and provide program offices 

with information about contract processing times.23 For the purposes of 

our lead time analysis, we reviewed agency lead time guidance from each 

of the components we reviewed that identified the estimated time needed 

to award a contract using negotiated procedures, focusing specifically on 

the number of days from when the agency issued a solicitation to contract 

award. The lead times established in the guidance varied considerably 

and did not consistently account for a number of factors such as the 

degree or type of competition (i.e., competed or not competed), the 

commercial availability and type of item or service procured, and 

estimated contract value of the acquisition. Recognizing these limitations, 

we compared the expected lead times for negotiated competitive 

procurements based on agency guidance with the actual lead times we 

observed for eight test program contracts we reviewed. For these 

contracts, we identified the number of days from solicitation issuance to 

contract award and compared these actual days with the estimated time 

to award a competitive negotiated contract based on each respective 

agency’s guidance. As shown in table 3, seven of the eight test program 

contracts we reviewed that were competitively awarded were awarded in 

fewer days than identified in agency guidance. In general, test program 

contracts that were not competed were awarded in fewer days than those 

that were competed.

 23GAO, Acquisition Planning: Opportunities to Build Strong Foundations for Better 

Services Contracts, GAO-11-672 (Washington, D.C.: Aug. 9, 2011).
Page 16 GAO-14-178 Commercial Items

Table 3: Comparison of Estimated Contracting Lead Time for Competitively 

Awarded Negotiated Contracts to Actual Lead Time for Eight Competitively 

Awarded Test Program Contracts GAO Reviewed

Contracting lead time (number of days from 

solicitation issuance to contract award)

Department/Component

Estimate for competitive 

negotiated contracts

per agency guidance

Actual for test program 

contracts GAO revieweda

DOD – Army Materiel 

Command

180

No dollar value specified

20

DOD – Air Force Materiel 

Command

330

Awards valued between 

$1 million and $50 million

176

DOD – Naval Supply 

Systems Command

180 (products) to 240 

(services)b

Awards for commercial 

items and services valued at 

greater than $150,000

42

82

192c

DHS – Coast Guard 102b

Awards for commercial 

items valued above 

$500,000

82

DOI – Acquisitions Services 

Directorate

73

Awards for commercial 

items and services

No dollar value specified

55

75

Source: GAO analysis of agency data.

Note: The agency guidance we reviewed was generally applicable to competitively awarded 

negotiated awards and did not consistently account for the degree and type of competition, 

commercial availability, the type of item or service procured, and estimated value.

a

This analysis includes eight test program contracts that were awarded competitively. We excluded 

14 contracts that were awarded noncompetitively, one purchase order for which the agency was 

unable to provide a solicitation, and three delivery orders.

b

The contracting lead time estimates for the Naval Supply System’s Command and the Coast Guard 

include time associated with pre-solicitation activities.

c

This award was for a service.

According to contracting officers we interviewed, the test program 

provided them flexibility and discretion with respect to evaluating offers 

and making contract awards and allowed them to keep documentation to 

a minimum. For example, an Army contracting officer competitively 

awarded a $1.3 million firm-fixed-price contract for blast barriers and 

bunkers for installations in Kuwait in 20 days after receiving quotes from 

23 local contractors and evaluating them for technical acceptability and 
Page 17 GAO-14-178 Commercial Items

price.24

In contrast, under simplified acquisition procedures, if using price and 

other factors, the contracting officer must ensure that quotations or offers 

can be evaluated in an efficient and minimally burdensome fashion. 

Formal evaluation plans, and establishing a competitive range, 

conducting discussions, and scoring quotations or offers are not required. 

Some contracting officers explained that they chose to use simplified 

procedures under the test program because it would have taken 

additional time to use negotiated procedures to acquire the same goods 

and services.

In another example, a DOI contracting officer competitively 

awarded a $2.3 million firm-fixed-price contract for aircraft services for 

firefighting missions in Colorado in 55 days after evaluating six quotations 

submitted by regional businesses for price and aircraft capability, among 

other criteria. According to contracting officers we interviewed, had the 

test program not been available, they would have used negotiated 

procedures under FAR Part 15. In that regard, they would have been 

required to establish formal evaluation criteria, convene an evaluation 

team, and evaluate proposals against the criteria, as well as notify 

unsuccessful offerors and generally conduct negotiations with the offerors 

in the competitive range. 

Contracting officers used the combined posting and solicitation issuance 

procedures allowed for all commercial item acquisitions in combination 

with the other flexibilities of the test program to varying degrees. For 

example, contracting officers did not consistently issue combined notice 

and solicitation, or establish a reduced solicitation response time that 

affords potential offerors a reasonable opportunity to respond to the 

commercial item acquisition. Contracting officers used the combined 

notice and solicitation issuance procedure in only 6 of the 26 contracts we 

reviewed. In 8 contracts involving noncompetitively awarded small 

business 8(a) contracts, there was no requirement to post notice of the 

proposed contract action. In other cases, contracting officers provided 

several reasons why they chose not to use the combined notice and 

solicitation issuance procedure. For example, a Coast Guard contracting 

official explained that she did not use the combined posting and 

 24Although the Army was not required to post the proposed contract action, which is by a 

defense agency and will be made and performed outside the U.S. and its outlying areas, 

and only local sources will be solicited, the Army nevertheless posted a solicitation 

requesting expedited quotations from local firms. See generally, FAR § 5.202(a)(12).
Page 18 GAO-14-178 Commercial Items

solicitation issuance procedures for a test program contract for ship 

repairs valued at approximately $800,000 because it is the office’s 

practice to issue a separate notice and solicitation for all ship repair 

contracts valued over $150,000 to encourage competition among the 

limited number of vendors that can provide these services. We also found 

that in some cases contracting officers did not reduce the solicitation 

response time and allowed a solicitation response time of 30 days or 

more. Contracting officials at the agencies we reviewed reported that 

combined posting and solicitation issuance procedures are more likely to 

be used in test program awards where there is limited time to complete 

an acquisition due to urgency, the need to award contracts before the end 

of the fiscal year, or when the specifications of the requirement are not 

complex.

According to officials from the agencies and components we reviewed, 

test program contracts are reviewed using existing internal controls and 

standard contract review processes, which are often based on dollar 

thresholds. Consequently, these officials noted that there is no difference 

between the reviews they conduct prior to awarding a test program 

contract versus other, comparably-valued contracts. Further, the FAR 

requires that agency needs are described in sufficient detail to allow for 

the conduct of market research. Market research establishes the 

foundation for the agency description of need, the solicitation, and 

resulting contract. Further, it is intended to help the agency determine if 

there is a commercial market, which helps ensure that the prices offered 

are subject to market forces. We found that the contracting officers 

responsible for the contracts we reviewed documented their market 

research in 24 of 26 cases. In the remaining two cases, agency officials 

could not provide evidence that market research was conducted.

The FAR also requires test program contracts to be competed to the 

maximum extent practicable, unless contracting officers justify awarding 

them noncompetitively. Noncompetitive awards are permissible under 

certain circumstances such as when only one responsible source and no 

other supplies or services will satisfy agency requirements, or under the 

8(a) small business program. Most contracts, however, were not awarded 

competitively. Our review found that 10 of the 26 contracts were awarded 

competitively and the remaining 16 were awarded on a noncompetitive 

basis and included justifications and approvals when required by federal 

regulations (see appendix II). In 8 cases, the contracts were awarded 

noncompetitively to small businesses. In another 7 cases, contracting 

officers justified the decision to award the contract noncompetitively on 

Test Program Does 

Not Generally Introduce 

Additional Risk When 

Internal Controls Are 

in Place
Page 19 GAO-14-178 Commercial Items

the basis that only a single contractor could satisfy the government’s 

requirements. For example, the Coast Guard awarded a $4.3 million 

contract for aircraft spare parts on a noncompetitive basis because the 

contractor owned the technical data—information used to define a design 

and to produce, support, maintain or operate an item—for the needed 

item. In another example, the Army justified a $1.6 million noncompetitive 

award to upgrade a mobile radio system on the basis that the vendor was 

the only source since it owns proprietary rights in the hardware and 

software.25

Our work and that of others has found that noncompetitive contracting 

poses risks of overspending because these awards lack a direct market 

mechanism to help establish pricing. For example, we have reported that 

competitive contracts can help save the taxpayer money, improve 

contractor performance, curb fraud, and promote accountability for 

results.

In the remaining noncompetitive award, the Army awarded a 

$1.2 million contract for computer systems equipment and 

troubleshooting on behalf of the Saudi Arabian National Guard on the 

basis that competition was precluded by the terms of an international 

agreement.

26 According to OFPP, while noncompetitive contracts can play an 

important role in helping agencies meet needs that arise, they also 

present a risk because they place agencies in the position of having to 

negotiate contracts without the benefit of a direct market mechanism to 

help establish pricing.27

DOD regulations add the requirement that contracting officers prepare a

written determination that the acquisition meets the commercial item 

definition in the FAR for purchases greater than $1 million. DOD also 

requires approval one level higher than the contracting officer level for 

acquisitions greater than $1 million when the determinations are based on 

 25In 2013, we reported that a long-standing factor impacting DOD’s competition rate is its 

reliance on an original equipment manufacturer through the life cycle of a program 

because of a previous decision not to purchase proprietary technical data. GAO, Defense 

Contracting: Actions Needed to Increase Competition, GAO-13-325 (Washington, D.C.: 

Mar. 28, 2013).

26GAO, Federal Contracting: Opportunities Exist to Increase Competition and Assess 

Reasons When Only One Offer Is Received, GAO-10-833 (Washington, D.C.: July 26, 

2010); and GAO-09-792

27Office of Federal Procurement Policy Memorandum, Increasing Competition and 

Structuring Contracts for the Best Results (Washington, D.C.: Oct. 27, 2009).
Page 20 GAO-14-178 Commercial Items

a “of the type” or “offered for sale” language contained in the commercial 

item definition. The purpose of the determination and higher level 

approval is to mitigate against the potential risk associated with 

misapplication of the commercial item definition. As we found in 2006, 

improper classification of an item as commercial can leave the 

government vulnerable to accepting prices that may not be the best value 

if the item is not sold in numbers sufficient for the government to 

determine the reasonableness of the vendor’s prices as the government 

is precluded from requesting certified cost or pricing information for 

commercial items.28

We found that contracting officers documented the required commercial 

item determinations in 11 of 13 DOD contracts we reviewed valued over 

$1 million. For 2 contracts, however, the commercial item determination 

was not documented and agency officials could not provide an 

explanation. Overall, about 18 percent of the new commercial item 

awards in fiscal year 2011 for the 3 DOD components we reviewed had 

an estimated value each of $1 million at award. At the Coast Guard and 

the Department of the Interior’s Acquisition Services Directorate, 22 and 

39 percent, respectively, of their new contract awards had an estimated 

value at award of $1 million or more. While DOD requires its components 

to prepare written determinations for certain commercial acquisitions, 

neither DHS nor DOI require or prepare commercial item determinations. 

Without such determinations, DHS and DOI may be vulnerable to 

misclassifying an item as commercial and thereby accepting prices that 

may not have been subject to market forces. Federal internal control 

standards call for managers to identify, analyze, and decide what actions 

should be taken to manage risk.29

Agencies face increased pressure to award contracts for the billions of 

dollars the federal government spends acquiring commercial goods and 

services each year more efficiently and effectively. The commercial item 

test program was intended to achieve such efficiencies by streamlining 

the acquisition process for commercial items and services and relying on 

the commercial marketplace to help improve quality and reduce prices. 

We found that contracts awarded using the test program represented a 

 28GAO-06-995; GAO-06-838R.

29GAO/AIMD-00-21.3.1.

Conclusions
Page 21 GAO-14-178 Commercial Items

small fraction of the total amount spent on commercial goods and 

services in fiscal year 2011, in part because of the existence of other 

means or approaches to acquire commercial items that may be better 

suited for the particular good or service being acquired. When the test 

program is used, we found that it helps reduce contracting lead times 

when compared to the agencies’ guidance on the time contracting officers 

should plan for if they intended to award a negotiated contract. The 

agencies we reviewed do not monitor or assess whether the test program 

is used to the maximum extent practicable and without further action by 

senior agency leadership, the possibility exists that the agencies are 

missing opportunities to further reduce their contracting lead times and 

administrative burdens.

From an oversight perspective, the agencies we reviewed indicated they 

generally subjected contracts awarded using the test program to their 

existing contract review and approval processes associated with 

contracts of similar value. The risks and challenges we identified are not 

unique to the test program, but generally affect commercial item 

acquisitions. For example, we found that contracting officers generally 

documented their market research as required for the use of the test 

program, but fewer than half of the contracts were competitively awarded. 

In that regard, while there are benefits to acquiring commercial items, 

doing so should not be construed as being synonymous with buying 

goods and services competitively. The limited competition we observed 

is a potential risk because our work and that of others has found that 

noncompetitive contracting poses risks of overspending because these 

awards lack a direct market mechanism to help establish pricing. Another 

challenge agencies faced when acquiring commercial items is the 

potential to inappropriately determine the good or service to be acquired 

is a commercial item. DOD officials have recognized that the 

misapplication of a commercial item definition may expose the 

government to additional risk and took steps to mitigate some of this risk 

by requiring its contracting personnel document their determination that 

the good or service being acquired met the definition of a commercial 

item, a prerequisite for using the authority. Neither DHS nor DOI require 

their contracting officers to do so and the absence of this safeguard may 

increase the risks to those agencies.

To increase the potential benefits from using the test program and 

mitigate potential risks, we are making the following two 

recommendations:

Recommendations for 

Executive Action
Page 22 GAO-14-178 Commercial Items

• We recommend that the Secretaries of Defense, Homeland Security, 

and the Interior collect and assess data to determine whether their 

agencies are using the simplified procedures authorized by the test 

program to the maximum extent practicable, as required by the FAR.

• To mitigate the potential risk of improperly designating a good or 

service as a commercial item, we recommend the Secretaries of 

Homeland Security and the Interior require contracting officers within 

their agencies to make a written commercial item determination at a 

level that they determine appropriate for their agencies.

We provided a draft of this report to DOD, DHS, DOI, and the Office of 

Management and Budget for comment. DOD concurred with our 

recommendation directed to the Secretary of Defense, but DHS and DOI 

did not concur with the recommendations directed to them. In an email 

response on January 30, 2014, the Associate Administrator of the Office 

of Federal Procurement Policy, Office of Management and Budget

generally agreed with our findings and included additional comments. The 

agencies’ comments and our responses are summarized below. Written 

comments from DOD, DHS, and DOI are reproduced in appendices III, 

IV, and V, respectively. DOI also provided technical comments, which we 

incorporated as appropriate.

Regarding our recommendation to increase the potential benefits from 

using the test program by assessing test program use, DOD agreed with 

our recommendation and indicated it will establish a process to collect 

and assess data to do so. DHS and DOI both disagreed, noting they 

questioned the value of such an assessment and that current procedures 

were adequate. DHS stated that a retroactive review to assess data on 

when the program was not used would be costly and labor intensive and 

would likely not result in findings that could be broadly addressed through 

policy changes or internal controls. DOI also questioned the value of 

assessing test program use, and indicated that doing such an 

assessment would imply that the use of the test program is a higher 

priority than other tools available to contracting officers. We did not intend 

for either DHS or DOI to retroactively assess the reasons why contracting 

officers did not choose to use the test program and agree that doing so 

would not be cost-effective. However, the wide variation in the 

components’ use of the authority and the lack of management visibility 

into its use indicates to us that the components may be missing 

opportunities to further reduce their lead times and administrative burden. 

Given the improved reliability of test program data reported in FPDS-NG, 

Agency Comments 

and Our Evaluation
Page 23 GAO-14-178 Commercial Items

agencies have data they can readily use to assess their commercial 

acquisition portfolios to help ensure that they maximize available 

resources by taking advantage of opportunities to use the test program 

when appropriate to reduce administrative burden. Similarly, the Office of 

Management and Budget noted that in the event that the authority was 

made permanent, it would expect agencies to periodically review their use 

of the test program as part of their management reviews. Consequently, 

we continue to believe that collecting and assessing data on the 

program’s use would be beneficial. 

DHS and DOI suggested that the temporary nature of the test program 

hindered its use and recommend that the authority be made permanent. 

We believe our work provides a basis for helping inform the debate as to 

the future of the authority; however, as our review focused on three 

agencies, making such a recommendation was beyond the scope of our 

review.

DHS and DOI also disagreed with our recommendation to mitigate 

potential test program risks by requiring contracting officers to make a 

written commercial item determination in certain cases. DHS stated that 

market research and existing internal controls are sufficient to ensure the 

test program is not misused to purchase non-commercial items. Similarly, 

DOI stated that information needed to confirm the commerciality of the 

item or service being purchased should be documented as part of market 

research and that an additional requirement would deviate from ongoing 

efforts to streamline the acquisition process. The Office of Management 

and Budget also noted that it was unclear whether there were 

weaknesses with the current safeguards that necessitated additional 

determinations, but stated that it would expect agencies to make sure the 

authority was used only to acquire commercial items as part of their 

management reviews. While we found that for the contracts we reviewed 

the risks associated with using the test program are generally no greater 

than other commercial acquisitions when internal controls are in place, 

GAO and others have noted risks associated with the potential 

misapplication of the commercial item definition. DOD has taken action to 

address this risk by requiring a commercial item determination in certain 

cases, such as when purchasing commercial items “of a type” or “offered 

for sale” as authorized under the commercial item definition. We continue 

to believe that the requirement for a commercial item determination in 

certain cases provides an additional safeguard against a known risk and 

that such a requirement could be implemented within the existing 

framework of internal controls already in place.
Page 24 GAO-14-178 Commercial Items

We are sending copies of this report to Secretaries of Defense, Homeland 

Security, and the Interior; the Director, Office of Management and Budget;

and interested congressional committees. This report will also be 

available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions concerning this report, please 

contact me at (202) 512-4841 or by e-mail at dinapolit@gao.gov. Contact 

points for our Offices of Congressional Relations and Public Affairs may 

be found on the last page of this report. Staff who made key contributions 

to this report are listed in appendix VI.

Timothy J. DiNapoli

Director

Acquisition and Sourcing Management
Page 25 GAO-14-178 Commercial Items

List of Committees

The Honorable Carl M. Levin

Chairman

The Honorable James M. Inhofe

Ranking Member

Committee on Armed Services

United States Senate

The Honorable Thomas R. Carper

Chairman

The Honorable Tom Coburn, M.D.

Ranking Member

Committee on Homeland Security and Governmental Affairs

United States Senate

The Honorable Richard J. Durbin

Chairman

The Honorable Thad Cochran

Ranking Member

Subcommittee on Defense

Committee on Appropriations

United States Senate

The Honorable Howard P. McKeon

Chairman

The Honorable Adam Smith

Ranking Member

Committee on Armed Services

House of Representatives

The Honorable Darrell Issa

Chairman

The Honorable Elijah Cummings

Ranking Member

Committee on Oversight and Government Reform

House of Representatives
Page 26 GAO-14-178 Commercial Items

The Honorable Rodney Frelinghuysen

Chairman

The Honorable Pete Visclosky

Ranking Member

Subcommittee on Defense

Committee on Appropriations

House of Representatives
Appendix I: Objectives, Scope and 

Methodology

Page 27 GAO-14-178 Commercial Items

This report focuses on the federal government’s use of the Test Program 

for Certain Commercial Items (test program) authority provided under 

Federal Acquisition Regulation (FAR) Subpart 13.5. This report 

addresses (1) the extent to which federal agencies have used the test 

program, and (2) its benefits and risks, if any.

To determine the extent to which federal agencies have used the test 

program, we analyzed data on contract actions awarded using the 

authority from the Federal Procurement Data System-Next Generation 

(FPDS-NG). We used fiscal year 2011 data from FPDS-NG because it 

was the most recent fiscal year with complete data available when we 

began our review due to a lapse in the program’s authority in 2012. 

Based on obligations reported for fiscal year 2011, we determined that 

the departments of Defense (DOD), Homeland Security (DHS), and the 

Interior (DOI) were the largest dollar users of the test program, 

collectively accounting for 74 percent of test program obligations. Within 

these departments, we focused on the five components reporting the 

greatest use of the test program as follows:

• DOD: Army Materiel Command, Naval Supply Systems Command, 

and Air Force Materiel Command (53 percent of DOD use);

• DHS: U.S. Coast Guard (54 percent of DHS use); and

• DOI: Acquisition Services Directorate (65 percent of DOI use).

To assess the reliability of the test program data reported in FPDS-NG, 

we drew a stratified, random sample of 243 contracts from the population 

of all contracts with positive obligations in fiscal year 2011 for the five 

components we reviewed. We grouped the three DOD components into 

one stratum as they all operate under DOD supplemental regulations. 

The two civilian components were grouped into their own strata. We sent 

a list of sampled contracts to each of the five components and asked 

them to verify whether they were correctly coded in FPDS-NG and to 

provide documentation from the contract file that the test program was 

used. Based on this assessment, we determined that the test program 

data reported in FPDS-NG were sufficiently reliable to determine the 

minimum extent to which the test program was used by the components 

we reviewed. We did not sample contracts that were identified as not 

using the test program, and as such, did not assess the extent to which 

test program actions and obligations may be underreported.

To assess the extent to which agencies used the test program, we 

analyzed the number of new awards for commercial items and services in 

fiscal year 2011 that fell within the test program thresholds of $150,000 to 

Appendix I: Objectives, Scope and 

Methodology
Appendix I: Objectives, Scope and 

Methodology

Page 28 GAO-14-178 Commercial Items

$6.5 million (based on the estimated value at award) and identified the 

percentage that used the test program. We interviewed contracting 

officials at the department and component-level to identify the factors they 

considered when determining whether or not to use the test program. We 

did not assess the test program’s higher threshold of $12 million when 

used in support of a contingency operation or to facilitate the defense 

against or recovery from nuclear, biological, chemical, or radiological 

attack since we determined that these contracts accounted for only 2 

percent of fiscal year 2011 obligations made by the components in our 

review.

To determine the benefits and risks of using the commercial item test 

program, we reviewed relevant legislation, including the Federal 

Acquisition Streamlining Act of 1994 and the Clinger-Cohen Act of 1996, 

as well as applicable Federal Acquisition Regulation (FAR) provisions. 

We reviewed agency and component policy and guidance related to test 

program use and oversight, commercial item acquisitions, simplified 

acquisition procedures, and contingency contracting. We also interviewed 

contracting officials from each of the five components as well as officials 

from DOD’s Defense Procurement and Acquisition Policy and the Office 

of Management and Budget’s Office of Federal Procurement Policy. 

Further, we selected and reviewed a nonrandom, nongeneralizable 

sample of 26 test program contracts including at least four of the largest 

test program contracts from each of the five components. For the 

selected contracts, we reviewed the contract and other relevant 

documents, such as acquisition plans, market research documentation, 

solicitations, and justifications and approvals, and interviewed the 

contracting officers who awarded the contracts, or other cognizant 

officials.

To assess test program benefits, we analyzed contract file documents 

and interviewed contracting officers for the selected 26 contracts to 

determine how they applied the simplified procedures and how the 

procedures resulted in either a savings of time or reduction in 

administrative burden. We reviewed relevant regulation and compared 

the requirements for using the test program under FAR Part 13 versus 

negotiated procedures under FAR Part 15 which most officials told us 

they would likely use in the absence of the test program or existing 

mechanisms such as indefinite-delivery contracts and blanket purchase 

agreements. For eight competitively awarded test program contracts, we 

also compared the contracting lead time—the amount of time between 

issuance of a solicitation and the date of contract award—for contracts 

awarded using the FAR Part 13 test program and the estimated lead time 
Appendix I: Objectives, Scope and 

Methodology

Page 29 GAO-14-178 Commercial Items

for contracts using FAR Part 15 negotiated procedures based on agency 

guidance.1

To identify and assess risk, we analyzed agency policies and interviewed 

contracting officials to determine the manner in which test program 

contracts are reviewed and approved. For noncompetitive awards, we 

determined whether the awards were justified in writing and approved at 

the required level when required. Additionally, we analyzed contract file 

documents to determine the extent to which contacting officers conducted 

market research. For DOD components, we reviewed test program 

contract files to determine whether commercial item determinations were 

included when required by DOD regulation and whether these 

determinations were approved at the required level. We determined 

whether or not the required documentation was provided but did not 

assess its adequacy.

We also analyzed the extent to which time savings, if any, 

were derived from the flexibility afforded by the test program versus the 

streamlined procedures available for all FAR Part 12 commercial item 

acquisitions that are independent of the test program. In addition, we 

analyzed contract file documents and interviewed contracting officers to 

determine how they used the test program and what procedures they 

would have used if the test program were not available.

To identify instances, if any, of fraud, waste, or abuse of the test program 

authority, we contacted inspector general offices at DOD, DHS, and DOI, 

as well as the military services. We obtained and reviewed relevant 

documentation, and discussed with agency officials, as needed. We also 

obtained information from OFPP officials on the extent to which the test 

program has been cited in bid protests.

We conducted this performance audit from March 2013 to February 2014 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

 1

We excluded 14 contracts that were awarded noncompetitively, one purchase order for 

which the agency was unable to provide a solicitation, and three delivery orders.
Appendix II: Summary of Contracts

GAO Reviewed

Page 30 GAO-14-178 Commercial Items

Description of product or service

Total estimated 

contract value

at award Contract type Competed

Reason not 

competed 

Department of Defense – Army Materiel Command

Communications infrastructure installation and support 

for base in Afghanistan

$3,640,949 Firm-fixed-price √

Installation, maintenance and training for new copiers $2,469,762 Firm-fixed-price Small business

System upgrade for first responder communications 

system

$1,599,904 Firm-fixed-price Only one source

Blast barriers and bunkers for installations in Kuwait $1,264,712 Firm-fixed-price √

Computer systems equipment and troubleshooting on 

behalf of Saudi Arabian National Guard

$1,225,334 Firm-fixed-price International 

Agreement

Leasing of vans, trucks, and sedans for transportation 

of troops to base

$5,464,800 Firm-fixed-price √

Department of Defense – Naval Supply Systems Command

Preparation, repair, modification, and fabrication of load 

frames

$1,219,729 Firm-fixed-price √

Professional, administrative, and technical services $3,424,593 Firm-fixed-price √

Strategic planning, financial management, and other 

administrative tasks

$2,539,460 Firm-fixed-price Small business

Data analysis for process streamlining and work 

product management

$500,000 Firm-fixed-price Small business

Procurement and installation of power generators for 

Naval Observatory master clock

$700,000 Firm-fixed-price √

Department of Defense – Air Force Materiel Command 

Telecommunications support for unmanned aerial 

vehicles

$3,523,577 Firm-fixed-price Small business

Large crane structure with jet engine repair bays $1,314,489 Firm-fixed-price Small business

Calibration press for portable aircraft platform scales $1,377,240 Firm-fixed-price √

Information technology support for Air Force ordering 

system

$1,786,000 Firm-fixed-price Small business

High power signal generator $512,586 Firm-fixed-price Only one source

Department of Homeland Security – U.S. Coast Guard

Spare parts for Coast Guard airplanes $4,324,440 Firm-fixed-price Only one source

Upgrade from analog to digital flight instrument for 

Coast Guard airplanes

$2,453,724 Firm-fixed-price Only one source

Spare parts for Coast Guard rescue helicopters $1,171,184 Firm-fixed-price Only one source

Dry-dock repair services for Coast Guard cutter $796,818 Firm-fixed-price √

Department of the Interior – Acquisition Services Directorate

Bridge contract for information technology technical 

services

$6,875,269a Firm-fixed-price Only one source

Energy consulting services for the Office of the 

Secretary of Defense

$3,910,508 Firm-fixed-price Small business

Appendix II: Summary of Contracts

GAO Reviewed 
Appendix II: Summary of Contracts

GAO Reviewed

Page 31 GAO-14-178 Commercial Items

Description of product or service

Total estimated 

contract value

at award Contract type Competed

Reason not 

competed 

Administrative support services for Department of 

Veterans Affairs

$5,600,871 Firm-fixed-price Only one source

Database and program support for Food and Drug 

Administration

$3,117,211 Time-andmaterialsSmall business

Management consulting services for testing of the 

Grants.gov system

$5,094,959 Time-andmaterials√

Aircraft services for firefighting missions in Colorado $2,299,200 Firm-fixed-price √

Source: GAO analysis of agency data.

Note: Noncompetitive awards are permissible under certain circumstances such as when only one 

responsible source and no other supplies or services will satisfy agency requirements, or when 

competition is precluded by the terms of an international agreement. Noncompetitive awards are also 

permissible when a statute authorizes or requires that the acquisition be made through another 

agency or through a specified source, such as noncompetitive awards under the 8(a) program. Under 

Section 8(a) of the Small Business Act which authorizes the Small Business Administration (SBA) to 

enter into contracts on a competitive or noncompetitive basis with other agencies and award 

subcontracts for performing those contracts to firms eligible for program participation. SBA’s 

subcontractors are referred to as “8(a) contractors.” 15 U.S.C. § 637(a); FAR §19.800(a) and (b).

a The requirement was needed to prevent a lapse in services considered critical by the agency. 

According to DOI officials, the contract was initially valued within test program thresholds but 

increased from solicitation to award, exceeding $6.5 million, after additional labor costs were factored 

in.
Appendix III: Comments from the Department 

of Defense

Page 32 GAO-14-178 Commercial Items

Appendix III: Comments from the 

Department of Defense
Appendix III: Comments from the Department 

of Defense

Page 33 GAO-14-178 Commercial Items
Appendix IV: Comments from the

Department of Homeland Security

Page 34 GAO-14-178 Commercial Items

Appendix IV: Comments from the

Department of Homeland Security
Appendix IV: Comments from the

Department of Homeland Security

Page 35 GAO-14-178 Commercial Items
Appendix IV: Comments from the

Department of Homeland Security

Page 36 GAO-14-178 Commercial Items
Appendix V: Comments from the

Department of the Interior

Page 37 GAO-14-178 Commercial Items

Appendix V: Comments from the

Department of the Interior
Appendix V: Comments from the

Department of the Interior

Page 38 GAO-14-178 Commercial Items
Appendix VI: GAO Contact and Staff 

Acknowledgments

Page 39 GAO-14-178 Commercial Items

Timothy J. DiNapoli, (202) 512-4841 or dinapolit@gao.gov

In addition to the contact name above, the following staff members made 

key contributions to this report: Penny Berrier, Assistant Director; Jacob 

Beier; Gary Bianchi; Danielle Greene; Robert Graves; Ioan Ifrim; Julia 

Kennon; Angie Nichols-Friedman; Ada Nwadugbo; Dae Park; Kenneth 

Patton; Sylvia Schatz; Erin Schoening; and Roxanna Sun.

Appendix VI: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(121121)
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