Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 3 of 3 | January 2019

Minimize Flowdown of Government-Unique Terms Volume 3

Recommendation 92: Minimize the flowdown of government-unique 

terms in commercial buying by implementing the Section 809 Panel’s

Recommendation 2.

Problem

In its meetings with companies of various sizes over the past 2 years, and in particular commercial 

companies doing or considering doing business with DoD, the Section 809 Panel heard about the 

numerous barriers they experience when trying to enter the defense marketplace. A consistent theme in 

discussions with these stakeholders is the extensive number of terms and conditions unique to 

government business. Companies fear what they see as the hidden compliance traps in these terms and 

the administrative and overhead cost of establishing and maintaining compliance mechanisms that are 

not readily measurable. This barrier is not new: It was an important reason for the commercial buying 

reforms enacted in the Federal Acquisition Streamlining Act (FASA) of 1994.

In its Volume 1, Recommendation 2, Minimize government-unique terms applicable to commercial 

buying, the Section 809 Panel applauded Congress for establishing in FASA a unique statutory 

mechanism in 41 U.S.C. § 1906 for limiting the government-unique clauses applicable to commercial 

buying, but pointed out an important weakness in the mechanism that prevents it from fully achieving 

its intended goal. The panel made a bold recommendation to fix the weakness and truly minimize the 

government-unique terms applicable to commercial buying at the prime and subcontract tiers. Recent 

Congressional action has caused the panel some concern that the importance of adopting this 

recommendation is not fully appreciated.

Background

As discussed in Volume 1 in more detail, Congress took comprehensive steps to reduce the governmentunique terms applicable to commercial buying. First, FASA addressed the procurement-related laws 

applicable to commercial buying already in place as of October 1, 1994 by making a number of them 

inapplicable or partially inapplicable to commercial buying. Second, FASA established a unique 

statutory mechanism prescribing that going forward, no new procurement-related statute would be 

applicable to commercial buying unless the statute references 41 U.S.C. § 1906 and specifically states 

that notwithstanding § 1906, the statute would be applicable to commercial buying. This rather strict 

limitation on applying statutes to commercial buying was mitigated somewhat by another provision 

that allowed the Federal Acquisition Regulatory Council (FAR Council) to make a determination that it 

was in the best interests of the government to apply a procurement-related statute to commercial 

buying even though Congress had chosen not to make it applicable. Although not specifically 

applicable to DoD, this same determination process was generally followed by the Defense Acquisition 

Regulations Council (DAR Council) for DoD-unique procurement-related statutes, Executive Orders

(EOs), and regulations. Section 874 of the FY 2017 National Defense Authorization Act (NDAA)

formally established a similar mechanism for DoD.

When FASA was implemented in October 1995, there were a total of 57 Federal Acquisition Regulation 

(FAR) and Defense FAR Supplement (DFARS) clauses based on statutes applicable to commercial 

buying. Today, there are a total of 122 FAR and DFARS clauses based on statute applicable to 

commercial buying, with another 20 based on EOs and 23 based on DoD policy, and the numbers 
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Minimize Flowdown of Government-Unique Terms Volume 3

continue to grow. Of these 122 clauses, only six are genuinely applicable under the extant statutory 

framework because Congress used the mechanism it established in FASA, citing 41 U.S.C. § 1906, and 

specifically made the underlying statutes applicable to commercial buying. The other 116 clauses are 

applicable because the FAR Council or DAR Council made a determination that it was in the best 

interests of the government to do so, or because no determination was made, but the clause was made 

applicable nonetheless. 

The proliferation of clauses applicable to commercial buying at the prime contract level directly affects

the flow down of government-unique clauses to subcontractors offering commercial products and 

services. In 1995, there were four clauses that flowed down to subcontractors offering commercial 

products or services; today there are 22. 

On several occasions Congress expressed concern about the rapid growth in the government-unique 

clauses applicable to commercial buying. In an attempt to address the problem, Section 821 of the 

FY 2008 NDAA required the Office of the Secretary of Defense (OSD) to

develop and implement a plan to minimize the number of government-unique contract clauses used in 

commercial contracts by restricting the clauses to the following: (1) Government-unique clauses 

authorized by law or regulation, and (2) Any additional clauses that are relevant and necessary to a 

specific contract.

The Section 809 Panel was unable to identify any specific action taken to minimize these clauses as a 

result of Section 821. 

Section 854 of the FY 2016 NDAA did not direct any change in policy, criteria, or process for 

determining which procurement-related statutes should be made applicable to commercial buying but 

did require a report to Congress on defense-unique laws applicable to the procurement of commercial 

and commercially available off-the-shelf items. That report was issued in June 2016. The Section 809 

Panel is not aware of any specific action taken as a result of this report. 

The structure envisioned in FASA to minimize the applicability of government-unique terms and 

conditions to commercial buying is not working as planned.

Discussion

Section 849 of the FY 2018 NDAA and Section 839 of the FY 2019 NDAA directed the FAR and DAR 

Councils to reconsider their determinations from the past 23 years that resulted in 122 procurementrelated statutes and 23 regulations not otherwise applicable to commercial buying being made 

applicable. The statutes then require the councils to propose revisions to the FAR and DFARS that 

would provide an exemption from each law for commercial buying unless they determine there is a 

specific reason not to provide the exemption.

Although these two reviews are well intentioned, they are unlikely to address the problem of having

122 clauses and 23 regulations currently applicable to commercial buying or to the application of future 

procurement-related statutes to commercial buying. As noted above, this approach was used in 2008 

with little to show for the work. Essentially, the councils have again been tasked to review their own 

work since 1995 that resulted in the applicability of this large number of statutes and regulations. The 
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Minimize Flowdown of Government-Unique Terms Volume 3

councils have been given no criteria for these reviews but have been given the same authority to make 

a determination that a statute should apply to commercial buying even though Congress chose not to 

make it applicable. Asking the same entity to conduct a review of the same statutes using the same 

criteria is likely to have the same result.

Conclusions

The Section 809 Panel’s Volume 1 Recommendation 2 would leave with Congress the sole authority to 

determine that a procurement-related statute was so important that it should be applied to what would 

otherwise be a commercial transaction between the Federal Government and a commercial supplier. 

The Panel recommended in Volume 1 that Congress rescind the authority granted in FASA for the FAR 

and DAR Councils to make a determination that a procurement-related statute, EO, or regulation 

should apply to commercial buying. 

Congress has on many occasions expressed frustration with the proliferation of contract clauses 

applicable to the procurement of commercial products and services. Consequently, Congress should 

take the lead in minimizing the government-unique statutes applicable to commercial buying.

Implementation

Legislative Branch

§ Rescind Section 849 of the FY 2018 NDAA.

§ Rescind Section 839 of the FY 2019 NDAA.

§ Implement Section 809 Panel Volume 1, Recommendation 2, Minimize government-unique terms 

applicable to commercial buying.

Executive Branch

§ There are no regulatory changes required for this recommendation.

Implications for Other Agencies

§ The panel recommends that Congress expand this recommendation to apply to all agencies 

subject to the FAR.