Subcontract Price Analysis

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Commercial Item Determinations: Practical Tips for Primes & Subs

Since the passage of the Federal Acquisition expect different treatment from the
Streamlining Act of 1994 (FASA), the preference government. Its less risky from an IG (Inspector
within the Federal Government has shifted from the General) perspective for government reviewers
acquisition of items developed exclusively for the to deny a commerciality claim than it is to
Government to the acquisition of commercial items1. approve one.
In response, Federal Primes and Subs have
Subcontractors
submitted assertions of commerciality that range
anywhere from rational to ridiculous. On the Subs are often first and foremost concerned with
Government side of things, its been so confusing their own well-being over and above the stated
that this year, the DCMA has created a dedicated needs of their Prime customers.
Command tasked with nothing other than reviewing
commercial item determinations (CIDs). Reviewing submittals from subs: Except for very
large contracts or where a company thats
This practical guide is based on what we have typically Prime is sub to another Prime, these
learned working with Prime Contractors (dealing reviews dont often happen. When the need
directly with the Government) and Subcontractors does arise for a traditional sub (for instance
(dealing with either Primes or other Subs). While all when a sub-tier contract is over the CCOPD
of these principles apply to both groups, its threshold) the process is murky and messy, at
important to understand some basic distinctions: best.
Submitting assertions to Primes: Typically
Prime Contractors include incomplete data and lump together
Primes are concerned with satisfying the needs of commerciality and price reasonableness. While
their government customers, which include the many have valid claims of commerciality, they
DCMA, DCAA, and Contracting Officers. present their case in their own language rather
than that of the Prime contract requirements
Reviewing submittals from subs: CIDs have a theyre working to assuage.
direct impact on their CPSR status (Contractor
Procurement System Review) in that
Step 1: Separate Commercial Item
commercial items are an exception to obtaining Determination from Price Reasonableness
certified cost or pricing data (CCOPD) for
Whether youre reviewing or writing CIDs, this is the
procurements over the Truthful Cost or Pricing
first area that causes trouble. A determination of
Data Threshold. Since the requirement for
commerciality has nothing to do with price
CCOPD is a matter of law, Primes tend to be
reasonableness. While most contractors nod in
quick to find reasons to deny commercial item
agreement with this statement, the documentation
assertions, particularly for procurements over
theyre providing to support their assertion is often
the threshold.
not in alignment.
Submitting assertions to the government: Just
because theyre typically bigger, doesnt mean
Submitters: Make it clear that youre providing
Primes are typically better at the CID process.
a commercial item assertion or determination
Primes are quick to deny their subs, but then
and support for price reasonableness. By simply

1
Office of the Secretary of Defense Acquisition,
Technology and Logistics. (2011). Commercial Item
Handbook, Version 2.0.

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quoting a price and providing a CID, youre Reviewers: Do a quick search on part number
implying that commerciality = price and description to see if a government CID
reasonableness and your chances of success already exists and whether it can be applied to
diminish significantly. the current purchase.
Reviewers: Start the review with an intent to
separate the issues of commerciality and price
reasonableness. Remember that applying non- Step 3: Write your own determination
commercial practices to buys that should qualify
If no prior CID exists, or youve determined that
as commercial is a waste of both company and
what does exist doesnt fit your needs, youll have to
taxpayer funds.
conduct and document your own determination. In
Figure 1, youll find the definition of a commercial
Step 2: Determine whether a government item (products, not services) and steps on writing
and reviewing CIDs.
commercial item determination already
exists Submitters: In order to be treated as
If an item has been determined commercial in the commercial, youre going to have to convince
past, it is to be reviewed for commerciality each time the buyer that your product or service meets
its purchased in the future. However, in order to the requirements set out by the FAR. But first,
overturn a commercial item determination, youre going to have to convince yourself!
additional work and supervisory review is required Conduct your own CID and submit it with the
by the dissenting PCO. proposal. If youre unable to complete it,
chances are the buyer will run into the same
So, put some effort into determining if a difficulty and your assertion will be denied.
government-issued CID already exists. Written CIDs Whenever possible, provide supporting
are required within the federal government for any documentation and market research.
purchase over $1 Million. This can be accomplished
by searching various online resources, including the Reviewers: Focus solely on commerciality.
Federal Procurement Data System-Next Generation Break the FAR 2.101 definition into distinct
(FPDS-NG). To strengthen the reliability of pieces, by sentence, and make an objective
information taken from this database, submit FOIA determination on each. Once youre done, it
(Freedom of Information Act) requests to obtain a pays to provide this objective determination
copy of the written CID. back to the supplier, especially if it suggests that
the item/service is not commercial. They may
This holds true to a lesser extent when working with have additional facts and data to assist you.
Prime-issued CIDs. While its advisable to rely on
past experience in this area, be aware that CID
precedent only holds at the level at the Government
Prime level. Between Prime and Sub, a prior
precedent may or may not be upheld, depending on
the Primes judgement.
Submitters: If a government-issued CID already
exists, be sure to include it with your assertion.
Remember that this only covers half the
equation price reasonableness support will
still be required.

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Commercial Item Definition (FAR 2.101) Pro Tips

1. Any item, other than real property, that is of a type customarily used by Dont stop at of a type.
the general public or by non-governmental entities for purposes other than Specifically show how its of a
governmental purposes, and type customarily usedfor
purposes other than governmental
purposes.
(i) Has been sold, leased, or licensed to the general public; or Identify which of these applies
and then provide verifiable
(ii) Has been offered for sale, lease, or license to the general public;
supporting documentation.
2. Any item that evolved from an item described in paragraph (1) of this Identify which item in paragraph
definition through advances in technology or performance and that is not yet (1) applies and then provide
available in the commercial marketplace, but will be available in the verifiable supporting
commercial marketplace in time to satisfy the delivery requirements under a documentation of when it will
Government solicitation; become available.
3. Any item that would satisfy a criterion expressed in paragraphs (1) or (2) Identify which applies (i or ii) and
then provide verifiable supporting
of this definition, but for
documentation. For (i) this is
(i) Modifications of a type customarily available in the commercial very straightforward. For (ii), try
marketplace; or to explain modifications in terms
(ii) Minor modifications of a type not customarily available in the of form, fit, and function.
Additionally (not in place of
commercial marketplace made to meet Federal Government requirements.
form, fit, and function) provide
Minor modifications means modifications that do not significantly alter verifiable supporting information
the nongovernmental function or essential physical characteristics of an showing the relative weight of
item or component, or change the purpose of a process. Factors to be any impact on price. The closer
in price the modified item is to
considered in determining whether a modification is minor include the
the un-modified item, the better.
value and size of the modification and the comparative value and size of
the final product.
4. Any combination of items meeting the requirements of paragraphs (1), Explain and provide evidence that
(2), (3), or (5) of this definition that are of a type customarily combined and the individual items are
sold in combination to the general public; commercial and that the
combination of these items are
customarily combined and sold to
the general public.
Figure 1: How to successfully write or review a commercial item assertion or determination (Products)

Step 4: Document Price Reasonableness an anchor point for use in negotiations.

Whenever possible, provide market data to help
Regardless of whether the item is determined support both the CID and price reasonableness
commercial or not, this step is required prior to reviews.
contract award and is separate from the CID process,
although the two impact each other. Reviewers: If the procurement value is below
the TCOPD threshold, this step can be
Submitters: Realize that the reviewer is going conducted in parallel with Steps 2 and 3 above.
to be required to complete this step, so do For items that are determined commercial, your
everything possible to help make it easier. How government customers will be looking for
is it that you know your price is reasonable? Is it market data. While this isnt a requirement of
due to prior purchase history? Explain it! Is it either commerciality or price analysis, it will
due to market research? Provide it! Best case significantly help support your case in both
outcome is that the buyer utilizes your data as areas.
the price analysis. Worst case, youve created

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Step 5: Maintain records of what worked The Author: Patrick Mathern

and what didnt Contact: [email protected]
President of SpendLogic; based in Santa
Experience will prove out what works and what Barbara, CA
doesnt. Tools such as SpendLogic allow you to create SpendLogic automates price analysis and
and reuse price analysis reports and commercial item provides services to the nations largest Defense
determinations over time. Tracking successful CIDs Contractors and their suppliers.
and price analysis reports significantly reduces time Committed to helping companies effectively and
required for follow-on and similar-to purchases in the efficiently meet the needs of federal contractors
future. related to price reasonableness determinations.

Conclusion
When it comes to commercial item determinations,
Submitters (sellers) and Reviewers (buyers) should
strive to work from the same playbook. By viewing
the issue from each others perspective, the chances
of success increase significantly, which saves both
sides time and money. - Patrick Mathern

Article at a glance
Commercial Item Determinations (CIDs) must be
treated separately from from price
reasonableness reviews.
Primes and Subs each may fill the role of
Reviewer (buyer) and Submitter (seller) at
different times.
Rely on existing government CIDs whenever
possible.
Include supporting market data whenever
possible, both in CIDs and Price support.
Use SpendLogic to standardize your CID and
Price Analysis process so that past efforts may
be reused.

Helpful Links and Related Content

www.SpendLogic.com Automated price analysis
software solutions
www.fpds.gov Federal Procurement Data
System Next Generation, as mentioned in this
article
www.acquisition.gov/far Federal Acquisition
Regulations (navigate to Section 2.101 for the
definition of commercial items or 15.404 for
price analysis methods)

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