Cost and Pricing Data for Commercial Item Acquisitions?
Is the U.S. Defense Department moving back toward requiring cost and pricing data for commercial item purchases? A recent series of memoranda and experiences show a backward march toward the department requesting cost data as a means to justify fair and reasonable pricing for commercial item purchases.
Last March, the Defense Department issued a federal acquisition regulation (FAR) deviation under FAR8.404(d) indicating that while the General Services Administration (GSA) may have determined prices for supplies and services to be fair and reasonable, contracting officers nonetheless may resort to FAR Part 15.404 price analysis to determine fair pricing for an individual order, or BPA. This past February, the Defense Department issued further guidance noting that in determining commercial item status for a particular item, the key consideration is fair and reasonable pricing. The guidance acknowledged that cost-based analysis using “other than cost and pricing data” may be used for that purpose.
Recently, I encountered a Defense Department acquisition officer demanding cost information from a software manufacturer selling commercial off-the-shelf (COTS) shrink–wrapped software through a reseller. Even after being advised that neither the reseller nor the software manufacturer had a cost accounting system that could provide the requested cost data, the contracting officer continued to demand the information and did not make the purchase.
The Defense Department cannot have it both ways. If the department wants to use FAR Part 8 and FAR Part 12 to streamline commercial item purchases, the “price” it pays is reliance on market pricing information to justify fair and reasonable pricing. If the department lacks confidence in market pricing, it should conduct the procurement under FAR Part 15, where every vendor knows the ground rules. Of course, by resorting to FAR 15, the government realizes a reduced competitive field, higher pricing and protracted delays.
Requiring any kind of cost data for COTS supplies and services under FAR Part 8 or Part 12 acquisitions is unsound policy. COTS manufacturers and resellers are not equipped for that. Making that demand also turns the last 20 years of procurement reform on its head. Obviously there is distrust with market based pricing, but returning to 1970s era demands for “cost and pricing data” or "other than cost and pricing data” for commercial items is not the answer.
Al Krachman, Esq., is a partner, Blank Rome LLP
