DoD has issued a Final Rule that gives added protections to the technical data of privately developed commercial items incorporated into major systems, including major weapon systems.  This rule implements Section 813(a) of the National Defense Authorization Act (NDAA) for Fiscal Year 2016 and modifies 10 U.S.C.§ 2321(f).

In general, a defense contractor’s assertion that a commercial item was developed exclusively at private expense is presumed to be valid, even if the contractor does not respond to a challenge notice from the Contracting Officer. Prior to the Final Rule, however, this presumption (known as the “Commercial Rule”) did not apply to DoD’s procurement of “major systems” or “subsystems or components of major systems,” unless the technical data related to commercially available off-the-shelf (COTS) items. Thus, without the benefit of the presumption in connection with the procurement of a “major system,” contractors were required to justify their assertion that an item was developed exclusively at private expense if they wanted to restrict the Government’s rights in the underlying technical data. This exception to the Commercial Rule is known as the “Major Systems Exception.”

The Final Rule modifies this practice in two ways: (1) the Major Systems Exception is narrowed to apply only to major weapons systems; and (2) the Commercial Rule is applied more broadly to include additional exceptions for COTS items.  In particular, the Final Rule provides that the Commercial Rule would apply not only to COTS items, but also to: (1) COTS items with minor modifications of a type customarily available in the commercial marketplace or minor modifications made to meet Federal Government requirements; (2) commercial subsystems or components of a major weapons system, if the major weapons system was acquired as a commercial item; and (3) components of a subsystem, if the subsystem was acquired as a commercial item.

This Final Rule promulgates the proposed rule that DoD first issued on May 10, 2016, without any substantive changes. Our analysis of the Proposed Rule can be found here.