[This article was originally published in Law360 and has been modified for the blog.]

Over the summer, pursuant to Section 874 of the FY 2017 National Defense Authorization Act (“NDAA”)[1], the Department of Defense (“DoD”) issued a proposed rule[2] to exclude the application of certain laws and regulations to the acquisition of commercial items, including commercially available off-the-shelf (“COTS”) items.  Among other things, the proposed rule identifies certain DFARS and FAR clauses that should be excluded from commercial item contracts and subcontracts, and sets forth a narrower definition of “subcontract” that would carve out a category of lower-tier commercial item agreements from the reach of certain flow-down requirements.  A summary of the proposed rule and our key observations/takeaways are below.
Continue Reading Takeaways From DoD’s Proposed Changes to Commercial Item Contracting

On July 25, the GSA’s Office of Inspector General (“OIG”) published a report summarizing its audit of the GSA Transactional Data Reporting (“TDR”) pilot program.  That ongoing pilot program, which we have covered previously and have been tracking since the beginning, allows participating Federal Supply Schedule (“FSS”) contract-holders to report government-sales data each month, in exchange for relief from regulations that would require them to disclose their commercial sales practices.  According to the OIG report, however, GSA cannot objectively measure whether the TDR program is working as intended, because the pilot lacks specific objectives and performance targets.  Moreover, the data that GSA has collected from TDR participants is “not available for . . .  evaluation of the pilot.”  Although the Federal Acquisition Service (“FAS”) disagreed with some of the report’s findings, the report suggests that the TDR program remains a work-in-progress.

Continue Reading OIG Report Criticizes GSA’s TDR Pilot Program

[Updated August 13, 2018]

If an agreement qualifies as a “subcontract” under a government contract, then it may be subject to certain flow-down, compliance, and reporting requirements.  These requirements are intended to protect the government’s interests, and have significant ramifications for contractors, e.g., increasing transaction costs, expanding potential areas of exposure.  These compliance obligations and risks can even deter some companies from performing under government contracts, especially those companies offering commercial items.

Currently, there is no uniform definition of “subcontract” in the applicable procurement regulations or in the procurement chapters under Titles 10 and 41 of the U.S. Code.  Indeed, there are more than twenty varying definitions of “subcontract” in the FAR and DFARS, with many clauses failing to specify which definition applies.  Now Congress is looking to address this lack of uniformity through the FY 2019 National Defense Authorization Act (NDAA).


Continue Reading Congress Aims to Redefine the “Subcontract”

GSA recently announced it is supporting an Inspector General investigation into alleged, third-party fraudulent activity in the System for Award Management (“SAM”). The GSA announcement suggests that fraudulent SAM accounts may have been used to divert certain federal payments to unauthorized bank accounts. The announcement does not elaborate on the scope of potentially impacted entities or the amount of misdirected payments at issue. GSA has advised impacted entities to validate their SAM registration and confirm their financial information. Although GSA has indicated it has or will reach out to impacted entities, contractors would be well advised to confirm independently the accuracy of their current SAM registration.

Continue Reading Fraudulent SAM Accounts Lead to More Complicated SAM Registration Requirements

Following instructions from Congress to create a new online shopping system leveraging existing commercial practices, the General Services Administration (“GSA”), in coordination with the Office of Management and Budget (“OMB”), has released an implementation plan (“Plan”) to begin e-commerce purchases by 2019.  As discussed in a previous blog post, GSA’s Plan is a first step toward implementing Section 846 of the National Defense Authorization Act for FY 2018, which requires GSA to develop “e-commerce portals” – essentially online shopping sites – for commercially available off-the-shelf (“COTS”) item procurements.

Continue Reading GSA Unveils Plan for Commercial Online Shopping Portal

A generic pharmaceutical distributor, Acetris Health, LLC, has challenged the Final Determination of U.S. Customs and Border Protection (“Customs”) that Acetris’ generic prescription drug, Rosuvastatin Calcium Tablets (“Rosuvastatin”), is a product of India, the place where the active pharmaceutical ingredient (“API”) is produced.  If successful, the challenge in the U.S. Court of International Trade (“CIT”) could have a meaningful impact on decisions about where to manufacture API for the very broad range of drug products sold to the U.S. Government.

Continue Reading The Long-Standing TAA “Substantial Transformation” Standard for Drug Products is Challenged at the Court of International Trade

On February 22, 2018, the General Services Administration (GSA) issued a Final Rule to address common commercial supplier agreement terms that it contends are inconsistent with federal law. The purpose of this rule is to streamline negotiations over commercial supplier agreements (“CSAs”), end-user license agreements (“EULAs”), Terms of Sale (“TOSs”) or similar sets of standard terms and conditions. Significantly, the rule reverses several controversial provisions from the Proposed Rule and an earlier class deviation by reverting the order of precedence and eliminating the burdensome requirement of providing the full text of all provisions. Less controversially, but nonetheless important, the Final Rule also formalizes GSA’s longstanding position that certain terms and conditions are unenforceable under federal law.

Continue Reading GSA Issues Final Rule Governing Negotiations of Common Commercial Terms

Few issues have bedeviled the GSA Schedules program as much as the provision of incidental supplies and services under Schedule orders.  For years, it has been unclear how such supplies and services are to be purchased and priced, since they are not themselves on Schedule.

But now, with GSA’s new Order-Level Materials (“OLM”) rule, GSA has resolved this issue by expressly permitting the government to easily and quickly obtain incidental supplies and services through the Schedules program.


Continue Reading At Long Last – GSA Issues Final Rule on Purchasing “Order-Level Materials” on Schedule Orders

On January 31, 2018, the Department of Defense (“DoD” or the “Department”) published a final rule regarding commercial item purchasing requirements.  Among other key amendments, the final rule modifies the Defense Federal Acquisition Regulation Supplement (“DFARS”) by:  (i) formalizing a presumption of commerciality for items that DoD previously treated as commercial; (ii) providing commercial item treatment to goods and services offered by nontraditional defense contractors; and (iii) prioritizing the types of information that the contracting officer (“CO”) can consider when determining price reasonableness in the absence of adequate competition.

The final rule adopts much of DoD’s August 2016 proposed rule, which itself was a revised version of a retracted August 2015 proposed version.  We discussed the August 2016 proposed rule on this subject (and linked to an article regarding the August 2015 version) in a prior post.  Despite receiving repeated input from industry and Congress, DoD’s final rule still provides little concrete guidance, and although these changes were made with the stated purpose of promoting consistency across purchasing components, it appears likely that inconsistencies will persist.  In particular, the final rule continues to leave the door open for individual contracting officers to make potentially burdensome requests for information to support the proposed pricing of commercial items.
Continue Reading Third Time Around: Inconsistencies Persist with Final DFARS Commercial Items Rule

As part of ongoing efforts to create an online marketplace for government purchasers, GSA officials held a public meeting yesterday to discuss potential market structures and legal requirements.

A wide range of stakeholders attended the hearing, responding to questions from GSA on issues such as how many online portals should be implemented, who should have privity of contract with the government, and whether certain federal procurement requirements should be waived for program participants.  GSA had previously published its discussion topics in a Federal Register notice on December 15, 2017.


Continue Reading GSA Hears Comments from Industry About e-Commerce Portals