FAR Part 12 Flashcards
Acquisition of Commercial Products and Commercial Services
Part 12
Acquisition of Commercial Products and Commercial Services
Part 12 - Acquisition of Commercial Products and Commercial Services
Slide 9: Overview of Part 12
Purpose: Simplify acquisition of commercial items to align with
market practices (FAR 12.000).
KeySections:
* 12.1: General guidelines for acquisition (FAR 12.101).
* 12.2: Special requirements for commercial items (FAR 12.201).
* 12.3: Solicitation provisions (FAR 12.301).
* 12.4: Terms and conditions (FAR 12.401).
* 12.5: Applicability of certain laws (FAR 12.500).
* 12.6: Streamlined procedures (FAR 12.601).
Part 12 - Acquisition of Commercial Products and Commercial Services
Subpart 12.1 - General
- Purpose: Use market-driven practices to streamline acquisition (FAR
12.101). - Benefits: Reduces transaction costs, increases procurement efficiency (FAR 12.102).
Part 12 - Acquisition of Commercial Products and Commercial Services
Subpart 12.2 - Special Requirements
- Purpose: Address unique needs in commercial acquisitions (FAR
12.201). - Benefits: Tailors requirements, enhances flexibility and efficiency (FAR 12.202).
Part 12 - Acquisition of Commercial Products and Commercial Services
Subpart 12.3 - Solicitation Provisions
- Purpose: Standardize provisions for commercial acquisitions (FAR
12.301). - FAR52.212-1:InstructionstoOfferors–CommercialItems
- FAR52.212-2:Evaluation–CommercialItems
- FAR52.212-3:OfferorRepresentationsandCertifications–CommercialItems
- FAR52.212-4:ContractTermsandConditions–CommercialItems
- FAR52.212-5:Contract Terms and Conditions Required to Implement Statutes or Executive Orders – Commercial Items
- Benefits: Facilitates clear communication, ensures compliance with market practices (FAR 12.302).
Part 12 - Acquisition of Commercial Products and Commercial Services
Subpart 12.4 - Terms and Conditions
- Purpose: Tailor contract terms to align with commercial standards
(FAR 12.401). - Benefits: Simplifies negotiations, aligns with market practices, reduces administrative burden (FAR 12.402).
Part 12 - Acquisition of Commercial Products and Commercial Services
Subpart12.6 Streamlined Procedures
Purpose: Simplify evaluation and solicitation for commercial items(FAR12.601)
* Oral Presentations (FAR 12.602(c)): Allowing offerors to present their proposals orally rather than in writing can significantly speed up the evaluation process.
* Simplified Evaluation Factors (FAR 12.602(b)): Using fewer and less complex evaluation factors, such as technical capability and past performance, helps streamline the process.
* Combined Synopsis/Solicitation (FAR 12.603): Issuing a combined synopsis and solicitation in a single document reduces the administrative burden and accelerates the procurement timeline.
* Electronic Commerce (FAR 12.603(d)): Utilizing electronic commerce methods to distribute solicitations and receive offers improves efficiency and reduces processing times.
Benefits: Reduces administrative costs, speeds up procurement cycles, enhances efficiency (FAR 12.602).
Commercial item
Any item, other than real property, that is of a type customarily used by the general public or by non-governmental entities for purposes other than governmental
purposes, and
* Has been sold, leased, or licensed to the general public; or
* Has been offered for sale, lease, or license to the general public
Any item that evolved from an item as defined above through advances
in technology or performance and that is not yet available in the
commercial marketplace, but wil be available in the commercial marketplace in time to satisfy the delivery requirements under a
government solicitation, is also a commercial item.
Minor modifications
Modifications that do not significantly alter the nongovernmental function or essential physical characteristics of an item or component, or change the purpose of a process
Factors to be considered in determining whether a modification is minor include the value and size of the modification and the comparative value
and size of the final product. Dollar values and percentages may be
used as guideposts, but are not conclusive evidence that a modification is minor.
Commercial items with modifications remain
commercial items
fi the modification is available commercially. Modifications that are uniquely governmental move the item further from the
definition of commercial item.
Computer
Computer with improved performance
Computer functioning underwater
Commercial Item
Any item, other than real property, that is of a type customarily used by the general public or by non-governmental entities for purposes other than governmental
purposes, and
* Has been sold, leased, or licensed to the general public; or
* Has been offered for sale, lease, or license to the general public
“Offered for sale, lease, or license” may mean that the item
has been advertised or demonstrated to the public, and an item that has not been offered for sale may still be a
commercial item fi ti has been offered for sale.
CFCM ONLNIE PREPARATORY COURSE
Commercial Item Defined
Any combination of items meeting the requirements as described that are
of a type customarily combined and sold ni combination to the general public are also commercial items.
Commercial Item
Evolved from a commercial item
modified commercial item
Commercial Item Defined
Installation services, maintenance services, repair services,
training services, and other services are
commercial items fi such services are procured for support of a commercial item, regardless of whether such services are provided by the same source or at the same time as the item; and the source of such services provides similar services contemporaneously to
the general public under terms and conditions similar to those offered to the Federal Government.
Commercial Item Defined
Services of a type offered and sold
competitively in substantial quantities in the commercial marketplace based on
established catalog or market prices for specific tasks performed or specific outcomes to be achieved and under standard commercial terms and conditions are commercial items.
This does not include services that are sold based on hourly rates without an established catalog or market price for a specific service performed or a specific outcome to be achieved.
Nondevelopmental item
Any previously developed item of supply used exclusively for governmental
purposes by a federal agency, a state or local government, or a foreign government with which the United States has a mutual defense cooperation agreement
Any item so described that requires only minor modification or modifications of a type customarily available in the commercial marketplace in order to meet the requirements of the procuring department or agency
Any item of supply being produced that does not meet the requirements above solely because the item is not yet in use
Commercially available off-the-shelf (COTS)
Any item of supply (including construction material) that is a commercial product, sold in substantial quantities in the commercial marketplace; offered to the Government,
under a contract or subcontract at any tier, without modification, in the same form in which it is sold in the commercial marketplace; and
does not include bulk cargo
such a s agricultural products and
petroleum products.
Special Requirements for CommercialItemAcquisition
Contracting officers shall use
the policies unique to the acquisition of commercial items prescribed in Part12 in conjunction with the policies and procedures in
Parts 13, 14, or 15, as appropriate for the particular acquisition.
S F1449: Solicitation/Contract/Order for Commercial Items
Used when:
* The acquisition is expected to
exceed the simplified acquisition threshold
* Apaper solicitation or contract is
being issued
* Streamlined solicitation
procedures are not being used
May be used for commercial
acquisitions under the SAT, but is not mandatory
Use of Technical Information in Commercial Item Evaluation
Where technical information is required to effectively evaluate offers, agencies should
review existing product literature in lieu of technical proposals
whenever possible.
Agencies should also allow offerors to propose more than one product that wil meet government needs, and contracting officers shall evaluate each product as a separate offer.
Use of Technical Information in Commercial Item Evaluation
Past performance should be
an important element of
every evaluation and contract award for commercial items.
Contracts for commercial items shall rely on a contractor’s existing quality assurance systems as a substitute for government inspection and testing unless other customary market practices exist.
Use of Technical Information in Commercial Item Evaluation
The contracting officer must establish price reasonableness
in accordance with the appropriate
FAR clauses, and should also be aware of customary commercial terms and conditions that may affect the pricing being provided to the government.
Tailoring of CommercialItem Specifications
Tailoring
The process by which individual sections, paragraphs, or sentences of a specification or solicitation are modified to meet the minimum requirements and
specific needs of the requestor
The following paragraphs of the Contract Terms and Conditions – Commercial Items clause implement statutory requirements and shall not be tailored:
* Assignments
* Disputes
* Payment (except as provided in Subpart 32.11)
* Invoice
- Compliance with laws unique to government contracts and other compliances
- Unauthorized obligations
Tailoring of CommercialItem Specifications
Waiver
As used in this section, a decision to not require certain criteria to be met for certain reasons, such as national security.
Additional terms or conditions in a solicitation or contract for commercial items must be consistent with customary commercial practice for the item being acquired unless a waiver is approved.
The request for waiver must describe the customary commercial practice, support the need to include a term or condition that is
inconsistent with that practice, and include a determination that use of the customary practice is inconsistent with the needs of the government.
TailoringofCommercialItem Specifications
The clause at 52.212-4, Contract Terms and Conditions – Commercial Items is to be inserted
in solicitations for the
acquisition of commercial items, and clauses in solicitations and contracts for the acquisition of commercial items.
This clause includes terms and conditions which are, to the
maximum extent practicable, consistent with customary commercial practices and is incorporated in the solicitation
and contract by reference.
Commercial Item Terms and Conditions
FAR 12.4 provides guidance on tailoring specific paragraphs in 52.212-4 when they do not reflect customary practice.
Acceptance
Assumes the government will rely on the contractor’s assurances that the commercial item conforms to the
contract requirements
Generally appropriate for non-complex acquisitions
The government always retains the right to reject or refuse acceptance of nonconforming products
Commercial Item Terms and Conditions
FAR 12.4 provides guidance on tailoring specific paragraphs in 52.212-4 when they do not reflect customary practice.
Termination
Permits the government to terminate a contract for either convenience or cause
The government’s rights after a termination for cause
includes all the remedies available to any commercial buyer
The preferred remedy is to acquire similar items and charge the defaulted contractor with excess reprocurement costs and incidental or consequential damages
Commercial Warranties
Warranty
A promise or affirmation given by a seller to a buyer regarding the nature,
usefulness, or condition of the supplies or performance of services furnished under the contract
Generally, a warranty’s purpose is to delineate the rights and obligations
for defective items and services, and to foster quality performance.
Commercial Warranties
Express Warranty
A written statement arising out of a sale to the consumer of a consumer good, pursuant to which the manufacturer, distributor, or retailer undertakes to preserve
or maintain the utility or performance of the consumer good or provide compensation if there is a failure in utility or performance
It is not necessary to the creation of an express warranty that formal words such as “warrant” or “guarantee” be used, or that a specific intention to make a warranty be present.
For commercial contracts, an express warranty must be included in the contract by addendum.
Commercial Warranties
Implied Warranty
A promise arising by operation of law that something that is sold shall be merchantable and fit for the purpose for which the seller has reason to know that ti is required
Some types of implied warranties:
* Implied warranty of merchantability
* Implied warranty of fitness for a particular purpose
* Implied warranty of title
* Implied warranty of wholesomeness
* Spearin Doctrine (implied warranty of specifications)
Solicitations for commercial items shall require offerors
to offer the government the same warranty terms offered to the general public.
For commercial contracts, an express warranty must be
included in the contract by addendum.
The government’s post-award rights contained in 52.212-4 are
the implied warranties
of and fitness for
particular purpose, and the remedies in the acceptance paragraph.
For commercial items acquired by the government there is an implied warranty of merchantability that
the item
is reasonably fit for ordinary purposes for which such items are used and the items must be of
at least average, fair, or medium-grade quality.
Contract Types
Firm-fixed-price contract
A contract that provides for a price that is not subject to any adjustment by reason of costs experienced by the contractor in the performance of the contract
Contract Types
Fixed-price with economic price adjustment contract
A fixed-price contract that permits an element of cost to fluctuate to reflect current market prices
Contract Types
Time and materials contract
A type of contract providing for a fixed hourly rate, including overhead and profit and material at cost plus handling charges
Contract Types
Labor hour contract
A contract that provides for reimbursement of the contractor’s labor costs at a fixed
hourly rate
A variation of the time-and-materials contract, differing supplied by the contractor
ContractTypes
Indefinite-delivery contracts may be used
when the prices are established on a firm-fixed price or fixed- price with economic price adjustment basis, or rates are established for commercial services on a time-and-materials or labor-hour basis.
What Drives
Commercial Item Pricing?
Speed of delivery and distribution channels
Length and extent of warranty
Limitation on seller’s liability
Purchasing in quantity
Length of the performance period
Specific performance requirements
Advances in technology
Benefits
Greatly simplified RFQ/RFP
Vendor response is simpler and cheaper
Government market is opened to more suppliers
Commercial innovations are leveraged for use by the government
Lower total ownership costs
Design, engineering, developmental testing, and production line setup are already completed
Products are already proven in service before the program receives them
Disadvantages
Not appropriate when extensive “tailoring” is required
Less ability to demand needed changes
Less oversight of contractor
Less insight into product
Advance payments are a SCP in some industries
Applicability of Certain Laws to Commercial Item Acquisitions
FAR 12.5 lists provisions of law that are not applicable to:
Contracts for the acquisition of commercial items
Subcontracts, at any tier, for the acquisition of commercial items
Contracts and subcontracts, at any tier, for the acquisition of COTS items.
Streamlined procedures are intended
to simplify the process of preparing and issuing solicitations
and evaluating offers for commercial items consistent with customary commercial practices.
When a written solicitation will be issued, the contracting officer may combine the
GPE synopsis and the solicitation into a single document.
FAR part 12 does not apply
to the acquisition of commercial items at or below the MPT,
or those acquired using the Standard Form 44,
the imprest fund,
the governmentwide commercial purchase card,
or directly from another federal agency.
In general, all provisions that apply to commercial items also apply to commercially available off-the-shelf items.
Agencies shall use
firm-fixed-price contracts
or fixed-price contracts with economic price adjustment for the acquisition of commercial items.
Time-and-materials or labor-hour con-tracts may be used for the acquisition of commercial services as provided in FAR 12.207(b).
Indefinite-delivery contracts may be used when the prices are established on a firm-fixed price or fixed-price with economic price adjustment basis, or rates are established for commercial services on a time-and-materials or labor-hours
If it is standard market practice for some commercial items to include buyer contract financing,
the contracting officer may offer government financing in accordance with FAR part
Unless it is mandated by agency specific statute, the government acquires only the technical data
and the rights in that data that are provided to the general public with the commercial item.
The contracting officer shall assume the data was developed exclusively at private expense.
If the government requires technical data rights, the contracting officer must include specific contract clauses.
Commercial computer software and documentation shall be acquired under licenses customarily provided to the public to the extent that those licenses are consistent with federal law and satisfy the government needs. In
general, the contractor will not be required to furnish any technical information that is not customarily provided to the public or to give the government rights to use, modify, reproduce, release, perform, display, or disclose the software except as mutually agreed
Cost Accounting Standards (CAS) do not apply
to contracts and subcontracts for the acquisition of commercial items unless the contract provides for an economic price adjustment based on actual costs incurred. (FAR 12.214)
TERMINATION: The clause permits the government to terminate a contract for either convenience or cause.
The government’s rights after a termination for cause shall include all the remedies available to any buyer in the marketplace.
The government’s preferred remedy will be to acquire similar items from another contractor and to charge the defaulted contractor with any excess reprocurement costs together with any incidental or consequential damages incurred because of the termination.
WARRANTIES: The government’s post-award rights contained in FAR 52.212-4 are the implied warranty of merchantability, the implied warranty of fitness for particular purpose, and the remedies contained in the acceptance paragraph.
The implied warranty of merchantability provides that an item is reasonably fit for the ordinary purposes for which such items are used.
The items must be of at least average, fair, or medium-grade quality and must be comparable in quality to those that will pass without objection in the trade or market for items of the same description.
The implied warranty of fitness for a particular purpose provides that an item is fit for use for the particular purpose for which the government will use the items.
The government can rely upon an implied warranty of fitness for a particular purpose when
(1) the seller knows the particular purpose for which the government intends to use the item; and
(2) the government relied upon the contractor’s skill and judgment that the item would be appropriate for that particular purpose.
In some markets, it may be customary commercial practice for contractors to exclude or limit the implied warranties contained in FAR 52.212-4 in the provisions of an express warranty. In such cases,
the contracting officer shall ensure that the express warranty provides for the repair or replacement of defective items discovered within a reasonable period after acceptance.
Express warranties shall be included in the contract by
