COMMERCIAL ITEM DETERMINATION & PRICING
(CID&P) PILOT - PATH FORWARD
Presented By: Cost & Pricing Center
Tom Walker
November 15, 2013
GOAL
Develop options for enhanced capability
within DCMA to meet buying office and
internal DCMA requests for commercial item
determination and pricing support;
A (CID&P) “Cadre”
New imperative: 2013 NDAA, Section 831(b)
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WHY?
2013 NDAA, Section 831(b)
•
(b) Training and Expertise- Not later than 270 days after the date of the
enactment of this Act, the Under Secretary of Defense for Acquisition,
Technology, and Logistics shall develop and begin implementation of a
plan of action to-•
(1) train the acquisition workforce on the use of the authority provided by
sections 2306a(d) and 2379 of title 10, United States Code, in evaluating
reasonableness of price in procurements of commercial items; and
•
(2) develop a cadre of experts within the Department of Defense to provide expert
advice to the acquisition workforce in the use of the authority provided by such
sections in accordance with the guidance issued pursuant to subsection (a).
DCMA designated by Director, Defense Pricing to pilot this role
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Observations to Date
• Commercial Item Determinations
• More commercial “of a type” items are pushing the boundaries of the
definition
• Prime contractors are prone to simply accepting subcontractor
commerciality assertions at face value
• Pricing
• Subcontractors – particularly true commercial vendors – are not
providing the information necessary to determine fair and reasonable
prices
• Low quantities of commercial sales present issues concerning price
validation
• Prices for high quantities of government purchases not reflective of
expected volume discounts
• Currency of historical data is often an issue
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Commercial Definition
• “Commercial item” means -• (1) 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-• (i) Has been sold, leased, or licensed to the general public; or,
• (ii) Has been offered for sale, lease, or license to the general public;
• (2) Any item that evolved from an item described in paragraph (1)
of this definition through advances in technology or
performance and that is not yet available in the commercial
marketplace, but will be available in the commercial marketplace
in time to satisfy the delivery requirements under a Government
solicitation;
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Commercial Definition (Cont.)
• “Commercial item” means -• (3) Any item that would satisfy a criterion expressed in
paragraphs (1) or (2) of this definition, but for -• (i) Modifications of a type customarily available in the commercial
marketplace; or
• (ii) Minor modifications of a type not customarily available in the
commercial marketplace made to meet Federal Government
requirements. Minor modifications means 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;
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Commercial Definition (Cont.)
• “Commercial item” means -• (4) Any combination of items meeting the requirements of
paragraphs (1), (2), (3), or (5) of this definition that are of a type
customarily combined and sold in combination to the general
public;
• (5) Installation services, maintenance services, repair services,
training services, and other services if-• (i) Such services are procured for support of an item referred to in
paragraph (1), (2), (3), or (4) of this definition, regardless of whether
such services are provided by the same source or at the same time
as the item; and
• (ii) 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;
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Commercial Definition (Cont.)
• “Commercial item” means -• (6) 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. For purposes of these
services—
• (i) “Catalog price” means a price included in a catalog, price list,
schedule, or other form that is regularly maintained by the
manufacturer or vendor, is either published or otherwise available
for inspection by customers, and states prices at which sales are
currently, or were last, made to a significant number of buyers
constituting the general public; and
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Commercial Definition (Cont.)
• “Commercial item” means -• (ii) “Market prices” means current prices that are established in the
course of ordinary trade between buyers and sellers free to bargain
and that can be substantiated through competition or from sources
independent of the offerors.
• (7) Any item, combination of items, or service referred to in
paragraphs (1) through (6) of this definition, notwithstanding the
fact that the item, combination of items, or service is transferred
between or among separate divisions, subsidiaries, or affiliates
of a contractor; or
• (8) A nondevelopmental item, if the procuring agency determines
the item was developed exclusively at private expense and sold
in substantial quantities, on a competitive basis, to multiple
State and local governments.
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Commercial Item Determinations
• SUBPART 212.1—ACQUISITION OF COMMERCIAL
ITEMS - GENERAL(Revised March 12, 2012)
• 212.102 Applicability.
• (a)(i) When using FAR part 12 procedures for acquisitions exceeding
$1 million in value, except for acquisitions made pursuant to FAR
12.102(f)(1), the contracting officer shall—
• (A) Determine in writing that the acquisition meets the commercial item
definition in FAR 2.101 or meets the criteria at FAR 12.102(g)(1);
• (B) Include the written determination in the contract file; and
• (C) Obtain approval at one level above the contracting officer when a
commercial item determination relies on subsections (1)(ii), (3), (4), or (6) of
the “commercial item” definition at FAR 2.101.
• (ii) Follow the procedures at PGI 212.102(a) regarding file
documentation.
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CIDs (Cont.)
• PGI 212.1--ACQUISITION OF COMMERCIAL ITEMS—
GENERAL
• PGI 212.102 Applicability.
• (a) Contracting officers shall ensure that contract files fully and
adequately document the market research and rationale supporting
a conclusion that the commercial item definition in FAR 2.101 has
been satisfied. Particular care must be taken to document
determinations involving “modifications of a type customarily
available in the marketplace,” and items only “offered for sale, lease,
or license to the general public,” but not yet actually sold, leased, or
licensed. In these situations, the documentation must clearly detail
the particulars of the modifications and sales offers. When such
items lack sufficient market pricing histories, additional diligence
must be given to determinations that prices are fair and reasonable
as required by FAR Subpart 15.4
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Commercial Pricing
• 15.403-1 -- Prohibition on Obtaining Certified Cost or
Pricing Data (10 U.S.C. 2306a and 41 U.S.C. 254b).
• (3) Commercial items. “… is exempt from the requirement for
certified cost or pricing data.”
• “modifications of a commercial item are not exempt from the
requirement for submission of certified cost or pricing data on
the basis of the exemption provided for at FAR 15.403-1(c)(3) if
the total price of all such modifications under a particular
contract action exceeds the greater of the threshold for
obtaining certified cost or pricing data in 15.403-4 or 5 percent of
the total price of the contract at the time of contract award.”
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Commercial Pricing
• 252.215-7009 Proposal Adequacy Checklist.
• 19. FAR 15.408, Table 15-2, Section II Paragraph A - Does the
proposal include a price analysis for all commercial items
offered that are not available to the general public?
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Commercial Pricing
• Price Analysis
• Comparison of proposed prices (competition)
• Historical Pricing
• Parametrics
• Competitive published prices
• Comparison to IGCE
• Comparison to prices obtained through market research
• Data other than certified cost/price data from offeror
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Commercial Pricing
• Subcontract Price Analysis (15.404-3)
• CO is responsible for the determination of a fair and reasonable
price for the prime contract, including subcontracting costs
• prime contractor or subcontractor shall
• Conduct appropriate cost or price analyses to establish the
reasonableness of proposed subcontract prices
• Include the results of these analyses in the price proposal
• When required, submit subcontractor certified cost or pricing data
as part of its own certified cost or pricing data.
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Major Weapon Systems
• Secretary of Defense determines
• Subsystems
• If system is commercial or
• CO determination of commercial AND sufficient info to
determine reasonableness
• Components/Spares (other than COTS)
• System or Subsystem determined commercial or
• CO determination AND sufficient information
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Way Forward
Not later than 270 days after the date of the
enactment of this Act, the Under Secretary of
Defense for Acquisition, Technology, and
Logistics shall develop and begin
implementation of a plan of action……….
28 September 2013
The DCMA/Navy Pricefighter team currently working pilot projects fulfills this mandate:
Results previously briefed indicate opportunities for improved Commercial Item
Determinations and pricing of Commercial Items across the Department
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Assumptions/Caveats
• Resources available for DoD Commercial pricing capability will be
constrained in accordance with DoD POM submissions to comply
with Budget Control Act
• Continued Navy Pricefighter Support is a priority
•
Will require both additional budget and manpower authorizations
• DPAP funding for DCMA travel and Pricefighter support (labor and
travel) will be available
• Commercial pricing path forward dependent upon policy/regulatory
framework to be established
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CID&P Structure – Next Step
Dedicated Organizational Structure Within Cost & Pricing Center
Cadre of experts = Commercial Pricing Hub Site (8 FTEs)*
Hub Site
Director
•
•
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Intend to hire incrementally
Demand/funding will drive pace
Key unknown is the extent to which
DoD PCOs are driven to use capability
Commercial
Pricing Hub Site
Lead (Supervisor)
Management
Analyst
1102 CID&P
Analysts
- 6 C/P Analysts
DCMA
Engineering
Navy
Price
Fighters
-Analysts
-Engineers
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Pros/Cons
•
Pros
•
Creates “real” organizational entity responsible for commercial pricing
• Simplifies reporting
• Eliminates competition for resources (Overhead Should Cost Reviews and pricing surge
efforts currently compete for same expertise)
•
•
Focuses functional experience/expertise
•
Consistency in Commercial Item Determinations and Pricing across services
•
Facilitates training of Commercial Pricing Cadre
•
Facilitates standardized Commercial Item Determination/Pricing Tool
development
Cons
•
Creates specialized niche in terms of Cost & Pricing Center skillsets
•
Not resource neutral
Substantial uncertainty as to demand for support. Policy/regulatory direction as to breadth and
depth of review on proposed commercial items will be the key determinant of resources required
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Summary
•
•
•
•
Development of a Commercial Capability is required by law
Director of Defense Pricing has identified DCMA to pilot this effort
Pilot project underway to determine needs and structure
Recommend a core capability to be developed within the DCMA
Cost & Pricing Center and Navy Pricefighters
• Initial DCMA team will stand up under an existing hub site
• When mature, a readily identifiable capability will stand up to
provide:
• Assistance with Commercial Item Determinations
• Price Reasonableness evaluations
• Policy framework will determine magnitude of effort and drive
funding requirements
Pilot is Proceeding and DCMA is
Ready for the Next Step Toward a Full
Commercial Pricing Capability!
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Backup Slides
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