Potential New Revenue Stream During COVID-19: Commercial Item Contracts with DoD?
Changes to the U.S. Department of Defense procurement regulations effective today, October 1, 2020, reduce some of the onerous complexities that are normally associated with contracting with the federal government. Companies that have previously shied away from contracting with the U.S. Government might now be inclined to consider it, especially during the economic downturn due to COVID-19.
The amendments effective today permit DoD to use streamlined commercial item contracting procedures with what DoD is terming "nontraditional defense contractors" and, in DoD's words, have been implemented in part to create incentives for new companies to enter the federal marketplace. DoD has long recognized that the Federal Acquisition Regulation (FAR) and the DoD FAR Supplement (DFARS) can be burdensome when the government is acting as a regular purchaser of commercial goods, and thus sometimes utilizes a simplified set of rules for procurement of commercial goods and services under FAR Part 12.
Historically, a federal agency could only avail itself of these simplified procurement procedures when it buys a product or service that qualifies as a "commercial item" as that term is defined in the FAR. Today's amendments, however, give DoD contracting officers some discretion to apply commercial item procedures more broadly when doing business with companies that meet a new definition of "nontraditional defense contractor" -- potentially a welcome option for companies that are looking to diversify their revenue streams during the COVID-19 pandemic.
Ultimately, while these commercial item procedures provide certain advantages over more rigorous methods of public contracting, they are nevertheless federal government contracts subject to the FAR and DFARS. Before pursuing a DoD commercial item procurement, you should carefully consider the compliance implications and be familiar with DoD's unique processes. If you are a small business interested in pursuing commercial item contracts with DoD, please contact Bill Speros or another attorney in the Government Services group at our Firm.