8:13 pm, July 10, 2014

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  • House Rejects change to Commercial-of-aType Definition
    Contractgal
    It should be easy for the Government to determine if something is Commercial-of-a-type just by using an internet search engine. Since the Government generally buys items that haave commercial market counterparts (planes, vehicles, equipment, etc), one can assume that most items could be contrued to be "of-a-type". A wheel and brake assembly, APU, seat belt, etc, are all items used on an aircraft, modified to fit the needs of a particular aircraft, but modified to fit the aircraft's performance requirements. It should be very easy to identify these instances, nearly intuitively, as commercial-of-a-type. Two things have bothered me about the Governments approach on this issue: First, the "real" issue is for the KO to have "proof" of Price Reasonableness, not that the product is commercial-of-a-type. They expect a contractor to produce all the proof, provide company Sales information, customer lists, sale dates, and rationale that adequately support the price offered to the Government if reasonable. The effort associated with this task can be onerous, time consuming and a drain on company resources. Certainly it is not common commercial practice either. The Government has the resources to determine price reasonableness based on information contained within the Government (per the FAR). For example, all parts procured and consumed in a vehicle fleet operated by every branch of the DoD have purchase history detail, yet the Government has not centralized this information into one repository that can be drawn on by it's own work-force. Rather, it operates in a completely compartmentalized mode perpetuating inefficient purchasing practices for both the Buyer and the Seller and resulting in increased administrative costs that have to be absorbed by a company and should be added to any procurement with the Government, especially when there are many Government order from different sources (Departments) rolling through a commercial business. Commercial-of-a-type should not be based on WHO the customer is that is buying the product from a particular supplier, but WHAT the product or service is that is actually being sold. If all commercial 707 aircraft were retired by the commercial industry but that aircraft remained in used by the Government, is it now no longer commercial? If a company only sold Army green pencils to the Government as a primary customer, does that make it non-commercial? Who a company chooses to sell to is a strategic business decision and selection of a market slice (and niche) in which it may have decided to focus and excel. That decision should make my product or service no less "commercial-of-a-type" Secondly, it appears that KO's exhibit a certain sense of paranoia in trying to decide if something meets the commercial-of-a-type criteria. It appears they worry about defending a reasonable price in the procurement. Deciding if something is commercial is a very different step than deciding if the price is reasonable. These two issues often appear to be melded together as ONE issue and then decided unilaterly based on availablity of price reasonableness data. They are two separate and different issues to decide. One should be relatively easy while the other should be available from the information already collected and available within the Government (per the FAR). In the quest to achieve cost reduction objectives, Mr. Assad would be wise to review the tools available to it's DoD employees (KO's) and perhaps focus on a centralized robust program that gives them access to the procurement information (by platform?) they need to make their jobs easier, remove their fear of making a "bad" decision and keep the Contractor's costs down by making the market research information available for the KO based on information already available within the Government. That's where the cost savings will be significanly gained.
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