How Federal Contractors Can Help Establish Commerciality of Their Products and Services
Federal government contractors have a unique opportunity to streamline acquisitions by demonstrating that their products or services qualify as “commercial” under the Federal Acquisition Regulation (FAR). While only a contracting officer can issue a Commercial Item Determination (CID), contractors play a critical role in providing the necessary support to justify that determination. For businesses aiming to operate under FAR Part 12—where procedures are simplified and regulatory burdens reduced—helping the government establish commerciality is a strategic imperative.
Under FAR 2.101, a commercial product or service must meet certain criteria: it must be of a type customarily used by the general public, sold or offered in the commercial marketplace, or modified only in ways that are customary or minor. The definitions also encompass evolved products, nondevelopmental items, and services sold in substantial quantities under standard commercial terms. Because the definition is broad but detailed, the burden is on the contractor to assist the government in making a well-supported determination.
Though the CID itself is issued by the contracting officer, contractors are expected to submit robust information packages that demonstrate how their offerings meet the commercial definitions. This begins with asserting which specific definition applies—such as “of a type,” “evolved,” or “minor modification”—and continues with the submission of documentation that supports this assertion. Without such input, especially in gray areas or where the government lacks a prior CID, the process can stall or default to FAR Part 15, which brings more scrutiny and compliance obligations.
To help establish commerciality, contractors should focus on two key areas: market research and pricing substantiation. Effective market research includes catalog prices, published sales data, and evidence that the product or service is sold to the public under comparable terms. Contractors should be able to identify how their offerings align with those sold commercially, even if government-specific adjustments are necessary. For example, a contractor offering a ruggedized power unit may provide evidence that its base model is sold commercially, and that the ruggedized version is a minor modification commonly made for industrial clients.
When modifications are involved, contractors must carefully document the nature of the changes and why they are either minor or customary. A modification that alters performance characteristics, physical form, or the function of the product may raise red flags unless clearly justified. Technical analysis, side-by-side comparisons, and sales history showing similar modifications in the commercial marketplace can all help make the case.
In terms of pricing, contractors should prepare to show how their proposed prices relate to those in the commercial market. This includes providing catalog pages, discount structures, historical invoices, and an explanation of any cost variances due to government-specific requirements. Contractors may also reference sales to state and local governments or to foreign governments in support of the commerciality argument. However, merely pointing to the presence of a catalog price is not enough; the pricing must be current, competitive, and reflective of actual sales.
Contractors must also be responsive to fact-finding questions from contracting officers. When there are uncertainties about the form, fit, or function of a product or service, the government will request clarification, often in the form of technical breakdowns or additional sales documentation. Failing to adequately respond to these inquiries can result in the government rejecting the commerciality claim and shifting the procurement to FAR Part 15.
While the authority to determine commerciality rests with the government, contractors are responsible under DFARS 244.402 for making their own commerciality determinations for subcontracted items. This means having internal procedures in place for documenting commercial sales, maintaining catalogs, and justifying pricing. During a Contractor Purchasing System Review (CPSR), your commercial item assertions for subcontracts will be evaluated, and a weak record can jeopardize future contracting opportunities.
In conclusion, federal contractors cannot issue Commercial Item Determinations, but they have a central role in enabling them. By preparing strong documentation, conducting diligent market research, and supporting the contracting officer with credible, fact-based assertions, contractors increase the likelihood that their offerings will be treated as commercial. The payoff is substantial: a more efficient procurement process, fewer compliance burdens, and a stronger position in the competitive federal marketplace.
Disclaimer:
This blog post is for general informational purposes only and does not constitute legal advice. While efforts have been made to ensure accuracy, readers should consult appropriate professionals or legal counsel before making business or legal decisions related to federal contracting.
