Commerciality Guidance for Major Weapon System Procurements

On May 30, 2024, the Department of Defense (DoD) issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement Section 803 of the 2023 National Defense Authorization Act, which modified 10 U.S.C. § 3455 to provide additional guidance regarding data requirements needed to support determinations of commerciality and price reasonableness under procurements for major weapon systems.  The rule applies to products that (i) have not previously been deemed commercial by the DoD; and (ii) are proposed as either a subsystem of a major weapon system or as a component or spare part of a major weapon system or subsystem. 

Where applicable, offerors seeking a commercial product determination (CPD) that relies on paragraphs (1) through (5) of the FAR 2.101 “commercial product” definition must now:

• identify the comparable commercial product that the offeror sells to the general public or nongovernmental entities for other than governmental purposes;
• provide a comparison between the physical characteristics and functionality of the comparable commercial product and the subsystem, component, or spare part; and
• provide the national stock number for the comparable commercial product if available, and for the subsystem, component, or spare part, if one is assigned.

If the offeror does not sell a comparable commercial product, it is required to notify the contracting officer (CO) in writing, and provide a comparison between the physical characteristics and functionality of the most comparable commercial product in the commercial market. 

Moreover, when the offeror is relying on the (3)(i) “modifications of a type” definition in FAR 2.101, it must supplement its package with a description of the modification and documentation to support that the modification is customarily available in the marketplace.  Similarly, when providing items with “minor modifications” made to meet government needs under prong (3)(ii), the offeror must also submit a detailed description of the modification, as well as detailed technical data to demonstrate the modification is minor, such as information on production processes and material differences.

The final rule also impacts the government’s price reasonableness analysis for products relying on the “minor modification” definition.  Where necessary, COs can require access to a representative sample of prices paid for similar commercial products, along with the terms and conditions of such sales, which may be redacted for certain customer information. 

According to the DoD, the requested information should be readily available to commercial companies via their sales records and should not require a new compliance infrastructure to segregate and archive business data.  However, lower-tier contractors should be aware that, to the extent they provide parts that fall within the scope of a major weapon system or subsystem procurement, they may be swept into providing these additional data obligations.  Moreover, though the final rule applies only to major weapon system procurements, all contractors providing commercial products should be aware of these new data submission standards, which could potentially be used as a baseline for supporting CPDs under other DoD commercial product procurements.