Goodbye Commercial “Items”: FAR Council Replaces Definition with Commercial Products and Services

On November 4, 2021, the FAR Council issued a final rule replacing the FAR definition of “commercial item” with bifurcated definitions for “commercial product’’ and “commercial service.”  The rule implements Section 836 of the National Defense Authorization Act for fiscal year 2019, and is also consistent with recommendations from the Section 809 Panel to implement separate definitions that promote uniformity and reduce the acquisition workforce’s “confusion over how to identify eligible commercial products and services.”

Effective December 6, 2021, the new references to “commercial products,” “commercial services,” or both, will be populated throughout the FAR.  The rule does not create substantive changes to the previous definitions of commercial products and services, nor does it create any new solicitation provisions or contract clauses.  The FAR Council further noted that the definitions do not expand or shrink the universe of products or services the government may procure using FAR part 12, nor does it change the terms and conditions with which contractors must comply.  In responding to public comments, the FAR Council also confirmed that commercially available off-the-shelf (“COTS”) products remain a subset of commercial products, and do not include commercial services.

While the final rule is a positive step toward further streamlining commercial contracting, it remains to be seen whether these changes will result in the government’s more consistent use of commercial procurement procedures and issuance of commerciality determinations.