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Hello again, 

We are currently subcontractors to a program and the prime has asked us for several commercial item determinations out of the blue. 

My company asserts commerciality of our parts on all quotes. They have always taken the stance that during valid period of the quote, and before a purchase order is placed, our company will provide any price analysis and assist in any commercial item justifications (CIJ). Should any price analysis or CIJ be provided, we do expect something in writing on the Prime's letterhead stating they accept our assertion of commerciality on the part numbers provided. 

That's a bit of background. 

Now, the prime has requested CIJ for several parts. Some of these parts were ordered years ago and some have open orders currently. 

To my knowledge, it is the Prime's responsibility to have done the price/cost analysis and price comparison at all times. Our prime is insisting that we, the sub, must provide CIJs with fair & reasonable price analysis for the parts requested. Our senior leadership insists this is not the case. 

I have reached out the DCMA to ask on the issue and they seem to side with us that ultimately, that responsibility was and is still the Primes but also encouraged us to work with the Prime if the DCMA is requesting the information. 

Sorry if this is a long read, my question is: 

Is our company correct in our assertion that this is all the Prime's responsibility and we are not obligated to provide CIJ? Is there a certain point from the RFQ, to the quote, to the purchase order where our obligation to provide ends? Going further, do we even have a obligation when during the RFQ, quote phase to provide anything? I believe the sub most likely does not have an obligation since the Prime can just move on before awarding any sub a contract if they refuse to provide a CIJ. 

Thank you.If there is any confusion, please let me know and I will do my best to answer it. 

 

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Obligation?  No, but be prepared for the consequences if you decide not to play ball (i.e. contentious negotiations, difficulty in other contracting issues, etc.)

If you have a definitized agreement (Purchase Order most likely) that is a contractual commitment including price, it appears that perhaps your Prime is a bit upside-down.  You have no obligation...unless you want to help your Prime out of a tough spot.  

On the other hand, consider that this request happens prior to PO placement.

All of a sudden this becomes an opportunity to weigh in on a process that is too-often a one-sided conversation.  Think of it this way:  your Prime has determined that you are NOT commercial and that price reasonableness cannot be determined without Other Than Certified Cost or Pricing Data.  Yuck!  Show them why you're commercial and give them several market comparables with rationale for any adjustments, to explain why your price is reasonable.

All of a sudden, you've made their lives easier, which means you've made life easier for yourselves.  They still have an obligation to write their price analysis, but you've now framed the conversation with objective facts.

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Thank you for the response. This is similar to the approach my company uses. 

Prior to a purchase order, we are more than happy to work with the prime with any questions or concerns they have in determining our commerciality. 

Once the PO is placed though, we cease our cooperation. From my understanding, this is due to many primes requesting years after a PO is placed in many cases and we see no reason to support a CIJ after years of orders for the part. 

Their stance that we MUST provide the CIJ (1) after the purchase order has been placed and (2) if the USG has not declared the parts commercial previously, is where my confusion came. 

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22 minutes ago, Don Mansfield said:

StePa,

Give them a quote for providing a commercial item justification. Price out each type of data they would like.

Haha Thanks @Don Mansfield. I actually really like this idea. I will bring it up to my senior folks as a response to this Prime. 

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Guest Vern Edwards
3 hours ago, StePa said:

Is our company correct in our assertion that this is all the Prime's responsibility and we are not obligated to provide CIJ? Is there a certain point from the RFQ, to the quote, to the purchase order where our obligation to provide ends? Going further, do we even have a obligation when during the RFQ, quote phase to provide anything? I believe the sub most likely does not have an obligation since the Prime can just move on before awarding any sub a contract if they refuse to provide a CIJ. 

All I can say is that if a prospective customer asked me to justify and document that my product is commercial and my price is fair and reasonable, I would smile and say, No problem. Only in the world of government contracting would a prospective seller ask whether they are obligated to do so. Anybody else's sales people would jump for joy at the chance. It must be a penny ante piece of business.

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7 hours ago, StePa said:

Is our company correct in our assertion that this is all the Prime's responsibility and we are not obligated to provide CIJ? 

 

I don't understand your company's rationale, StePa, or I don't fully understand what you are saying about the commercial item determination. In my view and experience, the subcontractor is responsible for identifying which paragraphs of the definition it is asserting its offered goods and/or services are a commercial item. The burden of proof is on the subcontractor. Additionally, I expect relevant facts to be stated by the subcontractor that support the assertion. Then I expect all of it to be certified to by signature. The prime or higher tier subcontractor should then internally review the assertion and facts, do any required market research/due diligence and if it agrees, endorse the subcontractor's assertions. 

Edited by Neil Roberts
typo

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@Neil Roberts HI Neil. My company does not have an issue with provide CIJ when we have quote open (which asserts commerciality on the parts quoted) with the Prime and before an order is placed. We provide all of this information at no cost to the Prime. 

Our issue is when requests come in months/years (this is actually quite common) after the purchase order has been placed and parts shipped out. 

I have been with this company less than year, but from what I can gather, the history we have with Primes is as follows: 

1. Prime requests CIJ.

2. We submit CIJ.

3. Prime never responds whether they accept the CIJ or approve of it as per DFAR 244.402. 

4. 1-3 years later, Prime again requests CIJ for the same part number. This point seems to be the main issue that annoys my senior leadership. They don't wish providing additional information since we never receive any official response to the information submitted. 

I believe that history with some of these Primes are dictating our stance with them currently. 

Hopefully this clears it up. From the information I've been receiving through correspondence with the DCMA, our position seems to be acceptable. Once a PO is in hand, there is nothing a sub is required to provide but..the DCMA did express that they hope if the USG is requesting the info, the sub and prime can work together to provide all information. 

 

My senior leadership mentioned that once a prime approves the CIJ per DFAR 244.402, another FAR or DFARs clause prevents the prime from requesting further information. Is this assertion correct? I assume this may be a reason why Primes do not expressly accept our CID but I am still researching the specific clause. 

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On 3/23/2018 at 5:59 PM, Vern Edwards said:

All I can say is that if a prospective customer asked me to justify and document that my product is commercial and my price is fair and reasonable, I would smile and say, No problem. Only in the world of government contracting would a prospective seller ask whether they are obligated to do so. Anybody else's sales people would jump for joy at the chance. It must be a penny ante piece of business.

HI @Vern Edwards

If it is a prospective customer, we have no problems providing the information from the RFQ to the time the quote is open. We have issues providing the information once the purchase order is placed or getting requests for information for:

1. quotes no longer valid (last quote issued in 2016) 

2. purchase order was placed and part has already shipped. 

Sorry if this was unclear. 

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Guest Vern Edwards

I agree with you on No. 1, but not on No. 2. If you sold the item as commercial and the customer comes back for justification after shipment, they probably want it for their own files. Why not help them out? It's a customer.

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@Vern Edwards I think that part of the decision was made in the situation I posted in my response to Neil. 

Quoted from my response to Neil:

"I have been with this company less than year, but from what I can gather, the history we have with Primes is as follows: 

1. Prime requests CIJ.

2. We submit CIJ.

3. Prime never responds whether they accept the CIJ or approve of it as per DFAR 244.402. 

4. 1-3 years later, Prime again requests CIJ for the same part number. This point seems to be the main issue that annoys my senior leadership. They don't wish providing additional information since we never receive any official response to the information submitted. 

I believe that history with some of these Primes are dictating our stance with them currently. "

 

I personally do not see what would be the issue for my company beyond our company not wanting to waste additional manpower, resources compiling the information for parts we have already submitted CIJ in past years. 90% of inquiries are for parts we already provided CIJ and never received responses for. 

 

 

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Guest Vern Edwards

Looking at your No. 4, I'd say that the prime is being unreasonable. I'd simply tell them that I'd already sent the info, tell them to whom it was sent, and let it go at that. The key concern is whether it would cost you a good sale.

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DFARS 244.402 does not require that a prime contractor advise subcontractor whether it “accepts” or “approves” the commercial item assertions made by subcontractor.

As others may have indicated, you should ask each prime why and what the subcontract basis is for additional support work after the subcontract is in effect. There are missing facts and scenarios in your post. However, for example, per FAR 15.403-1(c)(3) [called out in DFARS 244.402], it appears the Contracting Officer may determine that an item being purchased by a prime contractor from a subcontractor is not a commercial item, even after the prime determines it is, and requests additional commercial item determination and pricing support from the prime. Are you asking whether your company is on sound subcontract footing to refuse to support its previously submitted commercial item assertion? It depends. You must thoroughly read and understand the subcontract obligations and assess your business position and risk. Example: a subcontract clause that gives the prime access to your financial books and records, a prime contract level defective pricing clause that passes this financial risk on to you by a subcontract clause if related to your pricing, etc.

Prior commercial item determinations by prime contractors are not required to be recognized on subsequent buys. Even if recognition was to be considered, there should be some analysis along the lines suggested in DOD Guidebook for Acquiring Commercial Items Jan 2018 https://www.acq.osd.mil/dpap/cpic/cp/docs/Guidebook_Part_A_Commercial_Item_Determination_20180129.pdf  at page 15. In lieu of those 7 analysis items, in my opinion it would still be more efficient and best practice to follow the existing process to assert and justify the item anew. 

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@Neil Roberts Hi Neil. You are correct that the prime does not have to advise us whether they accept or approve the CI assertion but they must clearly determinate whether our item meets the definition of a commercial item which the Prime in this situation believes they cannot or will not. 

I guess I am a bit confused on this section you wrote. 

"Prior commercial item determinations by prime contractors are not required to be recognized on subsequent buys."

Are you saying the prior determinations do not have to be recognized by the USG or the prime? I am aware the USG does not have to recognize any CID made by the prime but I believed there was some clause which stated that once a Prime expressly makes a determination that an item meets the definition of a commercial item and the price is fair and reasonable, a prime cannot request more information on the matter.

I am obviously new to this and am not sure. I am actually trying to research what the exact clause is but our senior leadership mentioned it..so here I am searching endlessly for it. 

Any clarification would be greatly appreciated. 

 

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10 minutes ago, StePa said:

@Neil Roberts Hi Neil. You are correct that the prime does not have to advise us whether they accept or approve the CI assertion but they must clearly determinate whether our item meets the definition of a commercial item which the Prime in this situation believes they cannot or will not. 

I guess I am a bit confused on this section you wrote. 

"Prior commercial item determinations by prime contractors are not required to be recognized on subsequent buys."

Are you saying the prior determinations do not have to be recognized by the USG or the prime? I am aware the USG does not have to recognize any CID made by the prime but I believed there was some clause which stated that once a Prime expressly makes a determination that an item meets the definition of a commercial item and the price is fair and reasonable, a prime cannot request more information on the matter.

I am obviously new to this and am not sure. I am actually trying to research what the exact clause is but our senior leadership mentioned it..so here I am searching endlessly for it. 

Any clarification would be greatly appreciated. 

 

The prime's determination that a subcontract item is a commercial item can be based on the subcontractor's assertions, and not some independent judgement of the prime about the  subcontractor's item. If, for example, a Contracting Officer determines that the item is not commercial, the prime does not wish to be in the position of the subcontractor refusing  to provide information, claiming that the prime made the determination about the item, not the subcontractor. This could explain the prime's reluctance.

Prior commercial item determinations do not have to be automatically recognized by the USG or the prime. Definitions and requirements change over time.  

I am unaware of a clause that you describe about a prime being prohibiting from asking a subcontractor for any information about a prior commercial item assertion made by a subcontractor. You may however, have a leg to stand on based on your contract, as i previously indicated.

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1 hour ago, StePa said:

I am obviously new to this and am not sure. I am actually trying to research what the exact clause is but our senior leadership mentioned it..so here I am searching endlessly for it. 

Any clarification would be greatly appreciated. 

Your search shouldn't be endless unless your contract is endless (which I doubt is the case).  As someone new to this, I cannot overstress the importance of reading your contract(s).

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4 hours ago, StePa said:

I believed there was some clause which stated that once a Prime expressly makes a determination that an item meets the definition of a commercial item and the price is fair and reasonable, a prime cannot request more information on the matter.

I think you leadership may be getting confused concerning new language in (I believe) the 2018 NDAA to the effect that once the government makes a determination that an item is a commercial item, future contracting officers cannot question whether the item is a commercial item except in specified circumstances.

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19 hours ago, Retreadfed said:

I think you leadership may be getting confused concerning new language in (I believe) the 2018 NDAA to the effect that once the government makes a determination that an item is a commercial item, future contracting officers cannot question whether the item is a commercial item except in specified circumstances.

Bingo!

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@Retreadfed @here_2_help Thanks. I had assumed this as well but they all mentioned they had some presentation by a law firm years ago which included something about it. Of course, the presentation and slides are no where to be found and my senior leadership can't recall which firm gave that presentation. 

Thanks again everyone for your input. 

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Consider offering an annual statement asserting that ALL of your offers that may be purchased over the year qualify as commercial items under the FAR.  (if that's the case...)

This has two effects:

1.  It helps minimize the repetitive requests (and gives you a handy, signed document to produce when they do pop up)

2.  It helps the customer (the prime) paper their contract file in a way that is almost over-compensating, making them happy (to Vern's point).    

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There are some Primes who play by their own set of rules.  A few years ago, I issued a quote to a large Government contractor for a radar altimeter as a commercial item.  As justification for commerciality and price, I sent him my price list, catalog and a contract I has with the U.S. Government which stated in the contract that the Government considered the item to be commercial.  I then offered the same price as in my Government contract.  The Large Contractor said they couldn't accept all this justification and considered the item to be non-commercial.  I told them I would accept their justification and submitted a new price based on a production run of the number of units they wanted and included set-up costs in the price. Obviously the price was now higher and the large Prime backed down and said they would accept my commerciality justification.  I told them it was too late and this was now my price. They ended up buying the altimeters at the higher price because they were intent on following their internal definition of commerciality (which I felt we met) rather than the FAR/DFAR definition.  Sometimes it doesn't matter what you present or how right you are, some Primes have their own set of rules and feel they are big enough to push you around.  Decide how important this customer is t you and treat them accordingly.

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