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garth

Commercial Item - Definition of General Public

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The definition of commercial item requires sales, lease or license or offers thereof to the ?general public?.

The DFARS definition of ?general public? is: "General public" and "non-governmental entities," as used in the definition of "commercial item" at FAR 2.101, do not include the Federal Government or a State, local, or foreign government.

Would sales to a commercial entity such as Boeing, BAE, NGC, Honeywell, etc. qualify as sales to the general public if the end user was the USG? For example if Boeing purchased a black box from Honeywell for used on the F-15 would the sale of the black box to Boeing be consider sales to the ?general public??

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FAR 2.101 defines a commercial Item as:

?Commercial item? means?

(1) Any item, other than real property, that is of a type customarily used by the general public or by non-governmental entities for purposes other than governmental purposes,

and?

(i) Has been sold, leased, or licensed to the general public; or

(ii) Has been offered for sale, lease, or license to the general public;

So, to define a commercial product you need to look at what the item is and how it is used to determine comerciallity. If you developed a radar altimeter suitable for all types of aircraft and offered it to the general public but only sold it to Lockheed for use on the F-16 program, I would say it was a commercial product as it is a type customarily used by the general public and has applications in other than military aircraft.

If on the other hand, you developed a computer program to control the launch and guidance of a missile shot from a plane, even if you offered it to the general puiblic it would not be a commercial product.

Hope this helps

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I would say it depends.

If they are acting as resellers or distributers and simply reselling your product to the USG then no this is not a commercial sale. However, if they take your product and change it, bundle it, or use it in the performance of a service and then sell the new product, or bundle, or service to the USG then it could be a commercial sale.

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I would say it depends.

If they are acting as resellers or distributers and simply reselling your product to the USG then no this is not a commercial sale. However, if they take your product and change it, bundle it, or use it in the performance of a service and then sell the new product, or bundle, or service to the USG then it could be a commercial sale.

I have to respectfully disagree. The above test is not the FAR's focus. The FAR definition looks first at whether the item is "of a type customarily used by the general public or non-governmental entitities for purposes other than governmental purposes." Your example above fails this test, it seems to me.

Secondly, the FAR looks at what the seller has done (or will do--see (2) under the commercial item definition) with the item--has it been sold OR offered to the general public. Thus, "simply reselling your product to the USG" could in fact qualify as a commercial sale.

I think Loul got it right--the question of whether a sale by one defense contractor to another depends more on the product itself than, in this case, what the buyer plans to do with it.

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Note that the definition appears to make a distinction between "general public" and "nongovernmental entity." Arguably, if an item has not been sold or offered for sale to the general public, but only to "a nongovernmental entity" and only for government purposes, then the item is not a commercial item, even if it is "of a type customarily used" by the general public and nongovernmental entities for nongovernmental purposes. "Boeing, BAE, NGC, Honeywell, etc." are certainly nongovernmental entities. Arguably, if the item has been sold or offered for sale only to them, and if they wanted the item only "for governmental purposes," then the item is not a commercial item.

Arguably.

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I read Garth's post differently.

I thought if the post was asking if those sales alone could be used as a basis of a commercial item determination for that product. If you leave aside the other means to make a commercial item determination, such as "of a type" analysis, and you only have these sales, are these sales by themselves evidence of the product being commercial? It depends.

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I like Vern?s reading.

As I read it there are two tests: (1) is the item of a type that is customarily used by general public or non-governmental entities for purposes other than governmental, and (2) has the item ? itself - been sold or offered to the general public.

The first test is whether the type of item is us used by the general public or a non-governmental entity. But the second test is limited to the general public and does not qualify it to purposes other than governmental.

The argument being presented is that given the qualifier ? ?purpose other than governmental? ? is not applied to term ?general public? and not applied to the second test - the sell or offer to sell of the item itself to the general public ? then the end use of the item itself ? not the type ? is not relevant.

I am think the absence of the qualifier - ?for purposes other than governmental? - on the term ?general public? is due to the inherent use of the term; that the ?general public? is not going to use it for governmental purposes; not because the end use is not relevant.

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Garth,

Are you saying that a reseller, distributer, or agent qualifies as "general public" when they simply pass the product straight through to the government? It would be pretty easy for a company to put a front company in between themselves and the government, and label that as a sale to the general public. Within the confines of a particular prime contract, is the prime contractor "general public".

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Any thoughts on the difference between "general public" and "non-governmental entity" ?

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I would say that a commercial company, when they are a government prime contractor is a "non-governmental entity"; and when they are not a prime contractor they are the "general public". Probably extends to subcontract tiers as well.

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I do not think a sale to a reseller would qualifiy as the General Public. It is my understanding that the intent of "General Public" is the end user and how the item will be used.

Also, the fact that a company is a commercial company and thus a non-governmental entity does not bestow commerciality on an item.

Lets look at Boeing. Boeing is a commercial company. They are a non-governmental entity. They make airplanes. The Boeing 747 is a commercial item offered for sale tot he general public and also the US Governemnt (i.e. Air Firce 1). I do not think anyone would object to calling the 747 a commercial item.

But Boeing, a commercial company, also makes the F-22 Raptor. This item is not offered for sale to the general public, and even if it was, could not be sold to the general public as it is has no purpose other than governmental.

To me, this is the key to the commerciality concept. who is the end user and how can it (will it) be used. If the F-22 was sold by Boeng to The John Jones Distributing Company who then sold it to the US Government (assuming such an arangement was legal), the fact that a distributor or agent was used would not change the "commerciality" of the item.

Hope this helps.

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I think the end use is the discriminator also. It does not seem to make sense that if Boeing buys an item, that in and of itself would make it commercial. As stated above, if Boeing buys a wing for the 777 it should be commercial, if Boeing buys a wing for the F-22 it should not necessarily be commercial - or it should not be commercial merely because it was purchase by Boeing (the ?general public) .

But in trying to support my position, I am struggling with the wording of the definition.

It seems to be a two part test; and the second part just states, if the item was sold or offered to the ?general public?. It does have the qualifier addressing purpose of use that that the first test ? of a type - has for non-governmental entities.

I am thinking the reason the qualifier is not applied to the term ?general public? is that the non-governmental use is inherent is the term ?general public?. But I don?t really have any support for that interpretation.

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Garth:

I think if you really thought about it, you could come up with a number of examples where an item would be sold to non-governmental entities, but not the general public and these sales to non-governmental entities would qualify the item as a commercial item. How about some of the things that a hospital (non-governmental entity) might buy that the general public wouldn't, but that the federal government (VA) would?

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I think we are missing something, I am not sure the definition of a ?non-governmental entity? means simply any entity that is not the government. I think that ?non-governmental entity? is an entity that is doing government type work or participating with the government, but is not actually a government entity. In comparison, a governmental entity is the government performing government functions; a non-governmental entity is an entity other than the government performing government functions.

And then there is the term ?governmental purposes?. Can an item have both ?general public? purposes and ?governmental? purposes?

What about ambulance service? What if a county contracted with a company to provide ambulance service? And that company required a radio for dispatching? The company does not resell the radio to the county but uses it in the provisioning of the service. In this case, the company is an entity other than the government performing a government function ? ambulance service; can the radio purchase be identified as a non-governmental entity purchase for ?other than governmental purposes??

I can?t unravel it.

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Any thoughts on the difference between "general public" and "non-governmental entity" ?

In 1995, FAR 15.804-1(B)(2)(v) read as follows:

General public. The general public ordinarily consists of buyers other than the U.S. Government or its instrumentalities, e.g., U.S. Government corporations. Sales to the general public do not include sales to affiliates of the offerors or purchases by the U.S. Government on behalf of foreign governments, such as for Foreign Military Sales. If the contracting officer can determine without requiring information from the offeror that sales are for Government end use, these sales need not be considered sales to the general public.

That being the case, nongovernmental entities are a subset of the general public.

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This argument was applied to sales of the C-130 Hercules aircraft a few years ago in my memory. A Contracting Officer wanted to make a purchase of C-130 subassemblies a commercial purchase, arguing that since C-130's have been purchased by non-governmental corporations, that made them commercial. Legal was arguing that it was not commercial, as the C-130's in question were not available to the public as a complete aircraft. Seems to me that if I buy a wiggly hula doll to put on the dash of my F-35, that does not make the hula doll purchase a non-commercial sale since the F-35 is a military only aircraft, but hey, they are legal and get paid to make arguments.

The argument was still ongoing as of my last connection with that discussion, I no longer have access to that forum since I left that job a few years ago. A google search shows that while some C-130 parts and aircraft are now being used in the commercial market, the C-130 is still considered a non-commercial product making some parts and assemblies difficult to obtain for the commercial users of the C-130.

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In 1995, FAR 15.804-1(B)(2)(v) read as follows:

That being the case, nongovernmental entities are a subset of the general public.

I think if that definition remained it would be very useful. Given it was removed -and not replaced - does it still have some legitimacy. Can we argue that in the absence of any current definition that is the proper guidance?

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