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You can't have a service contract for commercial items


Don Mansfield

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29 minutes ago, joel hoffman said:

apparently wasn’t a commercial services contract

That’s not factual. The Army CO’s CID stands until a future CO’s HCA comes along and follows DFARS 212.102(a)(ii)(B) procedures, documenting a conversion of the procurement from commercial acquisition procedures.

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11 hours ago, WifWaf said:

That’s not factual. The Army CO’s CID stands until a future CO’s HCA comes along and follows DFARS 212.102(a)(ii)(B) procedures, documenting a conversion of the procurement from commercial acquisition procedures.

It wasn’t a commercial services contract (or task order?) per the Appeal of JKB Solutions and Services, LLC from the US Court of Federal Claims to the United States Court of Appeals for the Federal Circuit, referenced herein.

Both the Court of Federal Claims and the Court of Appeals decided that it wasn’t a commercial items (commercial services) contract (or task order?) . The basis of the Appeal to the Court of Appeals concerned the Court of Federal Claims’ decision that the commercial items contract clause for termination for convenience was applicable to the non-commercial items (services contract) in the absence of the standard FAR Termination for Convenience Clause. The Court of Appeals vacated the Claims Court ruling and remanded it for further proceedings. “On remand, the Claims Court may consider whether the Christian doctrine applies to incorporate a termination for convenience clause and whether, in light of our case law, the doctrine of constructive termination for convenience applies in these circumstances.”

Thus, any Commercial Item Determination by the CO for the contract (specific task order?) would have been invalid.

Much of the discussion in this thread concerned the poorly worded characterization of the type of services covered in the task order by the Court(s). 

 

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@joel hoffmanMy first post yesterday was an attempt to display that JKB's counsel, in arguing the requirement was services and not a commercial item, didn't even know what the services were for.  I wanted to point that out and say moral of the story is, expertise matters.

Come to think of it though - and along the lines of recent discussions in Wifcon about not obeying illegal orders - I still don't agree that, from the CO's perspective, this court decision renders the service noncommercial in the future.  You said, "Both the Court of Federal Claims and the Court of Appeals decided that it wasn’t a commercial items (commercial services) contract."  Perhaps the contract in question is indeed now "determined" noncommercial by the court - this would have an effect solely on the award in 2015, as the Judicial Branch has a retrospective effect with their decisions.  This should not, by itself, persuade the next Army CO that receives a requirements package for Army Logistics University services (i.e., "the follow-on") to determine the service noncommercial on the same basis as the courts did, or even just because the courts did.  The DFARS is clear, and backed vigorously by statute, that a conversion of a procurement from commercial acquisition procedures to other-than-commercial procedures must be justified in writing.  Absent an HCA-approved justification, the CO has no other recourse than to follow DFARS 212.102(a)(ii)(A) and, "[P]resume that a prior commercial item determination made by a military department, a defense agency, or another component of DoD shall serve as a determination for subsequent procurements of such item."  No HCA with an elementary understanding of the FAR would agree with this court's basis for determining the service noncommercial, and if the HCA does not sign a determination to convert the follow-on to noncommercial procedures, then the CO has to keep it commercial.  Nowhere in FAR 1.602-1(b) is the projection of this court decision on one contract cited as a CO responsibility; however, meeting the requirements of these DFARS policies and the FAR definition of "commercial item" is included.

I'm just trying to preempt any non-critical thinking by COs here.  Don't follow this court off a cliff!

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On 11/22/2021 at 10:12 AM, ji20874 said:

The term "commercial item" is defined in FAR 2.101.  There are eight numbered definitions.  Paragraphs (5) and (6) apply directly to services, and neither of these seem to reach the facts of this case.  I'm not certain, but I feel comfortable saying that these classes for “contractor management” and the “development of acquisition-ready requirements packages” are probably not offered and sold competitively in substantial quantities in the commercial marketplace based on established catalog or market prices.  If so, then the contract is not a contract for commercial items.

Good Morning ji,

If I were the HCA and my CO wrote this up as a justification, IAW DFARS 212.102(a)(ii)(B)(2), to "Issue a determination that the prior use of FAR part 12 procedures was improper or that it is no longer appropriate to acquire the item using FAR part 12 procedures," I would not sign it.  I would not sign any such determinations about a Small Business, because they could be technically "Nontraditional Defense Contractors" (not to mention JKB especially was, with no other awards on usaspending.gov).  In fact, it would be incredibly rare for me to sign one of these determinations, given my only standard is the definition of "commercial item"* in FAR.  The definition is too broad, so you are better off grabbing the bull by the horns and improving your market research to reduce the price commercially, rather than hiding behind the skinny flag poles of FAR 2.101.

* (now broken out as commercial services/products)

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18 minutes ago, WifWaf said:

@joel hoffmanMy first post yesterday was an attempt to display that JKB's counsel, in arguing the requirement was services and not a commercial item, didn't even know what the services were for.  I wanted to point that out and say moral of the story is, expertise matters.

Come to think of it though - and along the lines of recent discussions in Wifcon about not obeying illegal orders - I still don't agree that, from the CO's perspective, this court decision renders the service noncommercial in the future.  You said, "Both the Court of Federal Claims and the Court of Appeals decided that it wasn’t a commercial items (commercial services) contract."  Perhaps the contract in question is indeed now "determined" noncommercial by the court - this would have an effect solely on the award in 2015, as the Judicial Branch has a retrospective effect with their decisions.  This should not, by itself, persuade the next Army CO that receives a requirements package for Army Logistics University services (i.e., "the follow-on") to determine the service noncommercial on the same basis as the courts did, or even just because the courts did.  The DFARS is clear, and backed vigorously by statute, that a conversion of a procurement from commercial acquisition procedures to other-than-commercial procedures must be justified in writing.  Absent an HCA-approved justification, the CO has no other recourse than to follow DFARS 212.102(a)(ii)(A) and, "[P]resume that a prior commercial item determination made by a military department, a defense agency, or another component of DoD shall serve as a determination for subsequent procurements of such item."  No HCA with an elementary understanding of the FAR would agree with this court's basis for determining the service noncommercial, and if the HCA does not sign a determination to convert the follow-on to noncommercial procedures, then the CO has to keep it commercial.  Nowhere in FAR 1.602-1(b) is the projection of this court decision on one contract cited as a CO responsibility; however, meeting the requirements of these DFARS policies and the FAR definition of "commercial item" is included.

I'm just trying to preempt any non-critical thinking by COs here.  Don't follow this court off a cliff!

Why would a similar requirement be a commercial service, if the contractor is only providing instructors to teach a government provided course material and curriculum? That doesn’t seem to fit the description of a  commercial service:

        “   … (2)Services of a type offered and sold competitively in substantial quantities in the commercial marketplace based on established catalog or market prices for specific tasks performed or specific outcomes to be achieved and under standard commercial terms and conditions. For purposes of these services–

                 (i)  Catalog price means a price included in a catalog, price list, schedule, or other form that is regularly maintained by the manufacturer or vendor, is either published or otherwise available for inspection by customers, and states prices at which sales are currently, or were last, made to a significant number of buyers constituting the general public; and

                 (ii)  Market prices means current prices that are established in the course of ordinary trade between buyers and sellers free to bargain and that can be substantiated through competition or from sources independent of the offerors; or

            (3)A service referred to in paragraph (1) or (2) of this definition, even though the service is transferred between or among separate divisions, subsidiaries, or affiliates of a contractor.”

Seems like the government establishes and provides the course material, curriculum, facilities, schedule, etc.

Maybe not. There was some reason why the courts didn’t consider providing instructors a commercial service here. 

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WifWaf,

If your point is that there is misunderstanding in our community about the definition of commercial item, I will agree with you.

And I will agree with you that the FAR definition is the guide.

However, based on what I have read in this thread, I am unpersuaded that we're talking about a commercial service (using the FAR definition) -- but that is for the assigned contracting officer and his chain and his pool of contractors to decide.

Joel,

I don't think the court actually disagreed with the commercial item determination -- they never really considered the matter, and the attorneys never presented the matter.

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5 minutes ago, ji20874 said:

I don't think the court actually disagreed with the commercial item determination -- they never really considered the matter, and the attorneys never presented the matter.

The plaintiff's attorney asserted in his brief that the service was not a commercial item as defined in FAR, and gave reasons for his assertion in the brief and in oral argument.

The court agreed that the service was not commercial, but its reasons for doing so are unclear. It may be that they agreed with the attorney's argument. It may be that they misunderstood his argument and thought that contracts for services are not contracts for commercial "items."

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@joel hoffman@ji20874If I'm the contractor arguing for a CID, this one seems easy enough to file under commercial service definition (1):

Quote

Commercial service means—

(1) Installation services, maintenance services, repair services, training services, and other services if—

(i) Such services are procured for support of a commercial product as defined in this section, regardless of whether such services are provided by the same source or at the same time as the commercial product; and

(ii) The source of such services provides similar services contemporaneously to the general public under terms and conditions similar to those offered to the Federal Government;

These are training services.  Put a checkbox next to (1) above.  They are training our logisticians how to manage contractors doing operational contracting - stuff like snow removal, salting the driveways, grounds keeping, etc.  Any property management company must train its people how to manage the contractors working on its buildings too.  Put a checkbox next to (i) above.  The last thing I, the contractor, need to provide the CO, then, is a copy of our standard commercial T&Cs so the Government can put a checkbox next to (ii) above.  Voilà.

I think this work is also known by GSA as facilities services, which includes "Base facilities operation support services".  You can view GSA's commercial T&Cs for that here: GSA eLibrary Contractor Listing

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@RetreadfedAnything over $1M, like this three-year contract did, required a CID when a CO is using commercial item procedures.  https://www.federalregister.gov/d/E8-1121

@ji20874Could I persuade you by referring to the DOD Guidebook for Acquiring Commercial Items in my proposal?  A practical example for the Army CO to examine would be the one on pages 40-42 of Part A: Guidebook_Part_A_Commercial_Item_Determination_07_10_2019.pdf (osd.mil)

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I'm okay with the FAR definitions, and prefer to stay with them.

That said, I like to share what I like to think of as correct principles while letting others make their own decisions.  But I am not a player in this matter.  The federal judiciary made its ruling for that case -- that's who needs to be convinced of the alleged error.

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3 hours ago, ji20874 said:

WifWaf,
I agree that it is easy for a contractor to make an assertion with a "voilà" embellishment.  Such assertions may not always be persuasive, and are subject to review.

During oral argument the government's attorney told the court that the government did not dispute the contractor's assertion that the service was not commercial.

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10 hours ago, WifWaf said:

@joel hoffman@ji20874If I'm the contractor arguing for a CID, this one seems easy enough to file under commercial service definition (1):

These are training services.  Put a checkbox next to (1) above.  They are training our logisticians how to manage contractors doing operational contracting - stuff like snow removal, salting the driveways, grounds keeping, etc.  Any property management company must train its people how to manage the contractors working on its buildings too.  Put a checkbox next to (i) above.  The last thing I, the contractor, need to provide the CO, then, is a copy of our standard commercial T&Cs so the Government can put a checkbox next to (ii) above.  Voilà.

I think this work is also known by GSA as facilities services, which includes "Base facilities operation support services".  You can view GSA's commercial T&Cs for that here: GSA eLibrary Contractor Listing

WifWaf, it doesn’t appear to me that definition (1) (i) and (2) fit the scenario you described. 

 

10 hours ago, WifWaf said:

Commercial service means—

(1) Installation services, maintenance services, repair services, training services, and other services if—

(i) Such services are procured for support of a commercial product as defined in this section, regardless of whether such services are provided by the same source or at the same time as the commercial product; and

(ii) The source of such services provides similar services contemporaneously to the general public under terms and conditions similar to those offered to the Federal Government;

And I doubt that there is a catalog price for providing these services.  And what commercial product is the training for?  Training someone how to manage a service contract is not training in support of a commercial product.

They aren’t installing a product. They aren’t maintaining a product. They aren’t repairing a product. They aren’t training someone how to  use, install, maintain or repair a commercial product.
 

There may be a catalog “labor rate” but probably not a standard price  for the training. The training has to be tailored to the specific scope of the need.

What you described appears to be a non-commercial services contract or task order. 

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  • 2 months later...

The dust has settled and I think most on this forum agree that 1) this particular service was not commercial, and 2) the court's opinion was poorly worded in suggesting that services were not commercial items. I thought that surely no one with any experience would quote those lines and claim that the Fed Circuit has now held that services are not commercial items. After all, that would fly in the face of 20+ years of FASA, FARA, and the FAR definition of commercial items. Couldn't happen, right?

Then yesterday, a client alert arrived from a well-known law firm (name withheld), stating that the court appeared to draw a bright line between commercial-items and services contracts. Also that a range of commercial-items clauses could be inoperative when incorporated into services contracts. There was no mention of any conflict with the official definition of a commercial item, or that services are included in the definition in the law itself.

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1 hour ago, Fara Fasat said:

The dust has settled and I think most on this forum agree that 1) this particular service was not commercial

I do not agree with that. The training at issue was of a type offered for sale in the commercial market place. Look at the ads on this page.

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Here's one of the holdings of the Federal Circuit, as reported by Westlaw:

Quote

Contractor's indefinite delivery/indefinite quantity (ID/IQ) contract to provide instructor services to United States Army was not for “acquisition of commercial items,” within meaning of statute and federal acquisition regulation limiting clauses that could be included in solicitations and contracts to those for acquisition of commercial items, and thus, termination for convenience clause in regulation incorporated by reference into IDIQ contract did not apply, since contract was only for services, not commercial items, so termination for convenience clause had no effect.

Emphasis added.

But that will not stand. It is clearly in error.

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Don - maybe I should have said that most here agreed that the court said that this particular service was not commercial, not that most here agreed it was not. Inexact writing afflicts us all.

The larger point is that an established firm accepted the court's poor wording and warned clients that services might not be commercial items.

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1 hour ago, Fara Fasat said:

Don - maybe I should have said that most here agreed that the court said that this particular service was not commercial, not that most here agreed it was not. Inexact writing afflicts us all.

The larger point is that an established firm accepted the court's poor wording and warned clients that services might not be commercial items.

Agreed.

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