CAS applicability to items treated as commercial

[FARCRAZY]

Does CAS apply to a FAR 12 contract that is issued to a nontraditional defense contractor for items that are being treated as commercial?

[Retreadfed]

1 hour ago, FARCRAZY said:

a nontraditional defense contractor

Why is the contractor considered to be a nontraditional defense contractor?

[here_2_help]

Quote

9903.201-1 CAS applicability.

(a) This subsection describes the rules for determining whether a proposed contract or subcontract is exempt from CAS. (See 9904 or 9905, as applicable.) Negotiated contracts not exempt in accordance with 9903.201-1(b) shall be subject to CAS. A CAS-covered contract may be subject to full, modified or other types of CAS coverage. The rules for determining the applicable type of CAS coverage are in 9903.201-2.

(b) The following categories of contracts and subcontracts are exempt from all CAS requirements:

(1) Sealed bid contracts.

(2) Negotiated contracts and subcontracts not in excess of the Truth in Negotiations Act (TINA) threshold, as adjusted for inflation (41 U.S.C. 1908 and 41 U.S.C. 1502(b)(1)(B)). For purposes of this paragraph (b)(2), an order issued by one segment to another segment shall be treated as a subcontract.

(3) Contracts and subcontracts with small businesses.

(4) Contracts and subcontracts with foreign governments or their agents or instrumentalities or, insofar as the requirements of CAS other than 9904.401 and 9904.402 are concerned, any contract or subcontract awarded to a foreign concern.

(5) Contracts and subcontracts in which the price is set by law or regulation.

(6) Contracts and subcontracts authorized in 48 CFR 12.207 for the acquisition of commercial items.

(7) Contracts or subcontracts of less than $7.5 million, provided that, at the time of award, the business unit of the contractor or subcontractor is not currently performing any CAS-covered contracts or subcontracts valued at $7.5 million or greater.

(8)-(12) [Reserved]

(13) Subcontractors under the NATO PHM Ship program to be performed outside the United States by a foreign concern.

(14) [Reserved]

(15) Firm-fixed-price contracts or subcontracts awarded on the basis of adequate price competition without submission of certified cost or pricing data.

 

[FARCRAZY]

A "nontraditional defense contractor", with respect to a procurement or with respect to a transaction authorized under section 4021(a) or 4022 of this title, means an entity that is not currently performing and has not performed, for at least the one-year period preceding the solicitation of sources by the Department of Defense for the procurement or transaction, any contract or subcontract for the Department of Defense that is subject to full coverage under the cost accounting standards prescribed pursuant to section 1502 of title 41 and the regulations implementing such section.

19 hours ago, Retreadfed said:

Why is the contractor considered to be a nontraditional defense contractor?

 

[FARCRAZY]

The contractor is a non traditional defense contractor because the contractor is not and has not performed any CAS covered contract for at least one year

 

[joel hoffman]

Is this for an Other Transaction Authority contract?

This may or may not be accurate:

https://nstxl.org/traditional-vs-non-traditional-contracting/#:~:text=Non-traditional defense contractors qualify,contracts only under commercial procedures

[Retreadfed]

If we are talking about a contract subject to the FAR, here is what FAR 12.102 has to say about this "A contract in an amount greater than $20 million that is awarded on a sole source basis for a product or service treated as a commercial product or commercial service under paragraph (f)(1) of this section but does not meet the definition of a commercial product or commercial service as defined at FAR 2.101 shall not be exempt from—

(i) Cost accounting standards (see subpart  30.2); or

(ii) Certified cost or pricing data requirements (see 15.403)."

Thus, there are several factors that need to be considered in answering your question.  However, we can say that there is no blanket exemption from the CAS for such contracts.

[formerfed]

51 minutes ago, Retreadfed said:

If we are talking about a contract subject to the FAR, here is what FAR 12.102 has to say about this "A contract in an amount greater than $20 million that is awarded on a sole source basis for a product or service treated as a commercial product or commercial service under paragraph (f)(1) of this section but does not meet the definition of a commercial product or commercial service as defined at FAR 2.101 shall not be exempt from—

(i) Cost accounting standards (see subpart  30.2); or

(ii) Certified cost or pricing data requirements (see 15.403)."

 

This is getting way off track here.  The restriction in the quote above pertains to paragraph (f)(1) which says

Quote

f)  

(1) Contracting officers may treat any acquisition of supplies or services that, as determined by the head of the agency, are to be used to facilitate defense against or recovery from cyber, nuclear, biological, chemical, or radiological attack, as an acquisition of commercial products or commercial services.

 

[FARCRAZY]

Thanks to all the great responses.  I’m fairly confident that because the item/services being contracted are not determined commercial (as define in FAR part 2), and no other exemptions apply, CAS is applicable.

The items / Services are only being “treated commercial”, so not exempt from CAS, reference 48 CFR 9903.201-1(b).  

FAR provides permissive authority for items / services to be treated commercial when provided by non traditional defense contractors.

any further insight and comments are welcomed.

 

[Don Mansfield]

If you are "treating" the acquisition as commercial, see FAR 12.214.

[FARCRAZY]

FAR 12.214 - is clear that CAS does not apply to contracts and subcontracts for the acquisition of commercial products or commercial services. 

My issue / concern is that the contract is for the acquisition of products or services that are being "treated as commercial" - these products / services have not been determined commercial.

DFARS 212.102(a)(iv) - states - "The decision to apply commercial product and commercial service procedures to the procurement of supplies and services from nontraditional defense contractors does not require a commercial product or commercial service determination and does not mean the item is commercial;"

So, basically I have a contract that was issued using FAR 12 procedures for product/services that are being "treated as commercial" and not products / services that are determined commercial.

9903.201-1 CAS exemptions include "Contracts and subcontracts authorized in 48 CFR 12.207 for the acquisition of commercial items."

Products/Services treated as commercial are authorized in 48 CFR 1207 because Products/Services treated as commercial can use FAR Part 12 procedures.

[Don Mansfield]

What do you think "treated as commercial means"? I think it means you apply the regulations as if the products or services are commercial. Unless otherwise specified, you don't distinguish between actual commercial products or services and products or services being "treated" as commercial. I don't know how else to interpret that.

[Don Mansfield]

Also, if the contract already exists, why not see if it includes CAS clauses?

[Retreadfed]

On 7/24/2023 at 12:08 PM, FARCRAZY said:

items that are being treated as commercial?

Under what authority are the items being treated as commercial?

Is the NTDC a small business?

Has the contractor met the $50M threshold, either in the aggregate or a single CAS covered contract?

Is the contractor currently performing a CAS covered contract that exceeds $7.5M

Does the contract in question have a value in excess of $2M?

[formerfed]

4 hours ago, Don Mansfield said:

What do you think "treated as commercial means"? I think it means you apply the regulations as if the products or services are commercial. Unless otherwise specified, you don't distinguish between actual commercial products or services and products or services being "treated" as commercial. I don't know how else to interpret that.

 

4 hours ago, Don Mansfield said:

Also, if the contract already exists, why not see if it includes CAS clauses?

@FARCRAZY  These two points are the key ones.  Don’ interpretation in the first post above makes sense to me.  The second post question is right on.  If the contract is awarded, look at the clauses in it.  If not, ask the contracting officer.

@Retreadfed  the OP already said “The contractor is a non traditional defense contractor because the contractor is not and has not performed any CAS covered contract for at least one year.”  Also the DFARS cite quoted states a commercial item determination is not required.

[Retreadfed]

17 hours ago, formerfed said:

the OP already said “The contractor is a non traditional defense contractor because the contractor is not and has not performed any CAS covered contract for at least one year.”

In light of this statement and the CAS rules regarding applicability of the CAS to contracts, I am trying to figure out why the OP thinks the CAS may apply in this particular case even if they could apply in some circumstances such as those described in FAR 12.102(f).

[formerfed]

5 minutes ago, Retreadfed said:

In light of this statement and the CAS rules regarding applicability of the CAS to contracts, I am trying to figure out why the OP thinks the CAS may apply in this particular case even if they could apply in some circumstances such as those described in FAR 12.102(f).

Ah, ok.  See OPs 9:54 am post from yesterday above.  It’s not real clear but he’s stuck with the dilemma between commercial item exemption and the DFARS cite saying applying commercial rules to traditional non defense contractors does not mean the item is commercial.  Don’s subsequent post tries to reconcile that.  

[formerfed]

I forgot to post this.  It’s from the DFARS supplement reference from above
 

Quote

(iv) Nontraditional defense contractors. In accordance with 10 U.S.C. 3457, contracting officers—

(A) Except as provided in paragraph (a)(iv)(B) of this section, may treat supplies and services provided by nontraditional defense contractors as commercial products or commercial services. This permissive authority is intended to enhance defense innovation and investment, enable DoD to acquire items that otherwise might not have been available, and create incentives for nontraditional defense contractors to do business with DoD. It is not intended to recategorize current noncommercial other than commercial products or commercial services; however, when appropriate, contracting officers may consider applying commercial product or commercial service procedures to the procurement of supplies and services from business segments that meet the definition of “nontraditional defense contractor” even though they have been established under traditional defense contractors. The decision to apply commercial product and commercial service procedures to the procurement of supplies and services from nontraditional defense contractors does not require a commercial product or commercial service determination and does not mean the item is commercial;

(B) Shall treat services provided by a business unit that is a nontraditional defense contractor as commercial services, to the extent that such services use the same pool of employees as used for commercial customers and are priced using methodology similar to methodology used for commercial pricing; and

(C) Shall document the file when treating supplies or services from a nontraditional defense contractor as commercial products or commercial services in accordance with paragraph (a)(iv)(A) or (B) of this section.

So it seems CAS would not apply under the conditions described by the OP

[FARCRAZY]

Great discussion - thanks everyone.

Note - there is no contract currently in place so I cannot just review contract to see if CAS applies.  

My concern is / was if any distinction exists, specifically with regards to CAS coverage, with products determined commercial vice products treated as commercial.

My concern was piqued based on the DFARS cite that specifically states products treated as commercial are not determined commercial and may not in fact be commercial - per FAR 1.2 definition of commercial product/service.

Given all the very valuable comments and my consideration of regulations I am pretty confident that if the Govt uses FAR 12 procedures to procure a product or service that is being treated commercial, then CAS does not apply.  I am leaning heavily on the use of FAR 12 procedures with emphasis on the contract type, called out in FAR 12.207 - 48 CFR 9903.201-1 (b) CAS exemptions.