In efforts to help contracting officers make better determinations of when an item is commercial, a Federal Acquisition Circular (FAC) 2001-01, effective December 21, has made some revisions to the FAR definition of commercial item, clarifies when an ancillary service is a commercial item and further encourages use of commercial terms and conditions.

FAR 2.101 definition of commercial item has been revised to clarify that services ancillary to a commercial item – such as installation, maintenance, repair, training and other support services – are considered a commercial service.  This will be true regardless of whether the service is provided by the same vendor or at the same time as the item as long as the service is provided to the general public under similar terms and conditions.

The definition of “commercial item” at FAR 2.101 is also revised to include the phrase “for purposes other than governmental purposes”.  The revised definition states that commercial items are items customarily used by the general public or by non-governmental entities for purposes other than governmental purposes that: 1) have been sold, leased or licensed to the general public or 2) have been offered for sale, lease or license to the general public.

Also, definitions of “catalog price” and “market price” have been added to help identify services that may be acquired under the commercial item section of FAR Part 12.  “Catalog price” means a price included in a catalog, price list, schedule or other pricing form regularly maintained by a manufacturer or vendor and published or available for inspection by customers.  These prices must be the prices at which sales are currently made or were last made to a significant number of buyers from the general public.  “Market price” means current prices established in the course of ordinary trade between buyers and sellers that are free to bargain – prices that can be substantiated through competition or from sources independent of the offerors.

To encourage use of commercial terms and conditions, FAR 12.209 (Determination of Price Reasonableness) is amended to state that while COs must establish price reasonableness when pricing commercial items they also must be aware of customary commercial terms and conditions.  Commercial terms and conditions take into account such factors as speed of delivery, type of warranty, limitations of sellers’ liability, performance period and specific performance requirements.  Previously, COs were not required to be aware of commercial terms and conditions when pricing commercial items.

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