A task force representing several influential industry groups issued May 17 a report calling for regulatory and law changes to give the federal government “full and free access” to all services available to the commercial sector.  The report said in spite of the fact that total federal contract dollars spent on services exceeded 50 percent of the Defense Department’s budget, the rules covering acquisition of services continue to impede entry of commercial firms providing services to the government.  Legislative changes called for include:

1.  Redefining commercial services.  The definition of commercial services does not need to be conceptually different from the definition of commercial item.  The current distinction between “ancillary” and “non-ancillary” services as well as language such as need to demonstrate that services are sold competitively in substantial quantities and are based on established catalog or market prices are “unnecessarily restrictive” and should be eliminated.

2.  Expand use of T&M/LH contracts.  Use of time and material/labor hour contracts and subcontracts for acquiring services are very common in the commercial world.  The restriction of use of T&M/LH contracts to only competitively awarded ones and prohibiting their use to sole-source awards is erroneously based on the assumption that  competition is the only way to secure price reasonableness whereas market surveys and  reviews of past contracts are equally effective at obtaining price reasonableness.  Also statutory language should make clear that prime contractors are entitled to subcontract on a T&M/LH basis for services where the prime assumes responsibility for justifying contract type, terms and conditions.

3.  FAR Changes.  In addition to eliminating “outmoded” references to substantial quantities and catalog or market prices, other FAR changes should include (a) recognition that a commercial item acquisition can be either competitive or sole source if properly justified (b) provide guidance on a full range of methods for assessing reasonableness of prices for commercial services (e.g. market survey information including reviews of active and past commercial contracts) (c) establishing an obligation for vendors to provide supporting information to the CO to allow assessment of the reasonableness of proposed prices and (d) clarifying that vendor prices can be established through electronic or company Web pages.

4.  Past Performance Information.  There needs to be further attention to a mechanism for developing past performance information for services since the cost and schedule metrics currently collected for hardware contractors may not be the best measurement for services deliveries.

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