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TITLE VIII--ACQUISITION POLICY, ACQUISITION MANAGEMENT, AND RELATED MATTERS

Subtitle D—Provisions Relating to Acquisition Workforce

P. L. 114-

House Conference Report. 114-270

(a) Requirement for determination.—Subsection (a) of section 2379 of title 10, United States Code, is amended—

(1) in paragraph (1)(B), by inserting “and” after the semicolon;

(2) by striking paragraph (2); and

(3) by redesignating paragraph (3) as paragraph (2).

(b) Treatment of subsystems as commercial items.—Subsection (b) of such section is amended—

(1) in the matter preceding paragraph (1), by striking “only if” and inserting “if either”;

(2) in paragraph (2)—

(A) by striking “that—” and all that follows through “the subsystem is a” and inserting “that the subsystem is a”;

(B) by striking “; and” and inserting a period; and

(C) by striking subparagraph (B).

(c) Treatment of components as commercial items.—Subsection (c)(1) of such section is amended—

(1) by striking “title only if” and inserting “title if either”; and

(2) in subparagraph (B)—

(A) by striking “that—” and all that follows through “the component or” and inserting “that the component or”;

(B) by striking “; and” and inserting a period; and

(C) by striking clause (ii).

(d) Information submitted.—Subsection (d) of such section is amended to read as follows:

“(d) Information submitted.— (1) To the extent necessary to determine the reasonableness of the price for items acquired under this section, the contracting officer shall require the offeror to submit—

“(A) prices paid for the same or similar commercial items under comparable terms and conditions by both Government and commercial customers;

“(B) if the contracting officer determines that the offeror does not have access to and cannot provide sufficient information described in subparagraph (A) to determine the reasonableness of price, information on—

“(i) prices for the same or similar items sold under different terms and conditions;

“(ii) prices for similar levels of work or effort on related products or services;

“(iii) prices for alternative solutions or approaches; and

“(iv) other relevant information that can serve as the basis for a price assessment; and

“(C) if the contracting officer determines that the information submitted pursuant to subparagraphs (A) and (B) is not sufficient to determine the reasonableness of price, other relevant information regarding the basis for price or cost, including information on labor costs, material costs, and overhead rates.

“(2) An offeror may not be required to submit information described in paragraph (1)(C) with regard to a commercially available off-the-shelf item and may be required to submit such information with regard to any other item that was developed exclusively at private expense only after the head of the contracting activity determines in writing that the information submitted pursuant to paragraphs (1)(A) and (1)(B) is not sufficient to determine the reasonableness of price.”.

(e) Conforming amendment to truth in negotiations act.—Section 2306a(d)(1) of title 10, United States Code, is amended by adding at the end the following new sentence: “If the contracting officer determines that the offeror does not have access to and cannot provide sufficient information on prices for the same or similar items to determine the reasonableness of price, the contracting officer shall require the submission of information on prices for similar levels of work or effort on related products or services, prices for alternative solutions or approaches, and other information that is relevant to the determination of a fair and reasonable price.”.

The Senate amendment contained a similar provision (sec. 864).

The Senate recedes with an amendment that would clarify the hierarchy of information that can be requested by the Department of Defense to be submitted by a contractor to support a price reasonableness determination.

House Report 114-201 to accompany H. R. 1735 as it was reported out of the House Armed Services Committee.

Section 805--Modification to Information Required to be Submitted by Offeror in Procurement of Major Weapon Systems as Commercial Items

This section would amend section 2379 of title 10, United States Code, by striking the requirement that in making a determination that an item is a commercial item, the contracting officer shall determine in writing that the offeror of the item has submitted sufficient information to evaluate, through price analysis, the reasonableness of the price for such item.

Senate Report 114-49 to accompany S. 1376 as it was reported out of the Senate Armed Services Committee.

Treatment of commercial items purchased as major weapon systems (sec. 864)

The committee recommends a provision that would amend section 2379 of title 10, United States Code, regarding the purchase of commercial items as major weapon systems. This provision would clarify section 2379 by: (1) separating commercial item determinations from price reasonableness determinations; and (2) spelling out with more specificity the types of information that are required to make price reasonableness determinations.

Section 2379 was enacted in the National Defense Authorization Act for Fiscal Year 2006 (Public Law 109-163) to ensure that the Department of Defense purchases major weapon systems as commercial items only when it is in the Department's interest to do so. It was amended two years later in an effort to ensure that when the Department purchases subsystems or components of major weapon systems as commercial items, it obtains sufficient information to determine the reasonableness of price. Under the 2008 amendment, a subsystem or component of a major weapon system may be purchased as a commercial item only if the offeror provides sufficient information to evaluate price reasonableness.

The 2008 amendment created two problems. First, it blurred the lines between price reasonableness determinations and commercial item determinations. Second, the provision provided minimal detail on the types of information that should be required to determine price reasonableness, leading the Office of the Inspector General and others to conclude that in the absence of definitive price information for a particular item, the disclosure of detailed cost data is required. This is a cumbersome process that is inconsistent with standard commercial practices, and adds limited value to improving acquisition outcomes.

The provision recommended by the committee would address the first problem by clarifying that commercial item status is not contingent on the offeror's disclosure of price information. Contracting officers would still require offerors to disclose information necessary to determine price reasonableness, but commercial item determinations would no longer hinge on that disclosure.

The provision would address the second problem by reaffirming the statutory preference for commercial item price reasonableness determinations based on price information and price analysis, rather than cost information and cost analysis, and spelling out the types of price information that a contracting officer must seek from an offeror before requiring the production of cost information.

The amended provision would not authorize contracting officers to require the submission of cost information with regard to the components of a commercial system or subsystem, with regard to commercially available off-the-shelf (COTS) items, or with regard to any other items that are developed exclusively at private expense. The committee concludes that the amended provision would enable contracting officers to require the submission of information needed to make price reasonableness determinations, while protecting offerors from unnecessary and unreasonable demands for cost information.