• Federal Government Proposes to Simplify the Purchase of Commercially Available Off-the-Shelf Items
  • April 27, 2004
  • Law Firm: Epstein Becker & Green, P.C. - Washington Office
  • Selling commercial products to the federal government is about to get less complex.

    The federal government has published a proposed rule that seeks to make the sale of Commercially Available Off-the-Shelf ("COTS") items exempt from many administrative burdens and other requirements that typically are included in Government contracts. This proposed rule is an attempt to implement the provisions of the Clinger-Cohen Act of 1996 to permit the Government to purchase COTS items under more or less commercial marketplace terms.

    Once adopted, the Federal Acquisition Regulation (the "FAR") will define a COTS item as a commercial item that is sold in substantial quantities in the commercial marketplace and offered to the Government without modification in the same form as it is sold in the commercial marketplace. The FAR already lists several statutes that are inapplicable to the acquisition of commercial items. For example, sales of commercial items to the Government are exempt from the requirements of the Walsh-Healey Act and the typical contingent fee proscription.

    The new rule will list additional laws that are inapplicable to the acquisition of COTS items. For instance, under the proposed rule, certain requirements of the Buy American Act, 41 U.S.C. § 10a et seq., and the Trade Agreements Act, 19 U.S.C. § 2501 and § 2512, will be inapplicable to COTS purchases. Contractors selling COTS items to the Government will no longer bear the burden of performing what are often detailed analyses of the origin of each item and its component parts. This exemption also may mean that contractors will no longer be forced to segregate their federal government inventory for COTS items from their commercial inventory.

    The new rule also will exempt COTS purchases from the requirements of numerous statutes that place on contractors what often are considered to be unnecessary employment burdens, including: 29 U.S.C. § 793, Affirmative Action for Handicapped Workers; 31 U.S.C. § 1354(a), Limitation on use of appropriated funds for contracts with entities not meeting veteran's employment reporting requirements; 38 U.S.C. § 4212, Equal Opportunity for Special Disabled Veterans, Veterans of the Vietnam Era, and Other Eligible Veterans; 38 U.S.C. § 4212(d)(1), Employment Reports on Special Disabled Veterans, Veterans of the Vietnam Era, and Other Eligible Veterans; 41 U.S.C. § 43, Walsh-Healey Act; and 41 U.S.C. § 701 et seq., Drug-Free Workplace Act of 1988.

    Other statutes that will be exempted include 10 U.S.C. § 2631, Transportation of Supplies by Sea, 46 U.S.C. Appx 1241(b), Transportation in American Vessels of Government Personnel and Certain Cargo, and 49 U.S.C. § 40118, Fly American Act. These exemptions will eliminate provisions that ordinarily would require contractors to certify to the supply chain of component parts.

    The new rule will exempt federal government COTS purchases from the requirements of various provisions that many potential government contractors find to be unnecessary administrative and substantive obstacles, including 31 U.S.C. § 3324, Restriction on Advance Payments, 31 U.S.C. § 1352, Limitation on Payments to Influence Certain Federal Transactions, 41 U.S.C. § 418a, Rights in Technical Data, 41 U.S.C. § 253d, Validation of Proprietary Data Restrictions, 41 U.S.C. § 253g and 10 U.S.C.§ 2402, Prohibition of Limiting Subcontractor Direct Sales to the United States, 41 U.S.C.§ 254(a) and 10 U.S.C. § 2306(b), Contingent Fees, and 41 U.S.C.§ 254d(c) and 10 U.S.C.§ 2513(c), Examination of Records of Contractor.

    These exemptions are expected to have a ripple effect, particularly in the IT sector.

    Although the new rule will apply equally to both large and small contractors, the Government hopes that more small businesses will be motivated to do business with the Government.


    If you would like to discuss this article or other government contract issues, please contact Kenneth B. Weckstein at 202/861-0900 or Michael D. Maloney at 202/861-1877 in the firm's Washington, D.C. office if you have any questions or comments. Mr. Weckstein's e-mail address is [email protected] and Mr. Maloney's e-mail address is [email protected]

    This publication is provided by Epstein Becker & Green, P.C. for general information purposes; it is not and should not be used as a substitute for legal advice.