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Senator John McCain Calls for the Rescission of Proposed DFARS Rule on Commercial Item Procurements

By Phillip Seckman
September 10, 2015
  • Commercial Products and Services
  • Government Contracts
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In a letter to Secretary of Defense Ashton Carter on September 8, 2015, Senator John McCain called for the immediate rescission of the Department of Defense’s (DOD) proposed rule on evaluating price reasonableness for commercial items (DFARS Case 2013-D034). The proposed rule, which was published on August 3, 2015, would result in significant, substantive changes to commercial item acquisitions under DOD-funded contracts, including requiring the use of market-based pricing that is based on actual, nongovernmental sales in the absence of adequate price competition. Prime contractors would also be required under the proposed rule to obtain cost data to support commerciality determinations for subcontractors. Other key elements of the proposed rule are summarized in Dentons’ advisory, available here.

In the letter, Senator McCain stated that the proposed rule’s “cumbersome and excessively bureaucratic requirements” to provide cost data for commercial item procurements “could effectively preclude any significant participation by commercial firms in defense programs.” Senator McCain recognized that the requirements in the proposed rule would, in effect, require commercial item contractors to create new accounting systems before conducting business with the DOD. He further stressed that commercial item contractors are likely to exit the government procurement market rather than undertake these significant regulatory obligations, depriving the DOD of the opportunity to procure vital, cutting-edge technologies.

Moreover, the increased regulatory burdens for commercial item procurements in the proposed rule, according to Senator McCain, are directly contrary to the DOD’s ongoing efforts to engage more high-tech commercial firms in the government procurement market and serve as “a signal that DOD has little interest in realistic commercial acquisition practices.”

Comments on the proposed rule must be submitted to DOD on or before October 2, 2015. Dentons will continue to monitor developments associated with the proposed rule and provide updates here.

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Phillip Seckman

About Phillip Seckman

Phillip Seckman represents clients concerning government and commercial contract matters. His practice spans a broad range of subjects related to federal procurement law, state and local procurement law, and complex federal regulatory issues. He concentrates his practice in the areas of commercial item acquisitions, GSA schedule contracting, cybersecurity, compliance, internal investigations, and bid protests (both federal and state). A significant component of his practice involves government contract cost allowability, proper cost accounting, and contract cost and pricing issues.

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