The 2019 NDAA Streamlines, Reorganizes, and Redefines

August 30, 2018

By Timothy F. Valley
Practice Area: Government Contracts Law

Title VIII—Acquisition Policy, Acquisition Management, and Related Matters of the National Defense Authorization Act for Fiscal Year 2019 (“2019 NDAA”) includes a number of changes to the Department of Defense (“DoD”) acquisition statutes and the definition of commercial items. These changes appear to be in direct response to the recommendations from the Section 809 Panel (the “Panel”) reports from January and June of 2018. In its reports, the Panel noted the sometimes cumbersome and unnecessary complexity of the DoD acquisition system and the confusion surrounding the definition of commercial items.

Congress appears to have heeded the Panel’s concerns and incorporated a number of its recommendations into law. Indeed, Title VIII, Subtitle A, of the 2019 NDAA deals exclusively with the “Streamlining of Defense Acquisition Statutes and Regulations.” As such, effective February 1, 2019, DoD acquisition statutes in Title 10 will be consolidated into a new part of the United States Code (“Code”), and it will include multiple subparts. To make room for the new part of the Code, other sections and chapters will be redesignated. Title 10 references in other titles will be amended to reflect the changes. In other words, the 2019 NDAA consolidates acquisition-related provisions into the same location in the Code, which should help simplify DoD’s procurement statutes.

In its January 2018 report, the Panel recommended “[b]ifurcat[ing] the definition of commercial items into commercial products and commercial services, creating two separate definitions.” In Section 836 of the 2019 NDAA, Congress did just that, separating the definition of commercial items into definitions for commercial products and commercial services. Under the revised definition, a “commercial product” means any of the following:

(1) A product, other than real property, that (A) is of a type customarily used by the general public or by nongovernmental entities for purposes other than governmental purposes; and (B) has been sold, leased, or licensed, or offered for sale, lease, or license, to the general public.

(2) A product that (A) evolved from a product described in paragraph (1) through advances in technology or performance; and (B) is not yet available in the commercial marketplace but will be available in the commercial marketplace in time to satisfy the delivery requirements under a Federal Government solicitation.

(3) A product that would satisfy the criteria in paragraph (1) or (2) were it not for (A) modifications of a type customarily available in the commercial marketplace; or (B) minor modifications made to meet Federal Government requirements.

(4) Any combination of products meeting the requirements of paragraph (1), (2), or (3) that are of a type customarily combined and sold in combination to the general public.

(5) A product, or combination of products, referred to in paragraphs (1) through (4), even though the product, or combination of products, is transferred between or among separate divisions, subsidiaries, or affiliates of a contractor.

(6) A nondevelopmental item if the procuring agency determines, in accordance with conditions in the Federal Acquisition Regulation, that (A) the product was developed exclusively at private expense; and (B) has been sold in substantial quantities, on a competitive basis, to multiple State and local governments or to multiple foreign governments.
 
And a commercial service means any of the following:

(1) Installation services, maintenance services, repair services, training services, and other services if (A) those services are procured for support of a commercial product, regardless of whether the services are provided by the same source or at the same time as the commercial product; and (B) the source of the services provides similar services contemporaneously to the general public under terms and conditions similar to those offered to the Federal Government;

(2) Services of a type offered and sold competitively, in substantial quantities, in the commercial marketplace (A) based on established catalog or market prices; (B) for specific tasks performed or specific outcomes to be achieved; and (C) under standard commercial terms and conditions.

(3) A service described in paragraph (1) or (2), even though the service is transferred between or among separate divisions, subsidiaries, or affiliates of a contractor.
 
The 2019 NDAA also amended various other portions of the Code to reflect these definitional changes. These changes, however, do not take effect until January 1, 2020.

If you would like to know more about the 2019 NDAA and its impact on DoD acquisitions and commercial buying, please contact PilieroMazza, and one of our government contracts attorneys will be happy to assist you.

About the Author: Tim Valley is an associate with PilieroMazza in the Government Contracting and Litigation Law groups. He may be reached at tvalley@pilieromazza.com.
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