Michael P. Fischetti is the executive director of the National Contract Management Association.
If one were to ask the average citizen if the government should buy more like industry, most would probably say yes. So why then has commercial contracting by the government struggled to catch on?
Theoretically, the U.S. federal government encourages buying commercial whenever practical. Passage of the Federal Acquisition Streamlining Act (FASA) in 1994included the government's stated preference for commercial items. As stated in the Federal Acquisition Regulation (FAR), agencies shall determine whether commercial or nondevelopmental items are available to meet their needs, acquire them when available, and require contractors at all tiers to incorporate them as components. This can have worthwhile affects, such as minimizing acquisition lead time and reducing the need for detailed design specifications, expensive product testing, or government-funded research and development. The government can keep current, as commercial products or services will conform to industry trends and standards and reduce government-specific tailoring that increases cost.
And then there's the Uniform Commercial Code (UCC), largely adopted by all the states, which consists of party-neutral contracting presumptions applicable to commercial transactions between merchants. The UCC simplifies, clarifies, and keeps current commercial transaction law, permitting the expansion of commercial practices through custom, usage, and agreement, and making various jurisdictions' laws uniform, which facilitates the free flow of commerce.
But there are historic differences between government forms of commercial contracting and the UCC. The FAR is intended to protect the interests of taxpayers, including mandatory contract terms and conditions giving the edge to the government and taxpayer, and thus conflicting with commercial practice. A cursory review of the FAR (notably Part 12) by a small "commercial" business owner will intimidate many, driving some to abandon the market to experienced, "traditional" contractors to manage the government relationship. The government's contracting officer must still make a reasonable price determination, but in certain cases also determine if the items are "commercial" or not. Providing some of the required information might be foreign to most commercial firms, raising the unique compliance costs of their government customer.
Also consider that the FAR requires competition, while the UCC does not. There are other differences favoring the government in areas pertaining to inspection, warranties, contract changes, and termination. Since FASA's passage, these differences have grown.
FAR acknowledges that typical government contract methods are not effective for the acquisition of commercial items. It was intended to act as a middle ground between the "traditional" FAR and the UCC. The FAR offers a lengthy definition of commercial, relying on phrases such as:
Sold, leased, or licensed to the general public;
Sold in substantial quantities in the commercial marketplace; and/or
Offered to the government without modification, in the same form in which it is sold in the commercial marketplace.
Given the complexities in Part 12, many contracting officers—in the interests of time, simplicity, or familiarity—may thus gravitate towards an alternate, more familiar FAR acquisition strategy.
Existing gaps between current government contracting policy and its results, as well as between the FAR and UCC, means the government does not, and without major changes can't truly buy commercial. To do so would mean giving up unique and fundamental socioeconomic rights and obligations to the citizens served, upon which our current system is based and intended to ensure government funds are obligated fairly.
Unless the many constituencies involved—including Congress and industry—are willing to waive these principles, the government will continue to employ a modified, "commercial contracting–light" approach in meeting its requirements. This leaves the significant opportunities for meaningful acquisition innovation in areas such as requirements development, leveraging the many other excellent tools available within the FAR and developing a world-class acquisition workforce.