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Defense Contracts: Recent Legislation and DOD Actions Related to Commercial Item Acquisitions

GAO-17-645 Published: Jul 17, 2017. Publicly Released: Jul 17, 2017.
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Fast Facts

By buying directly from the commercial marketplace, DOD can take advantage of the latest innovations and reduce its purchasing costs.

We found that, as a portion of DOD's total contract spending, contracts awarded using federal procedures to purchase commercial items (for both products and services) have declined slightly between fiscal years 2007 and 2016, roughly in line with the decline in DOD's total spending. We also found that 54% of these contracts were for products and 46% were for services in FY 2016.

Recent legislation has, among other things, prompted DOD to improve its guidance on standards for purchasing commercial items.

DOD’s Use of Commercial Item Procedures for Fiscal Years 2007-2016

A bar graph showing DOD's use of federal procedures to purchase commercial items.

A bar graph showing DOD's use of federal procedures to purchase commercial items.

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What GAO Found

Data from the Federal Procurement Data System-Next Generation (FPDS-NG) show that as a proportion of the Department of Defense's (DOD) total contracting obligations, contracts awarded using commercial item procedures have gradually declined in a narrow range from fiscal years 2007 to 2016 (see figure). These numbers, however, do not reflect the full extent to which DOD acquires commercial items because FPDS-NG only captures information on whether or not commercial item acquisition procedures were used to acquire the product or service, and not whether items purchased are commercial or not commercial.

DOD's Use of Commercial Item Procedures, Fiscal Years 2007-2016


Note: Obligation amounts obtained from FPDS-NG were adjusted for inflation using the Fiscal Year Gross Domestic Product price index.

In addition, GAO found that for fiscal year 2016:

  • 54 percent of DOD's spending using commercial item procedures was on products, with the highest category being sustainment supplies and equipment;
  • 46 percent of the remaining spending was for services, with knowledge-based services such as engineering and technical support accounting for the highest obligations; and
  • 68 percent of DOD's commercial spending was competitive, slightly higher than DOD's past competition rate for overall contract spending.

Recent legislation from Congress includes a number of provisions related to commercial item acquisitions, including provisions intended to ensure contracting officers are negotiating fair and reasonable prices for commercial items. DOD has taken a number of actions to address this legislation, including updating its Guidebook for Acquiring Commercial Items and proposing Defense Federal Acquisition Regulation Supplement rules. When implemented, these rules will promote consistency in making commercial item determinations, among other things. Additionally, DOD has created six Commercial Item Centers of Excellence—a cadre of experts within DOD to provide advice to the acquisition workforce with regard to commercial item authorities.

Why GAO Did This Study

DOD purchases commercial items—generally defined as products and services readily available in the commercial marketplace—to meet many of its requirements. Relying on the commercial marketplace, when appropriate, enables DOD to take advantage of market innovations and reduce acquisition costs. Since 2013, Congress has enacted changes in the way DOD is to purchase commercial items.

GAO was asked to review the acquisition of commercial items by DOD. This report describes (1) what federal procurement data indicate about trends in DOD's acquisition of commercial items; and (2) recent legislative changes in the National Defense Authorization Acts (NDAAs) from fiscal years 2013 to 2017 related to the procurement of commercial items and DOD's actions in response to this legislation.

To obtain a longer term view, GAO analyzed data from FPDS-NG—the government's procurement database— for contracts awarded from fiscal years 2007 through 2016, reviewed applicable legislation and regulations, and interviewed DOD officials.

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GAO is not making recommendations in this report. The Department of Defense had no comments on a draft of this report.

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