New DoD Proposed Guidance on Commercial Item Pricing

defenseDoD has proposed new guidance on commercial item pricing. The proposed rule includes a definition of “market-based pricing” that deletes current “offered for sale” terminology. Under the proposed rule, market-based pricing would be the preferred method to establish a fair price in the absence of adequate competition where market-based pricing refers to cases in which nongovernmental buyers drive the price of a product or service in a commercial marketplace. According to the rule, there is a “strong likelihood” that pricing is market-based when nongovernmental buyers purchase 50 percent or more of the volume of a particular item on the commercial market.

The rule would also direct prime contractors to obtain pricing data from subcontractors to support price reasonableness, a broad requirement that could be burdensome to contractors. It allows contractors to apply for an exception from having to submit certified cost or pricing data, but, as the rule fails to specify how much data must be submitted to qualify for the exception, doing so may be time-consuming and expensive.