When purchasing commercial items,  firm knowledge of market pricing information is necessary and the  contracting officer must obtain sufficient information to negotiate a fair  and reasonable price. DOD’s Use of Commercial Item Procedures Has Gradually Declined Over 10 Years Within a Narrow Range DOD’s Use of Commercial Item Procedures Was Consistently Less than 25 Percent of Total Obligations

FPDS-NG data show that obligations under DOD contracts awarded  using commercial item procedures (i.e. FAR Part 12) declined since fiscal  year 2007, yet as a proportion of DOD’s total contracting obligations they  have remained within a narrow range from 22 to 16 percent. Figure 1  depicts DOD’s total obligations and commercial item obligations from  fiscal years 2007 through 2016. We could not determine the full extent to which DOD is procuring  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. In fiscal year 2016, products accounted for 54  percent of DOD’s commercial item obligations, while services accounted  for 46 percent. Competition  helps agencies get lower prices on products and services, and get the  best value for taxpayers. DOD Has Taken Action in Response to Recent Commercial Item Acquisition Legislation

Recent legislation from Congress includes a number of provisions related  to commercial item acquisitions, including both commercial item  determinations and price reasonableness determinations. DOD is also in the process of updating its Guidebook for Acquiring  Commercial Items. Fiscal Year 2016 NDAA

The fiscal year 2016 NDAA included provisions that required DOD to  provide guidance related to commercial items and price reasonableness  determinations, among other things. Agency Comments

We are not making any recommendations in this report. The Department  of Defense had no comments on a draft of this report. In addition, the report is  available at no charge on the GAO website at http://www.gao.gov. Appendix: Summary of Recent National Defense Authorization Act Sections Related to DOD’s Acquisition of Commercial Items

	Fiscal Year (FY) 2013 NDAA Sections

Summary of Sections regarding Commercial Items  Requires DOD to develop and begin implementation of a  plan to train the acquisition workforce in the use of certain  authorities for evaluating price reasonableness in  procurements of commercial items and develop a cadre of  experts within DOD to provide advice to the acquisition  workforce. Department of Defense (DOD) Actions  as of May 2017  Training:
Conferences addressing commercial  item pricing occurring in 2014, 2015,  2016, and 2017  Industry day on contracting with DOD  November 2014
DOD-wide pricing webinars
Week-long procurement contracting  officer training for evaluating price  reasonableness of commercial items  According to Defense Procurement  Acquisition Policy officials, the agency  is coordinating with Defense  Acquisition University to update  training to be consistent with the  DFARS and DOD Guidebook for  Acquiring Commercial Items, both of  which DOD is working to finalize. Cadre of experts:
Defense Contract Management  Agency created six Commercial Item  Centers of Excellence.
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.

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
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.

What GAO Recommends

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