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Don't Call It A Loophole: The Commercial Item Contracting Scandal That Wasn't Open Access

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This paper examines the recent criticisms of the federal, commercial item contracting regime and the proposed legislation to narrow the definition of a "commercial item." The analysis begins with a survey of the milestones that led to the existing commercial item contracting framework. The benefits of simplifying the federal procurement process have been documented over decades of practical experience and study. Such benefits are twofold: (i) increasing contractor participation, thereby promoting greater competition and innovation, and (ii) integrating the federal procurement market with the broader economy through reduced barriers to entry. Efforts to realize these benefits culminated with the passage of the Federal Acquisition Streamlining Act ("FASA") in 1994. The legislation represented the decades of deliberate analysis that preceded it, establishing a purposely broad, government-wide definition of "commercial item" for the first time. The broad scope of the commercial item contracting framework sought to put the government on par with large commercial buyers who can appropriately wield influence over suppliers without promoting protectionism or requiring complex compliance infrastructures. Since FASA, there has been a near-constant effort to erode the commercial item contracting regime. This paper identifies the more significant criticism of the existing commercial item framework, underscoring that it has focused on the price paid by the government in specific procurements without addressing the benefits of integrating the federal procurement market with the broader economy. There has not been any substantive criticism suggesting that the quality of the goods and services procured by the government under commercial item contracts are inferior or fail to meet applicable requirements. Nevertheless, the anecdotal criticisms of the prices the government has paid under several high-profile commercial item contracts have seemingly convinced different factions that the present framework is fraught with loopholes and in need of reform. This paper concludes that the recent criticism misses the mark and that commercial item contracting and the streamlining of federal procurement policy should be expanded rather than curtailed.

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