Today, February 17, 2009, a new Final FAR Rule takes effect to partially waive the Buy American Act as it applies to commercially-available off-the-shelf (COTS) items. FAR Case 2005-305, Commercially-Available Off-the-Shelf (COTS) Items, 74 Fed. Reg. 2713 (Jan. 15, 2009). The Civilian Agency Acquisition Counsel and the Defense Acquisition Regulations Council (FAR Councils) issued the Final Rule amending the Federal Acquisition Regulation (FAR), as well as an interim rule amending the Defense Federal Acquisition Regulation Supplement (DFARS), on January 15, 2009. The rules waive the Buy American Act's "component test" (41 U.S.C. §§ 10a and 10b) for COTS items, which means that a COTS item can be treated as a "domestic end product" so long as the item is "manufactured" in the United States, without the need to track the origin and cost of the item's individual components. In issuing this rule, the Councils observed that compliance with the component test can be especially burdensome in today's global marketplace, and noted that this change "reduces significantly the administrative burden on contractors and the associated costs to the Government."
The new FAR Rule also adds the following definition of "COTS" item, based on the definition found in 41 U.S.C. § 431(c):
(1) . . . any item of supply (including construction material) that is--
(i) A commercial item . . . ;
(ii) Sold in substantial quantities in the commercial marketplace; and
(iii) Offered to the Government, under a contract or subcontract at any tier, without modification, in the same form in which it is sold in the commercial marketplace; and
(2) Does not include bulk cargo . . . such as agricultural products and petroleum products.
74 Fed. Reg. 2,721.
The FAR Councils issued these new rules pursuant to 41 U.S.C. § 431, a provision of the Clinger-Cohen Act of 1996 that directed the FAR Councils to develop a "list of provisions of law that are inapplicable to contracts for the procurement of [COTS] items." The FAR Councils declined to waive other laws for the acquisition of COTS items, such as the Trade Agreements Act and authorization for the Comptroller General to examine contractor records, stating that it was not in the best interest of the Government. However, the Councils are still considering a partial waiver of Rights in Technical Data (41 U.S.C. § 418a and 10 U.S.C. § 2520), in particular unlimited Government rights in data for operation, maintenance, installation or training and the Government's right to make unlimited copies.
The DFARS Rule was issued as an interim rule, with an effective date of January 15, 2009, while the FAR Rule was issued as a final rule with an effective date February 17, 2009. The effective dates were not delayed in response to the so-called "Emanuel memo" on Regulatory Review.