Defense Contractors: Pitch Your Product As A Commercial Item

Selling to the Department of Defense can be more efficient—and more profitable—when your product qualifies as a "commercial item" under the Federal Acquisition Regulation (FAR) and the Defense Federal Acquisition Regulation Supplement (DFARS). For both prime contractors and sub contractors, this designation offers powerful benefits.

Benefits of Commercial Item Status for DoD Contracts

• Streamlined procurement under FAR Part 12, including the use of commercial terms.

• Relief from submission of certified cost or pricing data (FAR 15.403-1(c)(3)).

• Reduced audit risk from DCAA and potentially fewer DCMA oversight obligations.

• Favorable intellectual property terms, particularly around technical data and software rights (see DFARS 252.227-7015).

• Faster onboarding for subcontractors, as commercial item determinations can flow down from primes.

• Dual-use recognition, which supports innovation with both defense and civilian applications.Benefits of Commercial Item Status for DoD Contracts

Strategies For Achieving Commercial Item Status for DoD Contracts

1. Parse the Definition of “Commercial Item” in a DoD Context

Under FAR 2.101 and DFARS 212.102, a commercial item may include:

• Products sold or offered to the general public.

• Modified versions of commercial products for military needs.

• Services in support of a commercial product.

• Non-developmental items used exclusively for government purposes but produced at private expense.

DoD has broad latitude to accept commerciality claims, especially for subsystems or COTS components.

2. Document a Strong Commercial Sales History

To support a commercial item determination (CID), be prepared to:

• Provide evidence of commercial sales, catalogs, price lists, and marketing materials.

• Show non-government use or availability—even if limited.

• Include invoices, purchase orders, and descriptions of past transactions.

This documentation should be ready for review by contracting officers, prime contractors, or DCMA representatives.

3. Design with Dual-Use in Mind

Even if your initial customer is the DoD, consider how the technology can serve non-defense markets. A strong dual-use strategy supports commerciality and can unlock SBIR/STTR Phase III opportunities, tech transfer, and venture capital alignment.

4. Include Commercial Item Assertions in Your Proposal

Both primes and subs should explicitly state the item’s commercial nature in:

• Proposals, quotations, and teaming agreements.

• Technical volume narratives, referencing applicable FAR/DFARS definitions.

• Attachments or annexes supporting the commercial sales history and use case.

Use clear, confident language and back it up with evidence.

5. Negotiate for Commercial Terms in Prime/Sub Contracts

Don’t default to government-unique clauses. Push for:

• Commercial license terms for software and firmware.

• Standard warranty and maintenance terms.

• Delivery, inspection, and acceptance consistent with private-sector practice.

This protects your IP and can simplify performance obligations.

6. Preserve Your IP Rights through Commerciality

Positioning your software or technical data as commercial impacts data rights. Failure to assert commerciality upfront can result in broad rights concessions downstream.

• Commercial Technical Data

Under DFARS 252.227-7015, when your product is designated as a commercial item, the government only acquires the rights necessary to use the product as-is. They do not receive detailed design data, manufacturing processes, or source materials unless you agree to provide them.

• Commercial Software and Documentation

When software is treated as a commercial item, you can offer it under your standard commercial license agreement. This preserves:

• Control over usage rights and restrictions.

• The ability to impose update and support terms.

• Your rights to prevent reverse engineering or unauthorized sharing.

• Custom Negotiation Leverage

Even if the government needs certain data rights (e.g., for maintenance or integration), you can negotiate a narrow license rather than granting sweeping rights. This is far easier to manage under FAR Part 12 and DFARS commercial clauses.

• Fortify Your Commerciality Position With Best Practices

  
  

  • Clearly mark all technical data and software as “commercial” in your proposals and deliverables.

  • Use your standard commercial license agreement as an attachment or exhibit to the contract.

  • Negotiate exclusions or limitations on government-purpose rights if the item contains mixed funding.

  • Document funding sources for all IP included in the deliverables—government-funded, privately developed, or mixed—as this influences rights.

7. Avoid DCAA and Cost Disclosure Traps

Commercial item status can exempt you from:

• Certified cost or pricing data requirements.

• DCAA audits of indirect rates or pricing basis.

This is particularly important for subcontractors selling commercial off-the-shelf (COTS) parts to primes under major DoD systems.

8. Coordinate Early with Your Contracts Teams

Whether you’re a prime or a sub, bring in legal and contracts staff early to:

• Review your proposed commercial item position.

• Prepare documentation and CID justifications.

• Push back on unnecessary flow-down clauses from primes or government customers.

Bottom Line: For DoD contractors, commercial item designation is a strategic advantage. It reduces regulatory burdens, preserves intellectual property rights, and strengthens your competitiveness across the defense industrial base. With proper planning and documentation, even dual-use or defense-focused products can qualify—and thrive under FAR Part 12.