Commercial Off the Shelf Items in Government COTS Contracts

In government contracting, agencies sometimes buy commercial off the shelf items and services (COTS Items).  Simply put, when the government buys these commercial items or services, there is not much that must change. Getting involved in disputes with the government or engaging in bid protest litigation can create a huge burden on your company. However, defending yourself in litigation means first understanding the basic rules.

Commercial Off the Shelf COTS products are leased, sold, or licensed items to the general public including the government. The owner /vendor profits from the hardware, and software but also retains the Intellectual Property.

In Federal Government Contracting  COTS contracts allow the agency to benefit from technological advances, cost savings from the use, and other negotiated perks.

Government contractors in a bid protest seeking to challenge whether or not the awardee is selling FAR commercial items can avoid painful mistakes by articulating how the government is not meeting the legal commercial off the shelf definition.

Knowing that the CO’s decision must be reasonable is a substantial part of the analysis when considering non-commercial sources as compared to commercial-off-shelf (cots contracts.)The exception to this rule is the acquisition of bulk cargo. Procurement of training services, installation, or cloud services can be considered COTS items under the Federal Acquisition Regulation (FAR 12). See information about Service Contract Act Fringe Benefits (SCA).

What is COTS?

FAR Commercial off the Shelf Items – COTS Contracts Definition: In government contracting, the commercial off the shelf and FAR 12 FAR commercial items refer to whether commercial items are readily available without substantial modifications. The software can be a prime example. If the offeror has to substantially modify or program the software, then it might not meet the commercial definition. See VA Service Disabled Veteran Owned SDVOSB Requirements.

The use of COTS products allows procurement agencies to benefit from technological advances, cost savings, and the consistent competition in the commercial rapid procurement stemming from the marketplace as well as other innovative developments in federal agencies. The use of these items can minimize or eliminate the need for costly, time-consuming, government-sponsored research and development programs.

Federal Acquisition Regulations (FAR)
Subpart 2.101 – Definitions Commercially available off-the-shelf (COTS)” item

1. This means any item of supply (including construction material) that is
   • A commercial item (Item that can be sold, leased, or licensed to the general public);
   • Sold in substantial quantities in the commercial marketplace; and
   • 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, as defined in section 3 of the Shipping Act of 1984 (46 U.S.C. App. 1702), such as agricultural products and petroleum products.

The analysis of whether contracts for services or products can be commercially available includes looking to see whether the acquisition would need custom developments or a substantial amount of design after the award.

• Government contracting agencies should look to buy COTS items and services because there could be considerable savings to taxpayer dollars.

There a fair amount of cases where disputes arose in COTS contracts. For example, in a pre-award bid protest, a contractor may challenge the services or products solicited by the government as COTS if there is evidence that the commercial sector or industry standards do not meet the government’s definition or statement of work requirements. See also information about Buy American Act countries.

FAR 12 COTS Items – Commercial Off the Shelf Definition

(1) Means any item of supply (including construction material) that is—

(i) A commercial item (as defined in paragraph (1) of the definition in this section);

(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, as defined in section 3 of the Shipping Act of 1984 (46 USC App. 1702), such as agricultural products and petroleum products.

Unless indicated otherwise, all the policies that apply to FAR commercial items also apply to COTS. Section 12.505 lists the laws that are not applicable to COTS items (as well as 12.503 and 12.504); the components test of the Buy American Act requirements and the two recovered materials certifications in Subpart 23.4 do not apply to COTS contracts.

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Need help with your COTS Item implementation? For more questions about government contracting or help to litigate a government contract protest based on FAR commercial off the shelf / COTS contracts under FAR 12, call our lawyers at 1-866-601-5518.