C. Applicability to Commercial Items

Comment: Two respondents supported the interim rule but hoped that the Councils will eliminate the exceptions for commercial item and COTS item acquisition contracts.

Response: The statute specifically stated that contracts for COTS items are exempt and that for contracts for commercial items, the requirements only flow to the first-tier subcontracts. The rule implements the statutory requirements.

Comment: One respondent suggested that the following rewording of the clause flowdown in FAR 52.209-6(e) to "make the exceptions clearer":

"Subcontracts. The Contractor shall include the requirements of this clause, including this paragraph (e) (appropriately modified for the identification of the parties), in each subcontract that--

[cir] Exceeds $30,000 in value; and

[cir] Is not a subcontract for commercially available off-the-shelf items or commercial items."

According to the respondent, if the subcontract is for COTS or commercial items, the clause will not flow down to any subcontractor, because the prime contractor is responsible for determining the suspension and debarment status of only first-tier commercial item subcontractors and the prime contractor is not responsible for determining the suspension and debarment status for COTS subcontractors.

Response: According to the statute, the prohibition on subcontracting with entities that have been debarred, suspended, or proposed for debarment applies to subcontractors at any tier, other than subcontractors for COTS items, except that in the case of a contract for commercial items, such term includes only first-tier subcontracts.

The difference between the revised language proposed by the respondent and the language that was proposed in the Federal Register is in the treatment of a subcontract for a commercial item. Both versions will arrive at the same result with regard to a prime contract for a commercial item and the first-tier subcontracts under that commercial contract. In such case, each first-tier subcontract (over $30,000 and not a COTS item) will have to disclose whether at time of subcontract award it, or its principals, is debarred, suspended, or proposed for debarment.

However, with regard to subcontracts for the acquisition of a commercial item (which were not specifically addressed by the statute), the proposed rule implemented the statute to also apply to the subcontract one tier below a commercial subcontract for the acquisition of a commercial item, whereas the proposed revision does not apply the requirements of the statute to a subcontract under a commercial subcontract. The Councils consider the language of the proposed rule to be a reasonable interpretation of the statutory intent, by requiring all commercial contractors (whether a prime contractor or a higher-tier subcontractor), to get the reports of the next-tier subcontractors, but not be required to flow the requirement down to the next tier. To adopt the interpretation of the respondent would narrow the ability of agencies to determine if a subcontractor has been debarred, suspended, or proposed for debarment because agencies would have no visibility into the debarment/suspension status of any subcontract that was one level below a subcontract for the acquisition of a commercial item. This appears to be contrary to the intent of the statute.