24. Commercial Contracts

Comment: A respondent suggested that the rule should exempt commercial contracts explicitly. More specifically, the clauses at DFARS 252.242-7006, Accounting System Administration, and DFARS 252.244-7001, Contractor Purchasing Systems Administration, appear to be applicable to time-and-materials (T&M) and labor-hour contracts as written, per their prescriptions. The respondent questioned whether these provisions are applicable to T&M and firm-fixed-price (FFP) labor-hour contracts for commercial items. The respondent noted that there are times when DoD enters into T&M and labor-hour contracts using commercial labor rates such as GSA negotiated rates or other commercial rates. However, DFARS 252.242-7006 includes phrases such as segregation of direct costs from indirect costs, allocation of indirect costs, exclusion of unallowables" that are not relevant principles for commercial-item contracts. According to the respondent, DFARS 252.244-7001 appears to be applicable if a contractor has any T&M or FFP labor-hour contracts, regardless of whether subcontractors are performing this labor. The respondent questioned whether the prescriptions of the clauses should indicate their applicability only to noncommercial-item T&M and labor-hour contracts, or whether the clauses should indicate what would be applicable to commercial-item contractors.

Response: In accordance with FAR 12.301(d)(1), the clauses at DFARS 252.242-7006, Accounting System Administration, and DFARS 252.244-7001, Contractor Purchasing Systems Administration, are not applicable to T&M and FFP labor-hour contracts for commercial items. Furthermore, paragraph (6) of 48 CFR 9903.201-1, CAS Applicability, exempts FFP, T&M, and labor-hour contracts and subcontracts, for the acquisition of commercial items. Consequently, commercial-item contracts are not covered contracts and will not contain the clause at DFARS 252.242-7005, Contractor Business Systems.