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Search all opportunities →FAR Part 12 establishes the policies and procedures for acquiring commercial products and commercial services. It is one of the most contractor-friendly parts of the Federal Acquisition Regulation, reducing compliance burdens and enabling faster, simpler procurement.
This guide explains what qualifies as a commercial item, the simplified procedures available, which contract terms apply (and which do not), and how commercial item status benefits contractors.
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The definition of “commercial product” and “commercial service” in FAR 2.101 is intentionally broad, reflecting Congress's intent to maximize the government's access to the commercial marketplace. A product or service qualifies as commercial if it meets any of the following criteria:
The “of a type” language is critical. It means the specific item being sold to the government does not need to be identical to the commercial version — it just needs to be the same type of product. This opens commercial item status to a wide range of products and services that have commercial analogs.
One of the primary benefits of FAR Part 12 is the use of simplified acquisition procedures tailored to the commercial marketplace. These procedures are designed to mirror commercial buying practices rather than imposing the full weight of government procurement regulations.
Key simplifications include:
For acquisitions at or below the simplified acquisition threshold ($250,000), the procedures are further streamlined under FAR 13.5, which combines FAR Part 12 commercial procedures with FAR Part 13 simplified procedures. This allows contracting officers to buy commercial items quickly with minimal administrative burden.
Test Program for Commercial Items (FAR 13.5) extends simplified procedures to commercial item acquisitions up to $7.5 million ($15 million for contingency operations), further expanding the range of commercial procurements that benefit from streamlined processes.
FAR Part 12 significantly limits the number of contract clauses that apply to commercial acquisitions. This is one of its greatest benefits for contractors, reducing the compliance overhead that comes with non-commercial government contracts.
This streamlined clause structure is a significant competitive advantage for commercial contractors who might otherwise be deterred by the compliance burden of traditional government contracts. It means you can largely operate under the same terms you use in your commercial business.
FAR Part 12 distinguishes between Commercial Off-The-Shelf (COTS) items and modified commercial items, with COTS receiving the most favorable treatment.
COTS items are commercial products sold in substantial quantities in the commercial marketplace and offered to the government in the same form, fit, and function without modification.
Modified commercial items start as commercial products but are customized to meet government-specific requirements. The modifications must be minor to retain commercial item status.
The contracting officer is responsible for determining whether a product or service qualifies as commercial. This determination has significant implications for the applicable regulations, contract terms, and pricing approaches. Contractors can proactively support this determination by providing evidence.
Evidence that supports a commercial item determination includes:
If your product or service has a commercial market, investing time in documenting its commercial nature upfront can save significant compliance costs throughout the life of the contract. A strong commercial item determination file reduces the risk that the contracting officer will apply non-commercial terms.
Fewer applicable clauses means less administrative overhead. No CAS, no TINA, limited audit rights. You can operate largely under your standard commercial terms.
Simplified procedures mean shorter acquisition timelines. Commercial buys can close in weeks rather than months, getting you on contract and generating revenue faster.
Without TINA, you are not required to disclose your cost structure. Pricing is based on market analysis, allowing you to maintain competitive commercial pricing strategies.
Commercial item data rights provisions are more favorable. The government generally receives only limited rights in technical data and restricted rights in computer software delivered under commercial contracts.
Companies that might not have a traditional government accounting system or DCAA-compliant cost structure can still compete for government work through commercial channels.
FAR Part 12 provides a lower barrier to entry for commercial firms looking to sell to the government for the first time, without requiring a complete transformation of business practices.
Under FAR 2.101, a commercial product is any item customarily used by the general public or by nongovernmental entities for non-governmental purposes, and has been sold, leased, or licensed (or offered for sale, lease, or license) to the general public. It also includes items that evolved from commercial products through minor modifications. The key test is whether the item (or its close ancestor) has a commercial market.
COTS (Commercial Off-The-Shelf) items are commercial products sold in substantial quantities in the commercial marketplace and offered to the government without modification. Modified commercial items start as commercial products but are modified to meet government-specific requirements. COTS items receive the most streamlined treatment under FAR Part 12, while modified commercial items are still eligible for commercial procedures but may face additional scrutiny.
Generally, no. One of the major benefits of commercial item acquisitions is the exemption from the Truth in Negotiations Act (TINA) requirement to submit certified cost or pricing data. Instead, the contracting officer relies on market research, price analysis, and other techniques to determine price reasonableness. However, for items sold exclusively to the government or modified commercial items, some pricing information may be requested.
FAR 12.301 specifies that only the clauses listed in FAR 52.212-4 (Contract Terms and Conditions — Commercial Products and Commercial Services) and FAR 52.212-5 (Contract Terms and Conditions Required to Implement Statutes or Executive Orders) apply. Many burdensome clauses that apply to non-commercial contracts (such as CAS, cost accounting standards) are excluded. This significantly reduces compliance burden.
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