Generally, the Defense Federal Acquisition Regulations Supplement (“DFARS”) reserves, for the government, the right to challenge a prime or subcontractor’s asserted restrictions on technical data relating to a major system unless the contractor or subcontractor submits information demonstrating that the item was developed exclusively at private expense. The DoD’s position has been that the presumption – regarding development exclusively at private expense – does not apply to “major systems” (or subsystems or components thereof) unless they are commercially available off-the-shelf (“COTS”) items. Things have changed.

The DoD published a Final Rule, effective Sept. 23, 2016, that limits when the government can challenge a contractor/subcontractor’s claim of restricted rights. The new rule does so by increasing the applicability of the presumption – about when technical data has been developed exclusively at private expense – by narrowing the previous “major systems” rule to apply to only “major weapon systems” and by expanding the COTS presumption to include the following:

• A commercial subsystem or component of a major weapon system, if the major weapon system was acquired as a commercial item in accordance with DFARS subpart 234.70 (10 U.S.C. 2379(a)).
• A component of a subsystem, if the subsystem was acquired as a commercial item in accordance with DFARS subpart 234.70 (10 U.S.C. 2379(b)).
• COTS items with modifications of a type customarily available in the commercial marketplace or minor modifications made to meet federal government requirements.

Although this final rule amends DFARS 227.7103-13, Government right to review, verify, challenge, and validate asserted restrictions; DFARS 227.7203-13, Government right to review, verify, challenge, and validate asserted restrictions; DFARS 252.227-7019, Validation of Asserted Restrictions – Computer Software; and DFARS 252.227-7037, Validation of Restrictive Markings on Technical Data, it does not add any new DFARS provisions or clauses or add new requirements to existing DFARS provisions or clauses. Instead, it simply expands the circumstances in which the contracting officer shall presume that an item was developed exclusively at private expense when an agency is acquiring major weapon systems.

This law update was co-authored by Taft partners Suzanne Sumner and Barbara Duncombe, with contributions from Taft’s Tony Busch.