OSS is commercial by law, regulation, and policy
The DoD policy on OSS [DoD2009] attachment 2 part 2 says, “In almost all cases, OSS meets the definition of ‘commercial computer software’ and shall be given appropriate statutory preference in accordance with 10 USC 2377 (reference (b)) (see also FAR 2.101(b), 12.000, 12.101 (reference (c)); and DFARS 212.212, and 252.227-7014(a)(1) (reference (d))).” We can confirm this by examining U.S. law and regulation.
U.S. law governing federal procurement (specifically 41 USC 403) formally defines the term “commercial item” (underlining added) as:
“(A) Any item, other than real property, that is of a type customarily used by the general public or by nongovernmental entities for purposes other than governmental purposes, and that—
(i) has been sold, leased, or licensed to the general public; or
(ii) has been offered for sale, lease, or license to the general public.
(B) Any item that evolved from an item described in subparagraph (A) through advances in technology or performance and that is not yet available in the commercial marketplace, but will be available in the commercial marketplace in time to satisfy the delivery requirements under a Federal Government solicitation.
(C) Any item that, but for—
(i) modifications of a type customarily available in the commercial marketplace, or
(ii) minor modifications made to meet Federal Government requirements, would satisfy the criteria in subparagraph (A) or (B).
(D) Any combination of items meeting the requirements of subparagraph (A), (B), (C), or (E) that are of a type customarily combined and sold in combination to the general public.
(E) Installation services, maintenance services, repair services, training services, and other services if—
(i) the services are procured for support of an item referred to in subparagraph (A), (B), (C), or (D), regardless of whether such services are provided by the same source or at the same time as the item; and
(ii) the source of the services provides similar services contemporaneously to the general public under terms and conditions similar to those offered to the Federal Government.
(F) Services offered and sold competitively, in substantial quantities, in the commercial marketplace based on established catalog or market prices for specific tasks performed or specific outcomes to be achieved and under standard commercial terms and conditions.
(G) Any item, combination of items, or service referred to in subparagraphs (A) through (F) notwithstanding the fact that the item, combination of items, or service is transferred between or among separate divisions, subsidiaries, or affiliates of a contractor.
(H) A nondevelopmental item, if the procuring agency determines, in accordance with conditions set forth in the Federal Acquisition Regulation, that the item was developed exclusively at private expense and has been sold in substantial quantities, on a competitive basis, to multiple State and local governments.”
This definition in U.S. law is reflected in the Federal Acquisition Regulation (FAR) FAR 2.101, as well as the DoD FAR Supplement (DFARS) 212.212 and 252.227-7014(a)(1). The DFARS definition is shorter, but for our purposes has the same basic thrust.
Thus, OSS that has been released and licensed to the general public, and has at least one non-government use, is by definition commercial. Note that OSS that implements government functions, or was originally developed by the government, is still commercial as long as it meets this definition (e.g., it is licensed to the public and used for at least one non-government purpose). If the OSS isn’t released yet, but will be in time, it is still commercial (this enables OSS “bounty systems”). The government can often pay for modifications to OSS (e.g., to address government-specific needs) and still consider the result commercial. Related services (e.g., installation, repair, and training), even if they’re from a different source than the original author, are also typically commercial per this definition.
Note that software often ends up being used for non-government purposes, even if it was originally developed for a government purpose. Software developers often work to make their software more general-purpose, so that they have more potential users. In addition, many organizations perform functions that are similar to functions performed by the government. For example, many governments need integrated library systems, but many other non-government organizations (such as large universities and companies) need them also.
DoD’s “Commercial Item Handbook” (November 2001) explains that the broadness of this government definition of “commercial item” is intentional, because it “enables the Government to take greater advantage of the commercial marketplace.” The DoD policy memo “Commercial Acquisitions” (Jan. 5, 2001), Appendix A in the handbook, explains that the benefits of commercial item acquisition include “increased competition; use of market and catalog prices; and access to leading edge technology and ‘non-traditional’ business segments.” Note that those who created these definitions and policies anticipated that there will be changes in the commercial market, including “non-traditional business segments.”
This interpretation is supported by documents other than [DoD2009]. Department of the Navy memorandum “Department of the Navy Open Source Software Guidance” (signed June 5, 2007) was released specifically to make it clear that OSS is commercial. It says that the Navy will “treat OSS as [Commercial Off-the-Shelf (COTS)] when it meets the definition of a commercial item.” OMB Memo M-03-14 “Reducing Cost and Improving Quality in Federal Purchases of Commercial Software” is about commercial software, and it specifically says that its SmartBUY initiative will include open source software support.