Commercial Off-The-Shelf (COTS)

Commercial Off-The-Shelf, usually shortened to COTS, describes a product that is sold on the commercial market, is readily available to buyers, and is normally used without modification. NATO's procurement policy glossary defines it in these terms. The idea is simple: the buyer purchases something that already exists instead of commissioning something built to order. See the NATO procurement policy for the definition.

The term is used across defence acquisition and in Canadian federal procurement, where it appears in tenders and contracts for software and cloud services. COTS is a procurement term, not only an information technology term, so it can apply to hardware, supplies and products as well as software. Suppliers who understand how buyers use it can respond to COTS solicitations with greater precision.

How NATO defines COTS

NATO defines COTS as a commercially marketed product that is readily available for procurement and normally used without modification. Its procurement policy treats the expression as a general procurement term and does not limit it to software or information technology.

Earlier NATO material gives a software-specific description. It refers to mature, generally applicable, commercially marketed software that can be used without internal functional modification. That wording is available in NATO archival records. NATO terminology therefore sets COTS apart from purpose-built systems and from systems that a buyer modifies internally.

What COTS can cover in contract terms

The NATO Communications and Information Agency (NCIA) uses a wider contract definition. Its general terms and conditions define COTS to include commercial supplies, software, products, goods, and certain competitively offered commercial services.

• Hardware and physical products sold commercially
• Software packages and licences
• Commercial supplies and goods
• Commercial services that are offered competitively, where the contract terms say so

A supplier should read the definition in each solicitation, because the scope of COTS can differ from one set of contract terms to another.

The U.S. defence equivalent

In U.S. defence acquisition, the more specific expression is commercially available off-the-shelf item. The U.S. Department of Defense describes it as a commercial item sold in substantial quantities in the commercial marketplace and offered to government without modification. The department's commercial item determination guidebook sets out that definition. Canadian suppliers who work with allied defence buyers may meet both phrasings, and the shared core is the same: a product already sold commercially and offered as it is.

How Canadian federal buyers have used COTS

Several Canadian federal examples show the term in practice.

• Health Canada published a contract for application-software licence and maintenance fees that refers to Commercial Off-The-Shelf [COTS] software. The record is on the Open Government contracts search.
• The Canadian Deposit Insurance Corporation (CDIC) issued a tender for a commercial, integrated, cloud-based SaaS IT-service-management solution. The CanadaBuys tender notice describes the requirement.
• Innovation, Science and Economic Development Canada (ISED) chose COTS software for its Spectrum Application Modernization project instead of in-house custom development. The software was meant to satisfy a substantial portion of existing requirements. Public Services and Procurement Canada acted as contracting authority for specified contracts, as the ISED internal audit explains.

What COTS means for a supplier bidding on Canadian public contracts

A supplier responding to a COTS solicitation must offer the commercially available product or service the solicitation describes and demonstrate that it meets the stated requirements. The supplier must also meet the contract's obligations for implementation, licensing, maintenance, security, acceptance and delivery. The exact obligations depend on the solicitation and the resulting contract.

The ISED audit documents what buyers do after award. Deliverables were monitored, reviewed and formally accepted before milestone payments were approved. Bid teams should plan for vendor-management controls and formal acceptance steps, and should check each solicitation's definition of COTS before deciding whether their offering qualifies.