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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: October 10, 2003

SUBJECT: Defense Federal Acquisition Regulation Supplement (DFARS); Unique Item Identification and Valuation

SOURCE: Federal Register, October 10, 2003, Vol. 68, No. 197, page 58631

AGENCIES: Department of Defense (DOD)

ACTION: Interim Rule

SYNOPSIS: DOD is amending the DFARS to require contractors to uniquely identify, through the use of item identification marking, all items to be delivered to the government, and to identify the government's acquisition cost of items that are built or acquired by a contractor during contract performance and subsequently delivered to the government.

DATES: The interim rule is effective January 1, 2004. Comments on the interim rule must be submitted on or before November 10, 2003.

ADDRESSES: Respondents may submit comments directly on the web site at http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm. As an alternative, respondents may e-mail comments to: dfars@acq.osd.mil. Also, respondents who cannot submit comments through the web site or by e-mail may submit comments to Defense Acquisition Regulations Council, Attn: Steven Cohen, OUSD(AT&L)DP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062, or by fax to 703-602-0350. Cite "DFARS Case 2003-D081" when making comments on this interim rule.

FOR FURTHER INFORMATION CONTACT: Steven Cohen, 703-602-0293.

SUPPLEMENTAL INFORMATION: The Secretary of Defense has determined that the implementation of unique identification (UID) is a strategic imperative, necessary to efficiently move supplies to warfighters. This interim rule adds requirements for contractors to uniquely mark items and to provide for identification of the government's acquisition cost of items that are to be delivered to DoD. The implementation of UID will enhance logistics, contracting, and financial business transactions supporting U.S. and coalition troops. Through the new policy, DOD will be able to consistently capture the value of items it buys, control these items during their use, and combat counterfeiting of parts. In addition, it will enable DOD to make appropriate entries into its property accountability, inventory, and financial management information systems toward achieving compliance with the Chief Financial Officers Act of 1990 (Public Law 101-576) and the financial reporting requirements imposed by the Federal Accounting Standards Advisory Board.

The following are the significant changes being made to the DFARS by this interim rule:

• To DFARS 202.101, Definitions, is added the following definition for "unique item identifier": "Unique item identifier means a set of data marked on items that is globally unique, unambiguous, and robust enough to ensure data information quality throughout life and to support multi-faceted business applications and users."
  
  
• DFARS Subpart 204.71, Uniform Contract Line Item Numbering System, is modified to address subline items, as follows:
  
  
  • To paragraph (a)(3) of DFARS 204.7104-1, Criteria for Establishing, is added the requirement that information subline items are to be used to identify "the government's acquisition cost of an item delivered under a contract when -- (A) the item requires a unique item identifier; and (B) a separately priced contract line item or subline item is not practical."
    
    
  • DFARS 204.7104-2, Numbering Procedures, is amended by adding paragraph (e)(10) to provide an illustration of subline items "structured to capture the acquisition cost of spares that will require unique item identifiers (delivery schedule and fixed price are established for the lot of spares at the contract line item level)," and paragraph (e)(11) to provide an illustration of subline items "structured to capture the acquisition cost of spares that will require unique item identifiers under a cost-type contract."
  
  
• DFARS 211.274, Item Identification and Valuation, is added. It consists of the following subsections:
  
  
  • DFARS 211.274-1, Item Identification, which requires that all contracts "require that all items delivered to the government -- (1) be delivered under a contract line item; and (2) contain unique item identification, or a DOD recognized unique identification equivalent (if one is not already marked), if -- (i) the Government's acquisition cost of the item is $5,000 or more; or (ii) the requiring activity determines that unique identification is necessary for the item (e.g., serially managed, mission essential, or controlled inventory piece of equipment or a repairable item, a consumable item or material where permanent identification is required, or a component of a delivered item)." It also requires the contract to "include a requirement for commonly accepted commercial marks if it is determined that unique item identification or a DOD recognized unique identification equivalent is not required, and unique item identification is not already marked."
    
    
  • DFARS 211.274-2, Government's acquisition cost of items, which requires that contracts "identify the government's acquisition cost of all items delivered. The preferred approach for identifying the government's acquisition cost of items is separate pricing under a contract line item or subline item." It goes on to require that contracts establish separate information subline items for identifying the government's acquisition costs when separately priced contract line items or subline items are clearly not practicable. "Items valued at $5,000 or more shall be identified in a separate contract line item or subline item...Items valued below $5,000 may be combined under a contract line item or subline item; however, the contractor must report the government's acquisition cost of each item." It requires that the contract be modified "to establish separate contract line items or subline items prior to delivery of items that were not identified as contract deliverables at the time of contract award." Finally, it states that "the government's acquisition cost of components delivered within end items need not be identified."
    
    
  • DFARS 211.274-3, Contract Clause, requires the use of DFARS 252.211-7003, Item Identification and Valuation, in solicitations and contracts that require delivery of one or more items.
    
    
  • Paragraph (b) is added to DFARS 243.171, Obligation or Deobligation of Funds, which states, "(b) When changes in the value of the contract result in changes to the government's acquisition cost of delivered items, the contracting officer shall allocate those changes to the acquisition cost of those items."
    
    
  • DFARS 252.211-7003, Item Identification and Valuation, is added. It provides definitions for various terms: automatic identification device, commonly accepted commercial marks, data qualifier, DOD recognized unique identification equivalent, enterprise, enterprise identifier, government's acquisition cost, issuing agency code, item, machine-readable, original part number, registration (or controlling) authority, serial number within the enterprise identifier or unique serial number, serial number within the part number or serial number, serialization within the enterprise identifier, serialization within the part number, unique item identification, and unique item identifier. It goes on to describe the establishment of unique item identification, requirements for data elements, data syntax and semantics, requirements for marking items, maintaining item records, and requirements for reporting the government's acquisition cost fo items. Finally, it requires that its provisions be included all subcontracts that will result in delivery of items under the contract.

  EDITOR'S NOTE: Since this is an interim rule, DOD is soliciting comments. In the introduction to this interim rule, DOD says it is particularly interested in receiving comments on the following topics:

  1. The use and definition of the term "item" or some more appropriate term throughout the rule.
     
     
  2. The valuation portion of the rule, particularly as it applies to cost-type contracts and the treatment of non-recurring costs.
     
     
  3. Whether the rule imposes any new information collection requirements.
     
     
  4. The impact of the rule on small business.

  Also, the introduction states, "The rule assumes that MIL-STD-130, Identification Marking of U.S. Military Property, will be revised to be compatible with this unique identification requirement no later than the implementation date of January 1, 2004."

  FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

  Copyright 2003 by Panoptic Enterprises. All Rights Reserved.

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