[Federal Register: October 10, 2003 (Volume 68, Number 197)]
[Rules and Regulations]               
[Page 58631-58635]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10oc03-15]                         

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF DEFENSE

48 CFR Parts 202, 204, 211, 212, 243, and 252

[DFARS Case 2003-D081]

 
Defense Federal Acquisition Regulation Supplement; Unique Item 
Identification and Valuation

AGENCY: Department of Defense (DoD).

ACTION: Interim rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: DoD has issued an interim rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to add policy pertaining to 
item identification and valuation. The rule requires contractors to 
uniquely identify, through the use of item identification marking, all 
items to be delivered to the Government. The rule also adds 
requirements for contracts to provide for identification of 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: Effective date: January 1, 2004.
    Applicability date: The requirements in this rule apply to all 
solicitations issued on or after January 1, 2004.
    Comment date: Comments on the interim rule should be submitted to 
the address shown below on or before November 10, 2003, to be 
considered in the formation of the final rule.

ADDRESSES: Respondents may submit comments directly on the World Wide 
Web at http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm. As an alternative, respondents may e-mail comments to: dfars@osd.mil. Please 

cite DFARS Case 2003-D081 in the subject line of e-mailed comments.
    Respondents that cannot submit comments using either of the above 
methods may submit comments to: Defense Acquisition Regulations 
Council, Attn: Mr. Steven Cohen, OUSD(AT&L)DPAP(DAR), IMD 3C132, 3062 
Defense Pentagon, Washington, DC 20301-3062; facsimile (703) 602-0350. 
Please cite DFARS Case 2003-D081.
    At the end of the comment period, interested parties may view 
public comments on the World Wide Web at http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://emissary.acq.osd.mil/dar/dfars.nsf
.

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

SUPPLEMENTARY INFORMATION:

A. Background

    This interim rule establishes requirements for contractors to 
furnish unique item identifiers, or other item identification, and to 
provide the Government's acquisition cost of items that are to be 
delivered under a DoD contract.
    The rule requires contracting officers to include appropriate 
administrative requirements in contracts so that the Government's 
acquisition cost of the delivered items can be captured in DoD's 
property accountability, inventory, and financial management 
information systems.
    The rule requires that all items delivered to the Government be 
delivered under a contract line item and that the Government's 
acquisition cost of each item be identified under a contract line item 
or subline item or an informational subline item.
    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.
    DoD will make changes to its processes and information systems, in 
accordance with the requirements of this rule, necessary to comply with 
the financial reporting requirements imposed by the Federal Accounting 
Standards Advisory Board.
    DoD 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. The statement that the rule does not impose any new information 
collection requirements.

[[Page 58632]]

    4. The impact of the rule on small business.
    This rule was not subject to Office of Management and Budget review 
under Executive Order 12866, dated September 30, 1993.

B. Regulatory Flexibility Act

    This rule may have a significant economic impact on a substantial 
number of small entities within the meaning of the Regulatory 
Flexibility Act, 5 U.S.C. 601, et seq. DoD has prepared an initial 
regulatory flexibility analysis, which is summarized as follows:
    This interim rule adds requirements for contractors to provide 
unique identification for all items delivered to DoD, through the use 
of item identification marking. In addition, the rule adds requirements 
for DoD contracts to provide for identification of the Government's 
acquisition cost of all items built or acquired by the contractor and 
subsequently delivered to DoD under the contract. This rule will 
facilitate DoD compliance with the Chief Financial Officers Act of 1990 
(Pub. L. 101-576) and the financial reporting requirements imposed by 
the Federal Accounting Standards Advisory Board. The objective of the 
rule is to improve management of DoD assets. The rule does not 
duplicate, overlap, or conflict with any other Federal rules. There are 
no known significant alternatives that will enable DoD compliance with 
the Chief Financial Officers Act of 1990 and the Federal Accounting 
Standards Advisory Board reporting requirements.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the rule does 
not impose any new information collection requirements that require the 
approval of the Office of Management and Budget under 44 U.S.C. 3501, 
et seq.

D. Determination To Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense that urgent and compelling reasons exist to publish an 
interim rule prior to affording the public an opportunity to comment. 
DoD considers the implementation of unique identification--also known 
as UID, to be 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. It will enhance logistics, contracting, and financial business 
transactions supporting U.S. and coalition troops. Through the new 
policy, DoD can consistently capture the value of items it buys, 
control these items during their use and combat counterfeiting of 
parts. It will further 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. DoD issued UID policy by memorandum dated July 
29, 2003, requiring implementation by January 1, 2004. Immediate 
publication of this rule is essential to allow effective implementation 
of the policy by January 1, 2004. Comments received in response to this 
interim rule will be considered in the formation of the final rule.

List of Subjects in 48 CFR Parts 202, 204, 211, 212, 243, and 252

    Government procurement.

Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.


0
Therefore, 48 CFR Parts 202, 204, 211, 212, 243, and 252 are amended as 
follows:
0
1. The authority citation for 48 CFR Parts 202, 204, 211, 212, 243, and 
252 continues to read as follows:

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

PART 202--DEFINITIONS OF WORDS AND TERMS

0
2. Section 202.101 is amended by adding, in alphabetical order, a 
definition of ``Unique item identifier'' to read as follows:


202.101  Definitions.

* * * * *
    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.

PART 204--ADMINISTRATIVE MATTERS

0
3. Section 204.7104-1 is amended by revising paragraph (a)(3) to read 
as follows:


204.7104-1  Criteria for establishing.

* * * * *
    (a) * * *
    (3) Informational subline items shall be used to identify--
    (i) Each accounting classification citation assigned to a single 
contract line item number when use of multiple citations is authorized 
(see 204.7103-1(a)(4)(ii)); and
    (ii) 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.
* * * * *

0
4. Section 204.7104-2 is amended by adding paragraphs (e)(10) and (11) 
to read as follows:


204.7104-2  Numbering procedures.

* * * * *
    (e) * * *
    (10) 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).

----------------------------------------------------------------------------------------------------------------
           Item No.               Supplies/service      Quantity         Unit        Unit price       Amount
----------------------------------------------------------------------------------------------------------------
0031.........................  Spares for Torpedo MK           50  LOT............   $56,860.57    $2,843,028.50
                                45 Mod 1.
003101.......................  Integrator Assy LD;             50  EA.............          NSP  ...............
                                Acq Cost: $16,742.25.
003102.......................  Pulse Generator Assy            50  EA.............          NSP  ...............
                                LD; Acq Cost:
                                $8,357.56.
003103.......................  Drive Shaft Assy LD;            50  EA.............          NSP  ...............
                                Acq Cost: $6,365.12.

                                                  * * * * * * *
003116.......................  Actual Panel Assy LD;           50  EA.............          NSP  ...............
                                Acq Cost: $5,730.56.
003117.......................  Pulse Decoder; Acq              50  EA.............          NSP  ...............
                                Cost: <$5,000.
----------------------------------------------------------------------------------------------------------------


[[Page 58633]]

    (11) Subline items structured to capture the acquisition cost of 
spares that will require unique item identifiers under a cost-type 
contract.

----------------------------------------------------------------------------------------------------------------
                                                                                     Estimated   Total estimated
           Item No.               Supplies/service      Quantity         Unit         cost\*\        cost\*\
----------------------------------------------------------------------------------------------------------------
0031.........................  Spares for Torpedo MK           50  ...............  ...........    $2,843,028.50
                                45 Mod 1.
003101.......................  Integrator Assy LD...           50  EA.............  ...........  ...............
003102.......................  Pulse Generator Assy            50  EA.............  ...........  ...............
                                LD.
003103.......................  Drive Shaft Assy LD..           50  EA.............  ...........  ...............

                                                  * * * * * * *
003116.......................  Actual Panel Assy LD.           50  EA.............    $5,730.56  ...............
003117.......................  Pulse Decoder........           50  EA.............      $357.00  ...............
----------------------------------------------------------------------------------------------------------------
\*\ Acquisition cost for each item shall be reported in accordance with 252.211-7003, Item Identification and
  Valuation.

PART 211--DESCRIBING AGENCY NEEDS

0
5. Sections 211.274 through 211.274-3 are added to read as follows:


211.274  Item identification and valuation.


211.274-1  Item identification.

    (a) Contracts shall 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).
    (b) The contract shall 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.


211.274-2  Government's acquisition cost of items.

    (a) Contracts shall identify the Government's acquisition cost for 
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.
    (b) When separately priced contract line items or subline items are 
clearly not practicable, establish separate informational subline items 
(see 204.7104-1(a)) for identifying the Government's acquisition cost.
    (1) Informational subline items used only for identification of the 
Government's acquisition cost shall be clearly identified as such and 
shall not be used as a basis for payment.
    (2) When the Government's acquisition costs for like items differ, 
use a separate informational subline item to identify the acquisition 
cost for those items.
    (c) The Government's acquisition cost for items delivered under--
    (1) Fixed-price contracts is the unit price identified at contract 
award, updated by any contract modifications.
    (2) Cost-type contracts is the contractor's fully burdened actual 
cost for each item, plus a proportionate amount of the fee at the time 
the item is delivered to the Government.
    (i) Items valued at $5,000 or more shall be identified in a 
separate contract line item or subline item.
    (ii) 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.
    (d) Modify the contract 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.
    (e) The Government's acquisition cost of components delivered 
within end items need not be identified.


211.274-3  Contract clause.

    Use the clause at 252.211-7003, Item Identification and Valuation, 
in solicitations and contracts that require delivery of one or more 
``items'' as defined at 252.211-7003(a). Complete paragraph (b) of the 
clause with the contract line item number or subline item number and 
description of the item(s) requiring unique identification.

PART 212--ACQUISITION OF COMMERCIAL ITEMS

0
6. Section 212.301 is amended by adding paragraph (f)(vii) to read as 
follows:


212.301  Solicitation provisions and contract clauses for the 
acquisition of commercial items.

* * * * *
    (f) * * *
    (vii) Use the clause at 252.211-7003, Item Identification, as 
prescribed at 211.274-3.

PART 243--CONTRACT MODIFICATIONS

0
7. Section 243.171 is amended as follows:
0
a. By redesignating the introductory text and paragraphs (a), (b), and 
(c), as paragraphs (a) and (a)(1), (2), and (3), respectively; and
0
b. By adding a new paragraph (b) to read as follows:


243.171  Obligation or deobligation of funds.

* * * * *
    (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.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
8. Section 252.211-7003 is added to read as follows:


252.211-7003  Item Identification and Valuation.

    As prescribed in 211.274-3, use the following clause:

Item Identification and Valuation (Jan 2004)

    (a) Definitions. As used in this clause--
    Automatic identification device means a device, such as a reader 
or interrogator, used to retrieve data encoded on machine-readable 
media.
    Commonly accepted commercial marks means any system of marking 
products for identification that is in use generally throughout 
commercial industry or within commercial industry sectors. Some 
examples of commonly accepted commercial marks are: EAN.UCC Global 
Trade Item Number;

[[Page 58634]]

Automotive Industry Action Group B-4 Parts Identification and 
Tracking Application Standard, and B-2 Vehicle Identification Number 
Bar Code Label Standard; American Trucking Association Vehicle 
Maintenance Reporting Standards; Electronic Industries Alliance EIA 
802 Product Marking Standard; and Telecommunications Manufacturers 
Common Language Equipment Identification Code.
    Data qualifier means a specified character (or string of 
characters) that immediately precedes a data field that defines the 
general category or intended use of the data that follows.
    DoD recognized unique identification equivalent means a unique 
identification method that is in commercial use that can be used to 
uniquely identify DoD items that are purchased from commercial 
industries that use the unique identification equivalents. Some 
examples are: EAN.UCC Global Individual Asset Identifier, health 
care capital assets labeled with the Health Industry Bar Code 
Standard, and the Automotive Industry Action Group B-2 Vehicle 
Identification Number Bar Code Label Standard.
    Enterprise means the entity (i.e., a manufacturer or vendor) 
responsible for assigning unique item identifiers to items.
    Enterprise identifier means a code that is uniquely assigned to 
an enterprise by a registration (or controlling) authority.
    Government's acquisition cost means--
    (1) For fixed-price contracts, the unit price identified at 
contract award, updated by any contract modifications; and
    (2) For cost-type contracts, the Contractor's fully burdened 
actual cost that has been accumulated, plus a proportionate amount 
of fee for each item at the time the item is delivered.
    Issuing agency code means a code that designates the 
registration (or controlling) authority.
    Item means a single article or unit formed by a grouping of 
component or constituent parts required to be delivered in 
accordance with the terms and conditions of this contract. Under 
this contract, an item is any article produced, stocked, stored, 
issued, or used; or any product, including systems, materiel, parts, 
subassemblies, sets, or accessories.
    Machine-readable means an automatic information technology 
media, such as bar codes, contact memory buttons, radio frequency 
identification, or optical memory cards.
    Original part number means a combination of numbers or letters 
assigned by the enterprise at asset creation to a class of items 
with the same form, fit, function, and interface.
    Registration (or controlling) authority means an organization 
responsible for assigning a non-repeatable identifier to an 
enterprise (i.e., Dun & Bradstreet's Data Universal Numbering System 
(DUNS) Number, Uniform Code Council (UCC)/EAN International (EAN) 
Company Prefix, or Defense Logistics Information System (DLIS) 
Commercial and Government Entity (CAGE) Number).
    Serial number within the enterprise identifier or unique serial 
number means a combination of numbers, letters, or symbols assigned 
by the enterprise to an item that provides for the differentiation 
of that item from any other like and unlike item and is never used 
again within the enterprise.
    Serial number within the part number or serial number means a 
combination of numbers or letters assigned by the enterprise to an 
item that provides for the differentiation of that item from any 
other like item within a part number assignment.
    Serialization within the enterprise identifier means each item 
produced is assigned a serial number that is unique among all the 
tangible items produced by the enterprise and is never used again. 
The enterprise is responsible for ensuring unique serialization 
within the enterprise identifier.
    Serialization within the part number means each item of a 
particular part number is assigned a unique serial number within 
that part number assignment. The enterprise is responsible for 
ensuring unique serialization within the part number within the 
enterprise identifier.
    Unique item identification means marking an item with machine-
readable data elements to distinguish it from all other like and 
unlike items.
    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.
    (b) Unique item identification.
    (1) The Contractor shall provide unique item identification 
marking, or a DoD recognized unique identification equivalent (if 
one is not already marked), for--
    (i) All items delivered under this contract for which the 
Government's acquisition cost is $5,000 or more; and
    (ii) The following items to be delivered under this contract:


Contract Line Item                     Description
--------------------------------------


--------------------------------------


--------------------------------------



    (2) The unique item identifier and the component data elements 
of the unique item identifier shall not change over the life of the 
item.
    (3) Data elements.
    (i) For items that are serialized within the enterprise 
identifier, the unique identifier shall include the data elements of 
issuing agency code, enterprise identifier, and a unique serial 
number.
    (ii) For items that are serialized within the part number within 
the enterprise identifier, the unique identifier shall include the 
data elements of issuing agency code, enterprise identifier, the 
original part number, and the serial number.
    (iii) The issuing agency code shall be derived from the data 
qualifier for the enterprise identifier.
    (iv) The issuing agency code shall not be placed on the item.
    (4) Data syntax and semantics. The Contractor shall--
    (i) Mark the encoded data elements (except issuing agency code) 
on the item using any of the following three types of data 
qualifiers, as specified elsewhere in the contract:
    (A) Data Identifiers (DIs) (Format 06).
    (B) Application Identifiers (AIs) (Format 05), in accordance 
with ISO/IEC International Standard 15418, Information Technology--
EAN/UCC Application Identifiers and ASC MH 10 Data Identifiers and 
ASC MH 10 Data Identifiers and Maintenance.
    (C) Text Element Identifiers (TEIs), in accordance with the DoD 
collaborative solution ``DD'' format for use until the final 
solution is approved by ISO JTC1/SC 31. (Note: The DoD collaborative 
solution is described in Appendix D of the DoD guide to Uniquely 
Identifying Tangible Items, available at http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.acq.osd.mil/uid.
)
    (ii) Use high capacity automatic identification devices in 
unique identification that conform to ISO/IEC International Standard 
15434, Information Technology--Syntax for High Capacity Automatic 
Data Capture Media.
    (5) Marking items. Unless otherwise specified in the contract, 
data elements for unique identification (enterprise identifier, 
serial number, and, for serialization within the part number only, 
original part number) shall be placed on items requiring marking by 
paragraph (b)(1) of this clause in accordance with the standard 
practice of MIL-STD-130K, Identification Marking of U.S. Military 
Property.
    (c) Commonly accepted commercial marks. The Contractor shall 
provide commonly accepted commercial marking for items delivered 
under this contract that are not required to have unique item 
identification or a DoD-recognized unique identification equivalent 
under paragraph (b) of this clause.
    (d) Item records. Records of all items delivered to the 
Government shall include, at a minimum, the following information:
    (1) Description.
    (2) Unique item identifier concatenated or other approved item 
identifier.
    (3) Quantity shipped.
    (4) Unit of measure.
    (5) Acquisition cost.
    (6) Ship-to code.
    (7) Shipment date.
    (8) Enterprise identifier.
    (9) Serial number.
    (10) Original part number.
    (e) Valuation. The Contractor shall report the Government's 
acquisition cost of items delivered under this contract as follows:
    (1) Except as specified in paragraph (e)(3)(ii) of this clause, 
the Contractor shall report the Government's acquisition cost of 
items under separately priced contract line item numbers, subline 
item numbers, or informational subline item numbers.
    (2) When informational subline items are used only for 
identification of the Government's acquisition cost, they will be 
clearly identified as such and shall not be used as a basis for 
payment.
    (3) The Contractor shall normally report the Government's 
acquisition cost for items under cost-type contracts to the 
Contracting Officer at the time of delivery, but in no event later 
than the close of the Contractor's fiscal period during which the 
delivery was made.

[[Page 58635]]

    (i) When a unique item identifier is required, the Contractor 
shall report the actual cost that has been accumulated for each item 
identified in paragraph (b) of this clause and set forth in a 
contract line item or subline item.
    (ii) When a commonly accepted commercial mark is required, the 
Contractor shall report the actual cost that has been accumulated 
for each item, whether or not listed in paragraph (b) of this 
clause. In many cases, such items will have been combined under a 
single contract line item or subline item.
    (f) Subcontracts. The Contractor shall include the requirements 
of this clause in all subcontracts that will result in delivery of 
items under this contract.

(End of clause)

[FR Doc. 03-25827 Filed 10-9-03; 8:45 am]

BILLING CODE 5001-08-P