DEFARS CHANGE NOTICE, 20050422

DoD published the following final DFARS changes on April 22, 2005:

Final Rules:

Unique Item Identification and Valuation (DFARS Case 2003-D081)

Finalizes, with changes, the interim rule published in DFARS Change Notice 20040101.

The rule requires contractors to provide—

Unique identification of marking of all delivered items for which the Government’s unit acquisition cost is $5,000 or more, and certain items for which the Government’s unit acquisition cost is less than $5,000 (e.g, serially managed, mission essential, and controlled inventory); and The Government’s unit acquisition cost of all delivered items, as part of or associated with the Material Inspection and Receiving Report (DD Form 250).

The final rule includes exceptions to UID requirements for—

Items to be used in support of a contingency operation or to facilitate the defense against or recovery from nuclear, biological, chemical, or radiological attack; and

Commercial items or items acquired from a small business concern if the component acquisition executive (for ACAT I programs) or the head of the contracting activity (for all other programs) executes a determination and findings that it is more cost effective for the Government to assign, mark, and register the UID after delivery.

Unique identification enables DoD to consistently capture the value of the items it buys, control these items during their use, and combat counterfeiting of parts. Additional information on DoD’s unique identification policy can be found at http://www.acq.osd.mil/uid.

Affected subparts/sections: Part 211 Table of Contents; 211.2; 212.3; 252.211

The Federal Register notice for this rule: ……………….

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: Final rule.

SUMMARY: DoD has issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to establish policy for unique identification and valuation of items delivered under DoD contracts.

DATES: Effective April 22, 2005.

FOR FURTHER INFORMATION CONTACT: Ms. Michele Peterson, Defense Acquisition Regulations Directorate, OUSD(AT&L)DPAP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0311; facsimile (703) 602-0350. Please cite DFARS Case 2003-D081.

SUPPLEMENTARY INFORMATION:

A. Background DoD published an interim rule at 68 FR 75196 on December 30, 2003, containing policy that requires contractors to provide unique item identification (UID) and the Government's unit acquisition cost for items delivered under DoD contracts. Thirteen sources submitted comments on the interim rule. The following is a discussion of the comments and the changes made to the rule as a result of those comments:

1. Comment: A respondent stated that the implementation date of January 1, 2004, was too aggressive. The respondent recommended a later implementation date that would allow time in which to alert both Federal agencies and Federal contractors about the specifics of the new rule.

DoD Response: DoD agrees that the implementation schedule was aggressive. However, the rule is considered to be a strategic imperative. The implementation schedule could not be slipped.

2. Comment: We have been instructed to identify ``to be determined'' in the clause fill-in. We have also been instructed to contact our requirements (logistics) counterparts for their determination if this clause applies. According to our counterparts, they don't have the technical training or knowledge to make that determination. Also, there is currently no training or knowledge in the contracting world on a realistic cost for this information. DoD Response: The clause must go into all contracts that require the delivery of ``items'' as defined in the clause, unless an exception applies. Items valued at or above $5,000 must be marked with UID. The fill-ins are for items that meet other specified conditions, as well as embedded items that meet specified conditions. The implementing guidance in section 211.274 has been reworded for clarity to specify that the requiring activity determines what embedded items, subassemblies, or components require UID. There is less technical training or knowledge required than the interim rule implied; however, additional information is available at http://www.acq.osd.mil/dpap/uid.

3. Comment: DoD should give special consideration to communicating, aiding, and making available, training to all suppliers that will need to comply with this requirement--whether as prime contractors, or as subcontractors at any tier.

DoD Response: Concur. DoD is engaged in a large communication effort through its UID Program Office. The UID Web site at http://www.acq.osd.mil/dpap/uid should be consulted for information and resources that are available.

4. Comment: Both government buying offices and prime contractors should be encouraged to make special efforts to assist small and small disadvantaged, minority- or women-owned firms and make accommodations as needed to help them achieve the goals of this new requirement.

DoD Response: Concur. Small businesses will find that there are a number of vendors, many of which are small businesses themselves, that can provide UID marking assistance. Additionally, the final rule permits exceptions to marking requirements for items acquired from small business concerns when it is more cost effective for the Government requiring activity to assign, mark, and register the UID after delivery.

5. Comment: Not all requirements are generated from DoD. How does this requirement apply when a foreign government is the customer? A related comment was whether UID is applicable to Foreign Military Sales (FMS) contracts and whether our FMS customers were consulted about UID applicability and advised of potential cost impacts.

DoD Response: Items valued at or above $5,000, or items delivered to DoD that meet other specified conditions, must be marked with UID. There is no exception for FMS contracts. This rule has been developed with assistance from our allies and in consideration of international standards.

6. Comment: Does UID apply to items that we lease but of which we never take ownership? DoD Response: Yes. Items valued at or above $5,000, or items delivered to DoD that meet other specified conditions, must be marked with UID.

7. Comment: Two respondents asked whether UID and valuation apply to classified or COMSEC contracts. One respondent suggested that the final rule include instructions to require that all such issues be directed to the contracting officer for resolution.

DoD Response: Yes, the UID and valuation apply to classified contracts, unless there is an exemption cited in program directives.

8. Comment: Does UID apply to furniture that has an acquisition cost of $5,000 and above?

DoD Response: Yes, all items over $5,000 in value require unique identification.

9. Comment: The clause should include a statement that the contractor must comply with the most current version of MIL-STD-130.

DoD Response: Concur. After much consideration, it was considered best to refer to the version of MIL-STD-130 that is cited in the contract Schedule. This allows for updating, if necessary, at the time of award.

10. Comment: Is UID really appropriate when, in all likelihood, it probably will not survive the manufacturing process?

DoD Response: If an item is valued at or above $5,000, and it is delivered to DoD, it must be marked with UID. One of the purposes of UID is to be able to track items that may be warehoused for a period of time prior to being incorporated into a manufactured end item. The property record that was created when the item was delivered should be annotated with the item's disposition when it is incorporated into a manufactured item.

11. Comment: One respondent believes that, in an effort to save taxpayer dollars, items required for their own base operations, that are never used/received by the warfighter (i.e., is not a spare part), should be excluded.

DoD Response: Do not concur. Items valued at or above $5,000, or items meeting other specified conditions that are delivered to DoD, must be marked with UID. Although our primary mission is the warfighter, sound property management and accountability are integral to our responsibilities to the taxpayer.

12. Comment: Paragraph (c)(3) of clause at 252.211-7003 states, ``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.'' Where in the contract did you intend this to be specified?

DoD Response: The phrase ``as specified elsewhere in the contract'' has been excluded from the final rule.

13. Comment: The DoD Guide to Uniquely Identifying Items, Version 1.3, Nov 25, 2003, p. 18, indicates that the enterprise assigning serialization to an item makes the decision regarding which construct to use to uniquely identify items, as well as use of the associated business rules. The guide also suggests that it should not matter which of the three constructs the contractor uses because DoD should be able to read any of them. If that is the case, is it necessary to specify which type must be used in the contract?

DoD Response: The final rule clarifies that the determination of which construct to use is made by the contractor.

14. Comment: In the solicitation phase, would it not be better to allow contractors to propose which data qualifier they prefer to use rather than specifying one in the solicitation?

DoD Response: The phrase ``as specified elsewhere in the contract'' has been excluded from the final rule.

15. Comment: What ``Data Item Description'' covers UID? Further, is a new Data Item Description for UID being developed, or which existing one should we use?

DoD Response: The Data Item Description can be found under ``References'' on the UID Web site at http://www.acq.osd.mil/uid.

16. Comment: With regard to DFARS 211.274-2, it is not clear from the interim rule when the contract line items/subline items (CLINs/SLINs) or contract data requirements list (CDRL) will be updated to reflect the delivered items that require UID.

DoD Response: The intent is that the CLIN/SLIN structure should reflect the UID requirements at contract award. This may be the result of the procurement request and solicitation CLIN/SLIN structure, or it may be the result of information provided in the contractor's proposal in response to the solicitation. However, if this is not the case, the contract should be modified to reflect the CLIN/SLIN structure as necessary prior to delivery of the items requiring UID.

17. Comment: A respondent requested that DoD policy on applying UID to existing contracts remain as currently stated to apply UID to existing contracts ``where it makes business sense.''

DoD Response: Concur. This policy has not changed.

18. Comment: Considering that the new UID labeling requirement allows for the use of commonly accepted commercial marks for items that are not required to have unique identification, will DoD reconsider the application of the UID labeling requirement to contracts for commercial items under FAR Part 12?

DoD Response: The requirement for commonly accepted commercial marks for items that are not required to have unique identification has been deleted from the rule. Additionally, the final rule permits exceptions from UID requirements for commercial items when it is more cost effective for the Government requiring activity to assign, mark, and register the UID after delivery.

19. Comment: Is it DoD's intention to apply the UID labeling requirement to product orders placed under another agency's contract vehicle, such as GSA's Federal Supply Schedule or another agency's multiple award indefinite-delivery indefinite-quantity contract?

DoD Response: Yes. The final rule makes the clause at DFARS 252.211-7003 mandatory for all solicitations, contracts, and delivery orders. DoD believes that inclusion of the clause in delivery orders under Federal Supply Schedule (FSS) contracts is consistent with the provision at 252.211-7003, Marking, that is currently in FSS contracts allowing ordering activities to specify marking requirements in

delivery orders.

20. Comment: Does the UID labeling requirement apply to entities

that resell a manufacturer's product to DoD?

DoD Response: Yes.

21. Comment: Does DoD recognize Telcordia as an issuing agency?

DoD Response: Yes, DoD recognizes IAC ``LB'' for Telcordia.

22. Comment: Will DoD accept the UID in a MicroPDF417 symbol? The majority of North American Telecommunications Service Providers require equipment manufacturers to CLEI Code their products. Telcordia GR-383-CORE identifies MicroPDF417 as the required symbology for CLEI Coded product. We currently use MicroPDF417 in our designs and would require significant changes to implement Data Matrix 200. There is not sufficient space for two symbols, particularly when both will have the same information. The MH10.8.3 and MH10.8.2 data syntax will be the same for both symbologies. Further, MicroPDF417 has the benefit of being either square or rectangular in shape depending on how it is specified. This provides increased flexibility when working with space-constrained product. Scanners capable of reading Data Matrix 200 are also capable of reading MicroPDF417, but scanners capable of reading MicroPDF417 are not always capable of reading Data Matrix 200. DoD Response: No decision has been made as to DoD acceptance of the MicroPDF417 symbol.

23. Comment: Is the part number required in the 2D symbol if we use serialization within the enterprise identifier? The examples we see for

serialization within the enterprise are not clear. We will be using data identifier 18V, ANSIT1.220 issuing agency ``LB'', an enterprise identifier of ``WECO''. The serial number will use the data identifier ``S'' to define our unique serial number to form the UID. Do the data strings shown below meet the UID requirement?

CLEI coded product:

[) >Rs06 Gs18VLBWECOGSS123456789012345678GS11PAABBCCD1E1

Rs EOT.

Non-CLEI coded product:

[) >Rs06 Gs18VLBWECO G

SS123456789012345678 Rs EOT.

DoD Response: No. The only data identifier available for use in Construct 1 in this case is ``25S'', which is defined as ``18V'' + unique serial number (unique within the enterprise). The syntax would be:

Non-CLEI coded product (Serialization within the enterprise,

Construct 1)

[) >Rs06 Gs25SLBWECO123456789012345678Rs EOT.

UID would be: LBWECO123456789012345678

CLEI coded product (Serialization within the part, or product,

number, Construct 2):

[) >Rs06 Gs18VLBWECOGS11PAABBCCD1E1

GS S123456789012345678 Rs EOT.

Concatenated UID would be: LBWECOAABBCCD1E1123456789012345678

24. Comment: Does the order of the data fields matter? Telcordia has defined the CLEI Code as the first data field within the data symbol, and that is our current data format. Is the use of data identifiers sufficient to assemble the UID from the data string regardless of order?

DoD Response: The data fields should appear at the beginning of the syntax in order of concatenation: Construct 1: 25S, Construct 2: 18V+11P+S.

25. Comment: Must the UID label be scannable in service? If so, what exceptions would be considered?

DoD Response: Yes. The UID label must be scannable in service. There are no exceptions.

26. Comment: What is the labeling requirement for the first level product package label (P2 label)? Will this label require that the UID be encoded in a 2D symbol? If so, would this be a PDF417 symbol, Data Matrix 200, or other?

DoD Response: The labeling requirements are those specified in MIL-STD-129P.

27. Comment: What is the minimum data set for the UID on the shipping label, and is a 2D symbol required? We currently do not include product serial number information on our shipping labels. Adding UID information to the shipping label would require significant IT system changes.

DoD Response: The labeling requirements are those specified in MIL-STD-129P.

28. Comment: Several comments were received regarding the use of radio frequency identification (RFID) technology.

DoD Response: RFID technology is being addressed in separate DoD policy. The RFID policy, which addresses the labeling for shipping and packaging, is being developed in close coordination with the UID Program Office. RFID requirements will not replace or supersede UID requirements.

29. Comment: Is it DoD's understanding that the Christian Doctrine may apply, or will the requirement to mark items over $5,000 be applicable only to those contracts in which DFARS 252.211-7003 is cited?

DoD Response: DoD does not believe the Christian Doctrine would apply in the case of a contract that failed to include the clause at 252.211-7003.

30. Comment: Will drawings have to be changed prior to adding the physical UID marking to items? If not, will items be rejected for not conforming to the drawing? If so, are drawing changes to be bid the first time a solicitation is received for a particular item?

DoD Response: Defining the set of parts to mark, the method in which to mark them, the associated engineering analysis required, in addition to the process/program documentation, is a coordinated concert of activities that must occur simultaneously and with fluidity. The involvement of all entities is crucial as each lends a viewpoint to marking from different technological, logistical, and supply perspectives.

There must be close coordination with the DoD requiring activities, original equipment manufacturers, and vendors in order to minimize the manpower burden to accomplish the required changes on engineering documentation and to initiate the necessary changes to existing manufacturing and maintenance processes. This is true for a marking program on either a new end item or on a legacy end item.

Collaborative methods, or best practices that could be considered and are being prototyped today include the following: (1) Replacing existing data plates with UID labels; (2) Issuing a global engineering change notice; (3) Issuing part marking work orders into the existing manufacturing process; and (4) When the necessary marking information and criteria do not change the form, fit, or function of the part, the change does not require an immediate drawing update but rather can be accomplished by a coversheet with the marking instructions, thus permitting consolidation of drawing requirements.

31. Comment: Section 211.274-1(a)(3) is worded such that all lower-level assemblies of an item on a CDRL require UID marking. The respondent suggests rewording the section to ``Subassemblies, components, and embedded parts identified on a Contract Data Requirements List or other exhibit.''

DoD Response: Section 211.274-1(a)(3) of the interim rule contained guidance to the contracting officer. Paragraph (c)(1)(iii) of the clause at 252.211-7003 identifies the marking requirement for subassemblies, components, and embedded parts. It reads:

``(iii) Subassemblies, components, and parts embedded within delivered items as specified in Attachment Number ------.''

32. Comment: Even though the rule has been revised to clarify the responsibility of the vendor, it is our interpretation that DoD must assume the primary responsibility for communicating the unique identification at time of contract.

DoD Response: Concur. This should be accomplished through the clause at 252.211-7003.

33. Comment: Electronic invoicing, mandated by DFARS clause 252.232-7003, will be delayed to accommodate the UID requirements. Since many companies now are changing their accounting systems in order to be compliant with Wide Area WorkFlow, an additional requirement that UID's are included on invoices clearly will cause delays in the electronic billing system.

DoD Response: Do not concur. Currently contractors can separately invoice and report UID.

34. Comment: Small business suppliers may be required to create new systems for identification and marking of their products. This will result in increased costs to small businesses.

DoD Response: Small businesses will find there are a number of vendors, many of which are small businesses, that can provide UID marking assistance at low cost. In addition, the final rule permits exceptions to marking requirements for items acquired from small business concerns, when it is more cost effective for the Government requiring activity to assign, mark, and register the UID after delivery.

35. Comment: Extension of the UID requirement to the building trade industry, including electrical and mechanical products, will impose a severe business and economic hardship on large and small businesses alike to implement the marking and identification requirement on products, plus the supporting documentation to shipping documents and invoices.

DoD Response: As stated in the DoD response to Comment 34 above, there are a number of vendors that can provide UID assistance at low cost. The final rule permits exceptions to UID requirements for commercial items and for items acquired from small business concerns, when it is more cost effective for the Government requiring activity to assign, mark, and register the UID after delivery. The required supporting shipping documentation represents only a minimal increase in current DoD requirements for completion of DD Form 250, Material Inspection and Receiving Report.

36. Comment: One respondent suggested that DoD include ``Consumer Electronics Alliance'' in the examples of commonly accepted commercial marks.

DoD Response: The requirement for commonly accepted commercial marks for items that are not required to have unique identification has been deleted from the rule.

37. Comment: Please clarify that the ``Issuing Agency Code'' is derived and not ``marked'' on the item.

DoD Response: A change is included in the final rule to clarify that Issuing Agency Code is not marked.

38. Comment: One respondent noted that ``AIT'' means automatic identification technology.

DoD Response: Concur. The change is included in the final rule.

39. Comment: Please add ``Department of Defense Address Activity Code (DoDAAC)'' to registration (or controlling) authority.

DoD Response: Do not concur. An Issuing Agency Code (IAC) is being requested for DoDAAC. DoDAAC should not be added until the IAC is approved.

40. Comment: One respondent suggests rewording Section 252.211-7003(c)(3)(1)(A) as follows: ``Data Identifiers (DIs) (Format 06), 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.''

DoD Response: Concur. The change is included in the final rule.

41. Comment: A respondent suggests rewording Section 252.211-7003(c)(3)(1)(C) as follows: ``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. The DoD collaborative solution is described in Appendix D of the DoD Guide to Uniquely Identifying Items, available at http://www.acq.osd.mil/uid, and:''

DoD Response: Concur. DFARS 252.211-7003(c)(3)(i)(C) has been revised to essentially capture the comment.

42. Comment: The rule poses a substantial problem for commercial suppliers and service providers. The problem is that many commercial companies use item identification markings that differ significantly from the Department's prescribed unique identification markings.

For these companies to continue to do business with the Department, they will either need to establish separate assembly lines and procedures to process DoD orders using the Department's unique markings, or overhaul and convert their existing systems to meet the Department's requirements. For existing DoD suppliers and service providers, either of these approaches would pose a very expensive proposition. For potential new entrants to the Defense market, the requirements may pose a prohibitive barrier.

DoD Response: This rule is considered to be a strategic imperative. DoD acquires a large number of items from commercial suppliers and these items can not be excluded from the UID requirements. However, the final rule permits exceptions to marking requirements for commercial items when it is more cost effective for the Government requiring activity to assign, mark, and register the UID after delivery.

43. Comment: The interim rule may be read as burdensome and otherwise inconsistent with commercial practice to require vendors to change their delivery processes to accommodate Government-unique acquisition cost requirements. Some Department personnel have publicly stated that existing practices for completing DD 250 acceptance forms would suffice to support the acquisition unit cost requirement imposed by the interim rule. But that is not clear in the rule itself. We request that the rule be clarified to clearly read that vendors' existing DD 250 practices that currently meet DD 250 requirements will satisfy the interim rule's unit acquisition cost requirements.

DoD Response: Do not concur. There are no new or additional burdens imposed on vendors as a result of the ``Government's unit acquisition cost'' requirements. Currently, vendors are required to put a ``price'' on the DD 250. There is nothing in the rule to suggest that existing DD 250 practices would change.

44. Comment: Two respondents stated that imposing the interim rule's requirements in commercial acquisitions at this time is inconsistent with the Federal Acquisition Streamlining Act of 1994 (``FASA''), which mandates that Government agencies rely to the maximum extent practicable on commercial products and services to fill the Government's needs. In our view, imposition of the interim rule at this time in commercial acquisitions is neither required by statute nor consistent with customary commercial practice.

DoD Response: DoD does not concur that UID requirements are inconsistent with FASA. FASA does not restrict DoD's ability to define its needs and requirements for supporting the warfighter. However, the final rule permits exceptions to marking requirements for commercial items when it is more cost effective for the Government requiring activity to assign, mark, and register the UID after delivery of the item.

45. Comment: One respondent suggested that implementation of the rule for purposes of commercial item acquisitions be changed from January 1, 2004, to March 1, 2005. The respondent further recommended that, prior to the implementation date, the Department establish a working group that will include participants from commercial industry to determine what methods would be least intrusive to commercial practice, while operating to satisfy the Department's needs. The current interim rule seems to impose most of the burden, if not all, on the vendor, and may result in vendors having to adopt a ``Government only'' line of products at significant expense to both the vendor and the Government.

DoD Response: Do not concur. DoD acquires a large number of commercial items, and these items cannot be excluded from UID requirements. However, the final rule permits exceptions to marking requirements for commercial items when it is more cost effective for the Government requiring activity to assign, mark, and register the UID after delivery.

46. Comment: Does the rule apply to real property in DoD buildings and facilities?

DoD Response: Yes. Items valued at or above $5,000, or items that are delivered to DoD meeting other specified conditions, must be marked with UID.

47. Comment: Does the rule apply to electrical and mechanical equipment and building components making up a building and building systems?

DoD Response: Yes. Items valued at or above $5,000, or items that are delivered to DoD meeting other specified conditions, must be marked with UID.

48. Comment: In our February 27, 2004, letter to the Director of Defense Procurement, we expressed our concern that not all UID implementation costs may be recovered under existing accounting procedures. We encourage the Department to give early consideration to addressing this issue. We stand ready to meet with your representatives at your convenience.

49. DoD Response: DoD is willing to further discuss and examine whether all UID implementation costs may be recovered under existing accounting procedures.

50. Comment: In section 211.274-2(b)(2), Government's unit acquisition cost for cost type line, subline, or exhibit line items is the contractor's estimated fully burdened unit cost. In informal discussions with the Department's staff, we understand that this is intended to include a representative element of profit or fee. We suggest that this be clarified in the List of Frequently Asked Questions or in the Guide to Uniquely Identifying Items.

DoD Response: Concur. DoD will add to the List of Frequently Asked Questions an item that indicates that ``fully burdened unit cost to the Government'' would include all direct, indirect, G&A costs, and an appropriate portion of fee.

51. Comment: With regard to section 211.274-3, Contract clause, one respondent noted that this section has been improved for both industry and the government. It addresses ``items'' requiring UID and clarifies application where a CDRL/Exhibit is required for subassemblies, components, or embedded items. The respondent recommends that, in order to strengthen this principle, several illustrative examples be included in the DoD Guide to Uniquely Identified Items.

DoD Response: Concur. Examples will be included in the next version of the DoD Guide to Uniquely Identified Items.

52. Comment: In the clause at 252.211-7003(c)(1)(iii), there are requirements regarding subassemblies, components, and parts embedded within items specified in Exhibits or CDRLs. It should be noted that not all embedded items fit the category of subassemblies, components, or parts. As a hypothetical example, a latch that is permanently attached to a watertight door may be purchased but is not carried as a spare part, subassembly, or component. Once attached, it is embedded as a permanent part of the door and not replaceable. There needs to be clarification that such hardware is not to be subject to the requirements for assignment of a UID, and the clause need not be flowed down to the supplier.

DoD Response: Concur. This paragraph of the final rule was rewritten to clarify that only subassemblies, components, or parts embedded within an item that are serially managed, mission essential, or controlled inventory item, as determined by the requiring activity, may require UID.

53. Comment: In the clause at 252.211-7003(c)(3), Data syntax and semantics, the enterprise responsible for assigning the UID should determine the type of data qualifiers to use instead of this information being specified on a contract-by-contract basis.

DoD Response: Concur. The language was changed to avoid requiring a subcontractor that produces a common subassembly for use in three unique weapon systems to use a different type data qualifier depending on the end item application or service agency buying the item.

54. Comment: We believe that DoD should issue instructions to all of its organizations that failure to comply with the DFARS UID requirement in the first contract upon which it is imposed shall not be reason for refusing delivery or assessing withholds, provided the company has a plan in place for compliance and is proceeding in accordance with this plan. For example, we understand June 2004 is the earliest that Wide Area WorkFlow will be modified to accept DD Form 250 transactions that include required UID data, and then only for fixed-price contracts. Current contracts should not be rigidly enforced when the system for accepting the data for all contracts is not yet available to all suppliers.

DoD Response: Do not concur. Problems with compliance with the DFARS UID requirement should be addressed prior to award of the contract. After award, the contractor should be expected to comply with contract requirements.

55. Comment: We believe that special tooling and special test equipment and other items of Government property, created and used during the course of contracts during 2004, should be exempt from any UID marking or evaluation requirements until such items are delivered to the Government, or one of its suppliers, on or after January 1, 2005. Policy and procedure for this class of assets should be published as soon as possible.

DoD Response: Do not concur. Marking is only required when items, including special tooling and special test equipment, are delivered to the Government. Generally, it is unlikely that special tooling and special test equipment used in production under a contract requiring UID would have been delivered before January 1, 2005, due to the applicability of the rule (contracts resulting from solicitations that were issued on or after January 1, 2004).

56. Comment: The DoD UID policy should be coordinated and consistent with all other aspects of DoD acquisition policy. DoD should ensure that, as this and the RFID policies evolve, care is taken to reconcile the RFID and UID policies, DFARS rule, military standards, solicitation instructions, training, and other aspects to ensure uniform interpretation and avoid mis-steps on the part of Government or industry.

DoD Response: Concur. RFID policies, military standards related to RFID and UID, solicitation instructions, training, and other aspects of the policies are being closely coordinated with the UID Program Office.

57. Comment: Individual program offices should have the flexibility to designate which parts should be marked; however, they should not dictate the process and procedure for actual marking of parts. Individual program offices should be encouraged to work with their contractors to identify what parts are to be marked, but a program office should not normally tell a contractor what marking construct to use, since the contractor's plant, and its supply chain, may already be keyed to use of a certain approach, and may incur considerable cost and disruption to alter that for a single contract.

DoD Response: The phrase ``as specified elsewhere in the contact'' which permitted specifying the process and procedure for actual marking of parts has not been included in the final rule. This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993.

B. Regulatory Flexibility Act DoD has prepared a final regulatory flexibility analysis consistent with 5 U.S.C. 604. The analysis is summarized as follows: This rule establishes DoD policy for marking and valuation of items delivered under DoD contracts. The objective of the rule is to improve the management of DoD assets. DoD believes that the small businesses in the manufacturing categories subject to the rule normally use some form of product identification already, i.e., bar coding, as part of their commercial business practices. DoD is unaware of any small business that cannot comply with the UID policy. In fact, there is an increase in the number of small businesses providing marking/UID data services to industry and DoD. DoD anticipates that most small vendors will be able to comply using labels and data plates readily and inexpensively available in the commercial market. A small business can order labels and data plates from a wide array of vendors at a cost of $0.10 to $3.00 per item. No specific investment need be made by a small business.

A copy of the analysis may be obtained from the point of contact specified herein.

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

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

Government procurement. Michele P. Peterson, Editor, Defense Acquisition Regulations System.

Accordingly, the interim rule amending 48 CFR parts 202, 204, 211, 212, 243, and 252, which was published at 68 FR 75196 on December 30, 2003, is adopted as a final rule with the following changes:

A Microsoft Word format document showing all additions and deletions made by this rule:

Unique Item Identification and Valuation

DFARS Case 2003-D081

Final Rule

PART 211—DESCRIBING AGENCY NEEDS

* * * * *

SUBPART 211.2—USING AND MAINTAINING REQUIREMENTS DOCUMENTS

* * * * *

211.274 Item identification and valuation.

[211.274-1 General.

Unique item identification and valuation is a system of marking and valuing items delivered to DoD that will enhance logistics, contracting, and financial business transactions supporting the United States and coalition troops. Through unique item identification policy, which capitalizes on leading practices and embraces open standards, DoD can-

(a) Achieve lower life-cycle cost of item management and improve life-cycle property management;

(b) Improve operational readiness;

(c) Provide reliable accountability of property and asset visibility throughout the life cycle; and

(d) Reduce the burden on the workforce through increased productivity and efficiency.]

211.274-1[2] [Policy for unique] I[i]tem identification.

(a) [It is DoD policy that] DoD unique item identification, or a DoD recognized unique identification equivalent, is required for-

(1) All [delivered] items for which the Government’s unit acquisition cost is $5,000 or more;

(2) Items for which the Government’s unit acquisition cost is less than $5,000, when determined necessary by the requiring activity for [identified by the requiring activity as] serially managed, mission essential, or controlled inventory; equipment, repairable items, or consumable items or material; and

(3) [Items for which the Government’s unit acquisition cost is less than $5,000, when the requiring activity determines that permanent identification is required; and

(4) Regardless of value—

(i) Any DoD serially managed] [s]Subassembl[y]ies, components, [or] and parts embedded within an [delivered] item [and;

(ii) The parent item (as defined in 252.211-7003(a)) that contains the embedded subassembly, component, or part] identified on a Contract Data Requirements List or other exhibit (see http://www.acq.osd.mil/uid).

(b) [Exceptions. The Contractor will not be required to provide DoD unique item identification if--]If unique item identification is not required, the contractor shall provide commonly accepted commercial marks.

[(1) The items, as determined by the head of the agency, are to be used to support a contingency operation or to facilitate defense against or recovery from nuclear, biological, chemical, or radiological attack; or

(2) A determination and findings has been executed concluding that it is more cost effective for the Government requiring activity to assign, mark, and register the unique item identification after delivery of an item acquired from a small business concern or a commercial item acquired under FAR Part 12 or Part 8.

(i) The determination and findings shall be executed by—

(A) The Component Acquisition Executive for an acquisition category (ACAT) I program; or

(B) The head of the contracting activity for all other programs.

(ii) The DoD Unique Item Identification Program Office must receive a copy of the determination and findings required by paragraph (b)(2)(i) of this subsection. Send the copy to DPAP, SPEC ASST, 3060 Defense Pentagon, 3E1044, Washington, DC 20301-3060; or by facsimile to (703) 695-7596.]

211.274-2[3] [Policy for valuation] Government’s unit acquisition cost.

(a) Contractors shall identify the Government’s unit acquisition cost for all items delivered. [It is DoD policy that contractors shall be required to identify the Government’s unit acquisition cost (as defined in 252.211-7003(a)) for all items delivered, even if none of the criteria for placing a unique item identification mark applies.]

(b) The Government’s unit acquisition cost is—

(1) For fixed-price type line, subline, or exhibit line items, the unit price identified in the contract at the time of delivery.[;]

(2) For cost-type [or undefinitized] line, subline, or exhibit line items, the contractor’s estimated fully burdened unit cost to the Government for each item at the time of delivery.[; and]

[(3) For items delivered under a time-and-materials contract, the contractor’s estimated fully burdened unit cost to the Government at the time of delivery.]

(c) The Government’s unit acquisition cost of subassemblies, components, and parts embedded in delivered items need not be [separately] identified.

211.274-3[4] Contract clause.

Use the clause at 252.211-7003, Item Identification and Valuation, in solicitations and contracts that require [item identification or valuation, or both, in accordance with 211.274-2 and 211.274-3] delivery of one or more “items” as defined at 252.211-7003(a).

(a) Complete paragraph (c)(1)(ii) of the clause with the contract line, subline, or exhibit line item number and description of any item(s) below $5,000 in unit acquisition cost for which the requiring activity determines that DoD unique item identification or a DoD recognized unique identification equivalent is required [in accordance with 211.274-2(a)(2) or (3)].

(b) Complete paragraph (c)(1)(iii) of the clause with the applicable exhibit [attachment] number or Contract Data Requirements List item number, when DoD unique item identification or a DoD recognized unique identification equivalent is required [in accordance with 211.274-2(a)(4)] for [DoD serially managed] subassemblies, components, or parts embedded within deliverable items.

[(c) Use the clause with its Alternate I if—

(1) An exception in 211.274-2(b) applies; or

(2) Items are to be delivered to the Government and none of the criteria for placing a unique item identification mark applies.]

* * * * *

PART 212—ACQUISITION OF COMMERCIAL ITEMS

* * * * *

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

* * * * *

(f) * * *

(vi) Use the clause at 252.211-7003, Item Identification and Valuation, as prescribed at 211.274-3[4].

* * * * *

PART 252—SOLICITATION PROVISIONS AND CONTRACT CLAUSES

* * * * *

252.211-7003 Item Identification and Valuation.

As prescribed in 211.274-3[4], use the following clause:

ITEM IDENTIFICATION AND VALUATION (JAN 2004[APR 2005])

(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; 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.

“Concatenated unique item identifier” means—

(1) For items that are serialized within the enterprise identifier, the linking together of the unique identifier data elements in order of the issuing agency code, enterprise identifier, and unique serial number within the enterprise identifier; or

(2)  For items that are serialized within the original part[, lot, or batch] number, the linking together of the unique identifier data elements in order of the issuing agency code; enterprise identifier; original part[, lot, or batch] number; and serial number within the [original] part, lot, or batch] number.

“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 and has been recognized by DoD. All DoD recognized unique identification equivalents are listed at [http://www.acq.osd.mil/dpap/UID/equivalents.html] http://www.acq.osd.mil/uid.

“DoD unique item identification” means [a system of] marking an item[s delivered to DoD] with a unique item identifier[s] that has[ve] machine-readable data elements to distinguish it[an item] from all other like and unlike items. In addition—

(1) For items that are serialized within the enterprise identifier, the unique [item] identifier shall include the data elements of issuing agency code, [the] enterprise identifier, and a unique serial number.

(2) For items that are serialized within the part[, lot, or batch] number within the enterprise identifier, the unique [item] identifier shall include the data elements of issuing agency code, [the] enterprise identifier; the original part[, lot, or batch] number; and the serial number.

“Enterprise” means the entity (i.e.[e.g.], 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[n issuing agency] registration (or controlling) authority.

“Government’s unit acquisition cost” means—

(1) For fixed-price type line, subline, or exhibit line items, the unit price identified in the contract at the time of delivery; and

(2) For cost-type [or undefinitized] line, subline, or exhibit line items, the Contractor’s estimated fully burdened unit cost to the Government for each item at the time of delivery.[; and]

[(3) For items produced under a time-and-materials contract, the Contractor’s estimated fully burdened unit cost to the Government at the time of delivery.

“Issuing agency” 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) Code).]

“Issuing agency code” means a code that designates the registration (or controlling) authority [for the enterprise identifier].

“Item” means a single hardware article or [a single] unit formed by a grouping of subassemblies, components, or constituent parts required to be delivered in accordance with the terms and conditions of this contract.

["Lot or batch number" means an identifying number assigned by the enterprise to a designated group of items, usually referred to as either a lot or a batch, all of which were manufactured under identical conditions.]

“Machine-readable” means an automatic information [identification] 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[item] creation to a class of items with the same form, fit, function, and interface.

[“Parent item” means the item assembly, intermediate component, or subassembly that has an embedded item with a unique item identifier or DoD recognized unique identification equivalent.]

“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) Code).

“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[, lot, or batch] 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[, lot, or batch] 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[, lot, or batch] number” means each item of a particular part[, lot, or batch] number is assigned a unique serial number within that part[, lot, or batch] number assignment. The enterprise is responsible for ensuring unique serialization within the part[, lot, or batch] 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 [elements] marked on items that is globally unique,[and] unambiguous, and robust enough to ensure data information quality throughout life and to support multi-faceted business applications and users.

“Unique item identifier type” means a designator to indicate which method of uniquely identifying a part has been used. The current list of accepted unique item identifier types is maintained at [http://www.acq.osd.mil/dpap/UID/uid_types.html] http://www.acq.osd.mil/uid.

(b) The Contractor shall deliver all items under a contract line, subline, or exhibit line item.

(c) [DoD] U[u]nique item identification [or DoD recognized unique identification equivalents].

(1) The Contractor shall provide DoD unique item identification, or a DoD recognized unique identification equivalent, for-

(i) All [delivered] items for which the Government’s unit acquisition cost is $5,000 or more; and

(ii) The following items for which the Government’s unit acquisition cost is less than $5,000:

Contract Line, Subline, or Item Description

Exhibit Line Item Number:

_______________________________ _________________________

_______________________________ _________________________

_______________________________ _________________________

(iii) Subassemblies, components, and parts embedded within [delivered] items as specified in Exhibit[Attachment] Number ____ or Contract Data Requirements List Item Number _____.

(2) The [concatenated] unique item identifier and the component data elements of the [DoD] unique item identifier[cation or DoD recognized unique identification equivalent] shall not change over the life of the item.

(3) Data syntax and semantics [of DoD unique item identification and DoD recognized unique identification equivalents]. The Contractor shall [ensure that]—

(i) Mark t[T]he encoded data elements (except issuing agency code) [of the unique item identifier are marked] on the item using any[one] of the following three types of data qualifiers, as [determined by the Contractor] specified elsewhere in the contract:

(A) Data Identifiers (DIs) (Format 06) [in accordance with ISO/IEC International Standard 15418, Information Technology – EAN/UCC Aplication Identifiers and ANSI MH 10 Data Identifiers and ANSI MH 10 Data Identifiers and Maintenance].

(B) Application Identifiers (AIs) (Format 05), in accordance with ISO/IEC International Standard 15418, Information Technology – EAN/UCC Application Identifiers and A[N]S[I]C MH 10 Data Identifiers and A[N]S[I]C 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[/IEC] JTC1/[ ]SC 31. The DoD collaborative solution[“DD” format] is described in Appendix D of the DoD Guide to Uniquely Identifying Items, available at [http://www.acq.osd.mil/dpap/UID/guides.html]http://www.acq.osd.mil/uid; and

(ii) Use high capacity automatic identification devices in unique identification that[The encoded data elements of the unique item identifier] conform to ISO/IEC International Standard 15434, Information Technology – Syntax for High Capacity Automatic Data Capture Media.

(4) Marking items[DoD unique item identification and DoD recognized unique identification equivalents.

(i) The Contractor shall–

(A) Determine whether to serialize within the enterprise identifier or serialize within the part, lot, or batch number; and

(B)] Unless otherwise specified in the contract, [Place the] data elements for[of the] unique [item] identification[er] (enterprise identifier; serial number; and for serialization within the part[, lot, or batch] number only; original part[, lot, or batch] number) shall be placed on items requiring marking by paragraph (c)(1) of this clause[, based on the criteria provided] in accordance with the version of MIL-STD-130, Identification Marking of U.S. Military Property, cited in the contract Schedule.

(ii) The issuing agency code--

(A) Shall not be placed on the item; and

(B) Shall be derived from the data qualifier for the enterprise identifier.

(d) [For each item that requires unique item identification under paragraph (c) of this clause, in addition to the information provided as part of the Material Inspection and Receiving Report specified elsewhere in this contract, the Contractor shall report at the time of delivery, either as part of, or associated with, the Material Inspection and Receiving Report, the following information:]Commonly accepted commercial marks. The Contractor shall provide commonly accepted commercial marks for items that are not required to have unique identification under paragraph (c) of this clause.

[(1) Concatenated unique item identifier; or DoD recognized unique identification equivalent.

(2) Unique item identifier type.

(3) Issuing agency code (if concatenated unique item identifier is used).

(4) Enterprise identifier (if concatenated unique item identifier is used).

(5) Original part number.

(6) Lot or batch number.

(7) Current part number (if not the same as the original part number).

Current part number effective date.

Serial number.

Government’s unit acquisition cost.]

(e) Material Inspection and Receiving Report. The Contractor shall report at the time of delivery, as part of the Material Inspection and Receiving Report specified elsewhere in this contract, the following information:

(1) Description.*

(2) Unique identifier**, consisting of—

(i) Concatenated DoD unique item identifier; or

(ii) DoD recognized unique identification equivalent.

(3) Unique item identifier type.**

(4) Issuing agency code (if DoD unique item identifier is used).**

(5) Enterprise identifier (if DoD unique item identifier is used).**

(6) Original part number.**

(7) Serial number.**

(8) Quantity shipped.*

(9) Unit of measure.*

(10) Government’s unit acquisition cost.*

(11) Ship-to code.

(12) Shipment date.

(13) Contractor’s CAGE code or DUNS number.

(14) Contract number.

(15) Contract line, subline, or exhibit line item number.*

(16) Acceptance code.

* Once per contract line, subline, or exhibit line item.

** Once per item.

(f[e]) Material Inspection and Receiving Report for e[E]mbedded [DoD serially managed] subassemblies, components, and parts requiring unique item identification. The Contractor shall report at the time of delivery, [either] as part of[, or associated with] the Material Inspection and Receiving Report specified elsewhere in this contract, the following information:

(1) [Concatenated] U[u]nique item identifier [or DoD recognized unique identification equivalent] of the [parent] item delivered under a contract line, subline, or exhibit line item that contains the embedded subassembly, component, or part.

(2) [Concatenated] U[u]nique item identifier [or DoD recognized unique identification equivalent] of the embedded subassembly, component, or part, consisting of--

(i) Concatenated DoD unique item identifier; or

(ii) DoD recognized unique identification equivalent.

(3) Unique item identifier type.**

(4) Issuing agency code (if [concatenated] DoD unique item identifier is used).**

(5) Enterprise identifier (if [concatenated] DoD unique item identifier is used).**

(6) Original part number.**

[(7) Lot or batch number.**

(8) Current part number (if not the same as the original part number.**

(9) Current part number effective date.**]

(7[10]) Serial number.**

(8[11]) Unit of measure.

(9[12]) Description.

** Once per item.

(g[f]) The Contractor shall submit the information required by paragraphs (e[d]) and (f[e]) of this clause in accordance with the [data submission] procedures at [http://www.acq.osd.mil/dpap/UID/DataSubmission.htm]http://www.acq.osd.mil.uid.

(h[g]) Subcontracts. If paragraph (c)(1)(iii) of this clause applies, the Contractor shall include this clause, including this paragraph (h[g]), in all subcontracts issued under this contract.

(End of clause)

[ALTERNATE I (APR 2005)

As prescribed in 211.274-4(c), delete paragraphs (c), (d), (e), (f), and (g) of the basic clause, and add the following paragraphs (c) and (d) to the basic clause:

(c) For each item delivered under a contract line, subline, or exhibit line item under paragraph (b) of this clause, in addition to the information provided as part of the Material Inspection and Receiving Report specified elsewhere in this contract, the Contractor shall report the Government’s unit acquisition cost.

(d) The Contractor shall submit the information required by paragraph (c) of this clause in accordance with the data submission procedures at http://www.acq.osd.mil/dpap/UID/DataSubmission.htm.]

Reporting Contract Performance Outside the United States (DFARS Case 2004-D001)

Clarifies requirements for contractor reporting of contract performance outside the United States; and establishes two separate clauses to eliminate confusion between two reporting requirements previously contained in one clause. Relocates text on contracting officer distribution of reports to PGI. The reporting requirements apply to solicitations and contracts with a value exceeding $500,000.

Affected subparts/sections: Part 225 Table of Contents; 225.72; Part 252 Table of Contents; 252.225; PGI 225.72

The Federal Register notice for this rule:

DEPARTMENT OF DEFENSE

48 CFR Parts 225 and 252

[DFARS Case 2004-D001]

Defense Federal Acquisition Regulation Supplement; Reporting Contract Performance Outside the United States

AGENCY: Department of Defense (DoD).

ACTION: Final rule.

SUMMARY: DoD has issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to clarify requirements for reporting of contract performance outside the United States. This rule is a result of a transformation initiative undertaken by DoD to dramatically change the purpose and content of the DFARS.

DATES: Effective Date: April 22, 2005.

FOR FURTHER INFORMATION CONTACT: Ms. Amy Williams, Defense Acquisition Regulations Council, OUSD(AT&L)DPAP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0328; facsimile (703) 602-0350. Please cite DFARS Case 2004-D001.

SUPPLEMENTARY INFORMATION:

A. Background DFARS Transformation is a major DoD initiative to dramatically change the purpose and content of the DFARS. The objective is to improve the efficiency and effectiveness of the acquisition process, while allowing the acquisition workforce the flexibility to innovate. The transformed DFARS will contain only requirements of law, DoD-wide policies, delegations of FAR authorities, deviations from FAR requirements, and policies/procedures that have a significant effect beyond the internal operating procedures of DoD or a significant cost or administrative impact on contractors or offerors. Additional information on the DFARS Transformation initiative is available at http://www.acq.osd.mil/dp/dars/transf.htm.

DFARS Subpart 225.72, Reporting Contract Performance Outside the United States, implements: (1) DoD policy for contractor reporting of performance outside the United States under contracts exceeding $500,000; and (2) requirements of 10 U.S.C. 2410g for offerors and contractors to notify DoD of any intention to perform a DoD contract outside the United States and Canada, when the contract exceeds $10 million and could be performed inside the United States or Canada.

This final rule revises DFARS Subpart 225.72, and the corresponding solicitation provision and contract clause, to clarify the two separate reporting requirements. In addition, the rule removes DFARS text (previously at 225.7202) related to contracting officer distribution of reports. This text has been relocated to the new DFARS companion resource, Procedures, Guidance, and Information (PGI), available at http://www.acq.osd.mil/dpap/dars/pgi.

DoD published a proposed rule at 69 FR 31939 on June 8, 2004. DoD received comments from one industry association. The comments are summarized as follows:

1. Comment: The quarterly reporting requirement, which is not based on a statutory requirement, should be eliminated.

DoD Response: Do not concur. The quarterly report provides information that DoD uses in the assessment of bilateral defense trade with allied countries. The information is also of significant interest to Congress.

2. Comment: The reporting requirements should apply only to subcontracts that are awarded directly as a result of the award of the prime contract.

DoD Response: Do not concur. The purpose of the reporting requirements is to determine the portion of total contract dollars spent on performance outside the United States, regardless of whether the dollars are spent as a result of a preexisting contractual arrangement or as a result of a subcontract awarded directly under the prime contract.

3. Comment: The clause titles and text should be revised to clarify the nature and timing of the reporting requirements.

DoD Response: The final rule incorporates most of the recommended clarifying changes. In particular, the final rule--

Revises the titles of the clauses at (252) 225-7004 and (252) 225-7006 to make a distinction between requirements for reporting of intended and actual contract performance;

Revises paragraph (b) of the clause at (252) 225-7004 to require reporting ``as soon as practical after the information is known,'' rather than ``as soon as the information is known.''

Revises paragraph (b), and adds a new paragraph (e)(3), in the clause at (252) 225-7006 to further clarify reporting requirements for contractors and subcontractors.

4. Comment: Contracting officers should be authorized to substitute the new clauses for prior versions of the clauses that are in existing contracts, to simplify administration and improve compliance with clause requirements.

DoD Response: In accordance with FAR 1.108, the new clauses apply to solicitations issued on or after the effective date of this DFARS rule. Contracting officers may, at their discretion, include the clauses in any existing contract with appropriate consideration. This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993.

B. Regulatory Flexibility Act DoD certifies that this final rule will not 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., because the rule clarifies existing requirements for reporting contract performance outside the United States, with no substantive change to those requirements.

C. Paperwork Reduction Act The rule does not contain any new information collection requirements that require the approval of the Office of Management and Budget (OMB) under 44 U.S.C. 3501, et seq. The existing information collection requirements in DFARS Subpart 225.72 have been approved by OMB under Control Number 0704-0229 for use through March 31, 2007.

List of Subjects in 48 CFR Parts 225 and 252 Government procurement. Michele P. Peterson, Editor, Defense Acquisition Regulations System.

Therefore, 48 CFR Parts 225 and 252 are amended as follows:

A Microsoft Word format document showing all additions and deletions made by this rule:

Reporting Contract Performance Outside the United States

DFARS Case 2004-D001

Final Rule

(Text that is stricken and highlighted will be relocated

to Procedures, Guidance, and Information (PGI))

PART 225—FOREIGN ACQUISITION

* * * * *

SUBPART 225.72—REPORTING CONTRACT PERFORMANCE OUTSIDE THE UNITED STATES

225.7200[1] Scope of Subpart [Policy].

This subpart--

(a) Prescribes procedures for contractor reporting and DoD monitoring of the volume, type, and nature of contract performance outside the United States; and

(b) Implements 10 U.S.C. 2410g, for offerors and contractors to notify DoD of any intention to perform a DoD contract outside the United States and Canada when the contract could be performed inside the United States or Canada.

[(a) 10 U.S.C. 2410g requires offerors and contractors to notify DoD of any intention to perform a DoD contract outside the United States and Canada when the contract could be performed inside the United States or Canada.

(b) DoD requires contractors to report the volume, type, and nature of contract performance outside the United States.]

225.7201[2] Exception.

This subpart does not apply to contracts for commercial items, construction, ores, natural gas, utilities, petroleum products and crudes, timber (logs), or subsistence.

225.7202[3] [Contracting officer] D[d]istribution of reports.

Forward a copy of reports submitted in accordance with the clause at 252.225-7004, Reporting of Contract Performance Outside the United States, to the Deputy Director of Defense Procurement and Acquisition Policy (Program Acquisition and International Contracting), OUSD(AT&L)DPAP(PAIC), Washington, DC 20301-3060. This is necessary to satisfy the requirement of 10 U.S.C. 2410g that the notifications (or copies) be maintained in compiled form for 5 years after the date of submission. [Follow the procedures at PGI 225.7203 for distribution of reports submitted with offers in accordance with the provision at 252.225-7003, Report of Intended Performance Outside the United States and Canada– Submission with Offer.]

225.7203[4] Solicitation provision and contract clause[s].

Except for acquisitions described in 225.7201[2]

(a) Use the provision at 252.225-7003, Report of Intended Performance Outside the United States [and Canada–Submission with Offer], in solicitations with a value exceeding $500,000 [$10 million]; and

(b) Use the clause at 252.225-7004, Reporting of [Intended] Contract Performance Outside the United States [and Canada—Submission after Award], in solicitations and contracts with a value exceeding $500,000 [$10 million; and

(c) Use the clause at 252.225-7006, Quarterly Reporting of Actual Contract Performance Outside the United States, in solicitations and contracts with a value exceeding $500,000].

* * * * *

PART 252—SOLICITATION PROVISIONS AND CONTRACT CLAUSES

* * * * *

252.225-7003 Report of Intended Performance Outside the United States [and Canada–Submission with Offer].

As prescribed in 225.7203[4](a), use the following provision:

REPORT OF INTENDED PERFORMANCE OUTSIDE THE

UNITED STATES [AND CANADA–SUBMISSION WITH OFFER]

(APR 2003 [APR 2005])

(a) The offeror shall submit[, with its offer,] a Report of Contract Performance Outside [a report of intended performance outside] the United States [and Canada], with its offer, if—

(1) The offer exceeds $10 million in value; and

(2) The offeror is aware that the offeror or a first-tier subcontractor intends to perform any part of the contract outside the United States and Canada that—

(i) Exceeds $500,000 in value; and

(ii) Could be performed inside the United States or Canada.

(b) Information to be reported includes that for—

(1) Subcontracts;

(2) Purchases; and

(3) Intracompany transfers when transfers originate in a foreign location.

(c) The offeror shall submit the report using—

(1) DD Form 2139, Report of Contract Performance Outside the United States; or

(2) A computer-generated report that contains all information required by DD Form 2139.

(d) The offeror may obtain a copy of DD Form 2139 from the Contracting Officer [or via the Internet at http://www.dtic.mil/whs/directives/infomgt/forms/formsprogram.htm].

(End of provision)

252.225-7004 Reporting of Contract Performance Outside the United States.

As prescribed in 225.7203(b), use the following clause:

REPORTING OF CONTRACT PERFORMANCE OUTSIDE THE UNITED STATES

(APR 2003)

(a) Reporting criteria. Reporting under this clause is required for—

(1) Contracts exceeding $10 million in value, when any part that exceeds $500,000 in value could be performed inside the United States or Canada, but will be performed outside the United States and Canada. If the Contractor submitted the information with its offer, the Contractor need not resubmit the information unless it changes; and

(2) Contracts exceeding $500,000 in value, when any part that exceeds the simplified acquisition threshold in Part 2 of the Federal Acquisition Regulation will be performed outside the United States, unless—

(i) A foreign place of performance is the principal place of performance; and

(ii) The Contractor indicated the foreign place of performance in the Place of Performance provision of its offer.

(b) Information required. Information to be reported includes that for—

(1) Subcontracts;

(2) Purchases; and

(3) Intracompany transfers when transfers originate in a foreign location.

(c) Submission of reports. The Contractor—

(1) Shall submit reports required by paragraph (a)(1) of this clause to the Contracting Officer as soon as the information is known, with a copy to the addressee in paragraph (c)(2) of this clause. To the maximum extent practicable, the Contractor shall report information regarding a first-tier subcontractor at least 30 days before award of the subcontract;

(2) Shall submit reports required by paragraph (a)(2) of this clause within 10 days after the end of each Government quarter to—

(3) Shall submit reports using—

(i) DD Form 2139, Report of Contract Performance Outside the United States; or

(ii) A computer-generated report that contains all information required by DD Form 2139; and

(4) May obtain copies of DD Form 2139 from the Contracting Officer.

(d) Flowdown requirements.

(1) The Contractor shall include the substance of this clause in all first-tier subcontracts exceeding $500,000, except those for commercial items, construction, ores, natural gases, utilities, petroleum products and crudes, timber (logs), or subsistence.

(2) The Contractor shall provide the number of this contract to its subcontractors for reporting purposes.

(End of clause)

[252.225-7004 Report of Intended Performance Outside the United States and Canada—Submission after Award.

As prescribed in 225.7204(b), use the following clause:

REPORT OF INTENDED PERFORMANCE OUTSIDE THE UNITED STATES AND CANADA—SUBMISSION AFTER AWARD (APR 2005)

(a) Reporting requirement. The Contractor shall submit a report in accordance with this clause, if the Contractor or a first-tier subcontractor will perform any part of this contract outside the United States and Canada that—

(1) Exceeds $500,000 in value; and

(2) Could be performed inside the United States or Canada.

(b) Submission of reports. The Contractor—

(1) Shall submit a report as soon as practical after the information is known;

(2) To the maximum extent practicable, shall submit a report regarding a first-tier subcontractor at least 30 days before award of the subcontract;

(3) Need not resubmit information submitted with its offer, unless the information changes;

(4) Shall submit all reports to the Contracting Officer; and

(5) Shall submit a copy of each report to: Deputy Director of Defense Procurement and Acquisition Policy (Program Acquisition and International Contracting), OUSD(AT&L)DPAP(PAIC), Washington, DC 20301-3060.

(c) Report format. The Contractor--

(1) Shall submit reports using—

(i) DD Form 2139, Report of Contract Performance Outside the United States; or

(ii) A computer-generated report that contains all information required by DD Form 2139; and

(2) May obtain copies of DD Form 2139 from the Contracting Officer or via the Internet at http://www.dtic.mil/whs/directives/infomgt/forms/formsprogram.htm.

(End of clause)]

* * * * *

[252.225-7006 Quarterly Reporting of Actual Contract Performance Outside the United States.

As prescribed in 225.7204(c), use the following clause:

QUARTERLY REPORTING OF ACTUAL CONTRACT PERFORMANCE OUTSIDE THE UNITED STATES (APR 2005)

(a) Reporting requirement. Except as provided in paragraph (b) of this clause, within 10 days after the end of each quarter of the Government’s fiscal year, the Contractor shall report any subcontract, purchase, or intracompany transfer that—

(1) Will be or has been performed outside the United States;

(2) Exceeds the simplified acquisition threshold in Part 2 of the Federal Acquisition Regulation; and

(3) Has not been identified in a report for a previous quarter.

(b) Exception. Reporting under this clause is not required if—

(1) A foreign place of performance is the principal place of performance of the contract; and

(2) The Contractor specified the foreign place of performance in its offer.

(c) Submission of reports. The Contractor shall submit the reports required by this clause to: Deputy Director of Defense Procurement and Acquisition Policy (Program Acquisition and International Contracting), OUSD(AT&L)DPAP(PAIC), Washington, DC 20301-3060.

(d) Report format. The Contractor—

(1) Shall submit reports using—

(i) DD Form 2139, Report of Contract Performance Outside the United States; or

(ii) A computer-generated report that contains all information required by DD Form 2139; and

(2) May obtain copies of DD Form 2139 from the Contracting Officer or via the Internet at http://www.dtic.mil/whs/directives/infomgt/forms/formsprogram.htm.

(e) Subcontracts. The Contractor—

(1) Shall include the substance of this clause in all first-tier subcontracts exceeding $500,000, except those for commercial items, construction, ores, natural gases, utilities, petroleum products and crudes, timber (logs), or subsistence;

(2) Shall provide the number of this contract to its subcontractors required to submit reports under this clause; and

(3) Shall require the subcontractor, with respect to performance of its subcontract, to comply with the requirements directed to the Contractor in paragraphs (a) through (d) of this clause.

(End of clause)]

A Microsoft Word format document showing the text added to PGI:

Reporting Contract Performance Outside the United States

DFARS Case 2004-D001

Procedures, Guidance, and Information

PGI 225—FOREIGN ACQUISITION

PGI 225.72--REPORTING CONTRACT PERFORMANCE OUTSIDE THE UNITED STATES

PGI 225.7202 Contracting officer distribution of reports.

Before contract award, forward a copy of any reports that are submitted with offers in accordance with the provision at 252.225-7003, Report of Intended Performance Outside the United States and Canada—Submission with Offer, to the Deputy Director of Defense Procurement and Acquisition Policy (Program Acquisition and International Contracting), OUSD(AT&L)DPAP(PAIC), Washington, DC 20301-3060. This is necessary to satisfy the requirement of 10 U.S.C. 2410g that notifications (or copies) of contract performance outside the United States and Canada be maintained in compiled form for 5 years after the date of submission.