DOD Guidance Provides for Re-openers and Price Adjustments to Cover UID Compliance Costs
The Defense Department July 19 issued guidance on the pricing and accounting for costs incurred by contractors to comply with DOD’s recent unique item identification (UID) initiative. The guidance recognizes that compliance with the interim DOD rule issued December 30, 2003 – requirement to provide unique identification for all items above $5,000 to be delivered to DOD using machine readable data elements (i.e. bar codes) – may be costly for contractors and provides that costs of compliance should be allowable. If such costs cannot be estimated with reasonable accuracy, COs should consider including a reopener clause in new contracts to cover the difference between anticipated and actual costs; on existing contracts, COs should negotiate an equitable adjustment to the contract price for compliance.
The guidance states for the costs to be allowable they should follow cost assignment requirements of the Cost Accounting Standards and FAR 31: (1) tangible capital assets need to be depreciated in accordance with CAS 404/409 and FAR 31.205-11 (2) intangible assets expensed or amortized in accordance with generally accepted accounting principles (3) recurring costs that would have otherwise been incurred that are other than capital assets expensed in the period incurred (4) non-recurring costs that would have otherwise been incurred should be expensed in the period incurred but if not otherwise incurred then the expense should be separately accumulated as a deferred cost and amortized over a period not to exceed five years.
Under Secretary of Defense Michael Wynn September 3 issued a UID policy statement encouraging an “evolutionary approach” for implementing on existing items in inventory and operational use. It set a 2007 date to have (1) all existing serialized assets entered into the UID registry and (2) UID marking capabilities established for all existing items and embedded assets so marking can begin. By 2010 all UID marking of items and embedded assets should be completed. The DOD memo and highlights of the proposed policy are available at "http://www.acq.osd.mil/uid/ ".
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