Defense Federal Acquisition Regulation Supplement (DFARS); Warranty Tracking of Serialized Items, DFARS Case 2009-D018

AGENCY:

Defense Acquisition Regulations System, Department of Defense (DoD).

ACTION:

Final rule.

SUMMARY:

DoD is issuing a final rule to amend the Defense Federal Acquisition Regulation Supplement (DFARS) to implement a policy memorandum of the Undersecretary of Defense for Acquisition, Technology and Logistics dated February 6, 2007, which required definition of the requirements to track warranties for Item Unique Identification-required items in the DoD Item Unique Identification Registry. This final rule stresses that the enforcement of warranties is essential to the effectiveness and efficiency of DoD's material readiness.

DATES:

Effective date: June 8, 2011.

FOR FURTHER INFORMATION CONTACT:

Mr. Julian Thrash, 703-602-0310.

SUPPLEMENTARY INFORMATION:

I. Background

The Undersecretary of Defense for Acquisition, Technology and Logistics issued a policy memorandum dated February 6, 2007, which instructed the Director of Defense Procurement and Acquisition Policy to define the requirements to track warranties for Item Unique Identification-required items in the DoD Item Unique Identification Registry. The capability to track warranties will significantly enhance the ability of DoD to—

• Identify and enforce warranties;
• Ensure sufficient durations of warranties for specific goods; and
• Realize improved material readiness.

DoD issued a proposed rule in the Federal Register at 75 FR 52917 on August 30, 2010, to address the requirement to more effectively track warranties for Item Unique Identification items. The comment period closed October 29, 2010.

II. Public Comment

One respondent submitted comments to the proposed rule, which are discussed below.

Comment: The respondent states that while the unique item identification requirement was not established for the purpose of tracking warranty items, its use as a warranty-tracking methodology would result in increased costs for contractors and the Government. The addition of warranted items to DFARS 211.274-2 will expand the criteria for selecting the items to be uniquely identified. Today, that determination is based almost completely on the value of the item. Warranted items may or may not meet the value criterion established for determining what should be uniquely identified and marked. An application of unique item identification to warranted items may cause a part to be covered by unique item identification under a contract calling for warranty and not covered by unique item identification on another contract without warranty.

Response: This requirement applies to any “warranted serialized item,” and a clarifying change was made at 211.274-2(4)(iii) by adding the term “any warranted serialized item.”

Comment: The respondent also recommends that DoD not publish a final rule on warranty tracking of serialized items.

Response: DoD requires a more effective way to track warranties for Item Unique Identification items. Presently, DoD lacks the enterprise capability to provide visibility and accountability of warranty data associated with acquired goods. The tracking of warranties, from the identification of the requirement to the expiration date of the warranted item, will significantly enhance the ability of DoD to take full advantage of warranties when they are part of an acquisition. This will result in reduced costs, ability to recognize benefits, and the ability to compare performance against Government-specified warranties. The consequence of not collecting this data is that warranty management of mission critical assets is not optimized, which may have a significant impact during time of war or in response to contingencies. When this capability is developed, it is expected that warranty information will be collected and shared by acquisition organizations to document and improve warranty management. Additionally, as counterfeit items, particularly electronics parts increase, this traceability of items to a warranty will assist all members of the supply chain to manage risk appropriately. This traceability also leads to ensuring the Government receives the supplies purchased, reducing the number of counterfeit items. Based upon the above, DoD published a final rule.

III. Additional Technical Changes Required

During the final rule development, DoD restructured the layout of the rule to reduce burden to contractors and to facilitate data capture. This change required moving the tables from the clause at 252.246-7006, Warranty Tracking of Serialized Items, to 246.710-70, Warranty attachment. This will enable data capture through the use of the warranty attachments. DoD has posted schema to the DPAP/Program Development and Implementation Web site at http://www.acq.osd.mil/dpap/pdi/eb/gfp.html,, to facilitate this process. A summary of the required technical changes follows—

• DFARS 211.274-2, Policy for unique item identification—added the term “any warranted serialized item” to clarify that this rule applies to serialized warranted items, regardless of the value. The existence of a warranty does not solely create a criterion for Item Unique Identification applicability.
• DFARS 246.701, Definitions—added references to definitions for “duration,” “enterprise,” “enterprise identifier,” “fixed expiration,” “issuing agency,” “item type,” “starting event,” “serialized item,” “unique item identifier,” “usage,” “warranty administrator,” “warranty guarantor,” “warranty repair source,” and “warranty tracking” as being defined in the clause at 252.246-7006.
• DFARS 246.710, Solicitation provision and contract clauses, paragraph (5)—replaced previous references to tables I and II as the warranty attachments were added to DFARS 246.710-70. Related subparagraphs were revised accordingly to incorporate tables I and II, which were previously referred to in the provision at 252.246-7005, and included in the clause at 252.246-7006. Electronic business systems are being expanded to capture the data elements needed to support warranty tracking through the use of an attachment format. The procurement data strategy, the DoD method to implement data capture, relies on attachment file formats. This format can be embedded in the contract data file by the contract writing system, or sent in parallel as a separate attachment. To facilitate data capture, the tables for warranty data have been translated into an XML attachment schema published by DPAP, and available at this website: http://www.acq.osd.mil/dpap/pdi/eb/gfp.html. This schema will enable data flow from system to system. Data flow from a clause is not possible because the clause is text, not data. Extracting the data requirements from the clause and carrying it separately in an attachment will make the flowing of the data to the various business systems possible without modifying every DoD contract writing system.
• DFARS 246.710-70, Warranty attachment—a new section was added to provide two attachments and completion instructions to replace two tables previously included in the proposed clause at 252.247-70YY. The two new attachments are “Attachment __: Warranty Tracking Information,” and “Attachment __: Warranty Repair Source Instructions.”
• The “Warranty Tracking Information” attachment title is supplemented to include “Solicitation or Contract Number [To be filled in by the contracting officer].” Further, this attachment indicates that data marked “*” is to be completed by the requiring activity if a warranty is specified by the Government otherwise all offerors are to complete those elements as part of their offers. Data marked by “**” is to be completed by the contractor at the time of award. A reference to “***” was added for data to be completed at or after the time of award. The definition for “warranty administrator enterprise identifier” was revised to include the term “globally unique” identifier code.
• The “Warranty Repair Source Instructions” attachment title is supplemented to include “Solicitation or Contract Number [To be filled in by the contracting officer].” Additionally, the numbering for the table notes was revised for that table only. The definition for “warranty administrator enterprise identifier” was revised for clarity to include the term “globally unique” identifier code rather than using the term “non-repeatable.” Also, a note for “instructions” was moved from the table, and made a stand-alone note under the table.
• 252.211-7003(a), Item Identification and Valuation—the definition of “issuing agency” was revised for clarity to include the term a “globally unique” identifier code rather than using the term “non-repeatable.”
• 252.246-7005, Notice of Warranty Tracking of Serialized Items, was revised to replace references to tables I and II, which were incorporated into DFARS 246.710 as a warranty attachment.
• 252.246-7006, Warranty Tracking of Serialized Items—
• Paragraph (a), the definition of “DoD Item Unique Identification Registry” was not required for the clause and was removed. The definition of “issuing agency” was revised to include the term “globally unique” identifier code for clarity.
• Paragraph (b) was revised to remove references to tables I and II as these tables are incorporated into 246.710-70 as a warranty attachment to facilitate data flow.

IV. Executive Orders 12866 and 13563

Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under Section 6(b) of Executive Order 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

V. Regulatory Flexibility Act

DoD has prepared a final regulatory flexibility analysis consistent with 5 U.S.C. 604 et seq. A copy of the analysis may be obtained from the point of contact specified herein and is summarized below. The objective of this rule was for DoD to develop a more effective way to track warranties for Item Unique Identification items. DoD has lacked the enterprise capability that would provide visibility and accountability of warranty data associated with acquired goods. The tracking of warranties, from the identification of the requirement to the expiration date of the warranted item, will significantly enhance the ability of DoD to take full advantage of warranties when they are part of an acquisition, resulting in the ability to—

• Identify and enforce warranties;
• Ensure sufficient durations of warranties for specific goods; and
• Realize improved material readiness.

In FY 2009, DoD issued approximately 16,000 solicitations that use warranty clauses. In response to those solicitations, DoD estimates that approximately 76,000 offers may have been received (66,000 from small business, 10,000 from other than small business). Of that total, DoD estimates that 50% of the time the Government will provide the required warranty information for 38,000 offers (33,000 small and 5,000 other than small businesses). Therefore, approximately 33,000 small entities may be impacted by the rule.

This rule was published as a proposed rule in the Federal Register at 75 FR 52971, on August 30, 2010. No comments were received from small entities on the affected DFARS subpart with regard to small businesses. We anticipate that there will be limited, if any, additional costs imposed on small businesses unless there is a covered claim filed against a particular contractor.

IV. Paperwork Reduction Act

The provision at 252.246-7005, Notice of Warranty Tracking of Serialized Items and the clause at 252.246-7006, Warranty Tracking of Serialized Items, contain new information collection requirements. The Office of Management and Budget has approved the information collection requirements under Control Number 0704-0481, Warranty Tracking of Serialized Items.

List of Subjects in 48 CFR Parts 211, 246, and 252

• Government procurement

Therefore, 48 CFR parts 211, 246, and 252 are amended as follows:

1. The authority citation for 48 CFR parts 211, 246, and 252 continues to read as follows:

Authority: 41 U.S.C. 1303 and 48 CFR chapter 1.

PART 211—DESCRIBING AGENCY NEEDS

2. Amend section 211.274-2 as follows:

(a) Amend paragraph (a)(4)(i) to remove “and” after the semicolon;

(b) Amend paragraph (a)(4)(ii) to add the word “and” after the semicolon;

(c) Add new paragraph (a)(4)(iii) to read as set forth below.

PART 246—QUALITY ASSURANCE

3. Revise section 246.701 to read as follows:

4. Amend section 246.710 to:

(a) Revise the section title; and

(b) Add new paragraph (5)(i).

The additions and revisions read as follows:

5. Add new section 246.710-70 to read as follows:

PART 252—SOLICITATION PROVISIONS AND CONTRACT CLAUSES

6. Amend section 252.211-7003 as follows:

(a) Amend the clause date by removing “(AUG 2008)” and adding in its place “(JUN 2011)”;

(b) Amend paragraph (a) by revising the definition of “Issuing agency” as shown below.

7. Add section 252.246-7005 to read as follows:

6. Add section 252.246-7006 to read as follows: