CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure Working Definition of a Properly Formed Line Item Contract

line items form the basis of effective contract structure. In order for a line item to be formed properly, the magnitude of the performance or delivery expressed in the contract must primarily be divisible by the "quantity" of each line item. If part of one unit can be performed or delivered separately, it should be made into a separate item. A shipment must contain a whole number quantity of each line item delivered. Page 1 of 30

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure Line Item Characteristics Line items should include the following four characteristics per Defense Federal Acquisition Regulation Supplement (DFARS) 204.7103: Single unit price Separately identifiable Separate delivery schedule Single accounting classification citation Page 2 of 30

Click on each item above to learn more.

Single Unit Price The item must have a single unit price or a single total price. Separately Identifiable A contract line item must be identified separately from any other equipment, supplies or services in the contract. Separate Delivery Schedule Each contract line item or service shall have its own delivery schedule, period of performance, or completion date expressly stated. "As required" constitutes a proper and expressly stated delivery term. Single Accounting Classification Citation Accurate lines of accounting are key to successful contract execution and payment by ensuring proper posting of transactions.

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure Special Considerations for Separately Identifiable Line Items Supplies are separately identifiable if they have no more than one: National Stock Number (NSN) Item description Manufacturer's part number Services are separately identifiable if they have no more than one: Scope of work Description of services The separate identification requirement does not apply if there are associated subline items established for other than informational reasons, and those subline items include the actual detailed identification in accordance with DFARS 204.7104. Where this exception applies, use a general narrative description instead of the contract item description. Page 3 of 30

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure Special Considerations for Separate Delivery Schedules The fact that there is more than one delivery date, destination, performance date, or performance point may be a determining factor in the decision as to whether to establish more than one contract line item. If a contract line item has more than one destination or delivery date, the contracting officer may create individual contract line items for the different destinations or delivery dates. Alternatively, the contracting officer or may specify the different delivery dates for the units by destination in the delivery schedule. Page 4 of 30

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure Individual Delivery Example A separate delivery schedule should be established for each subline item rather than for the contract line item. The table below is an example that demonstrates subline items structured to allow identification (in Section F) of different destinations for identical items that are identically priced. UNIT QUANTITY UNIT PRICE AMOUNT Page 5 of 30

ITEM 0001

SUPPLIES/SERVICE NSN 1615-00-591-6620 Shim, Aluminum Alloy, Apbl, Rotor, Helicopter PRON a1-963821-M1-M1 ACRN: AA

0001AA A3168R-9030-4025 A2537M IPD: 2 RDD: 334 PROJ: 501 0001AB A3168R-9030-4026 A51AXBM IPD: 2 RDD: 325 PROJ: 502 0001AC A3168R-9030-4027 A67KBCM IPD: RDD: 349 PROJ: 503

10 10 15

EA EA EA

$100.00 $1,000.00 $100.00 $1,000.00 $100.00 $1,500.00

Reference: Procedures, Guidance, and Information (PGI) 204.7104-2

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure The Use of "Lot" in Supply Contracts Although a contract line item may indicate a quantity of "1" lot, the lot may consist of a variety of items and quantities delivered over time. This conflicts with the DFARS definition of a line item. When there are multiple deliveries against the line item, the lot quantity is designated as "0". However, one or more individual items are actually being delivered. This situation leads to ambiguity in the amount to be paid by the Government, as what exactly is being accepted by the Government is ambiguous. A "0" lot is sent to the Mechanization Of Contract Administration Services (MOCAS) system, but payment is for the total value of the lot. There is no mechanism to report a partial acceptance. The ambiguity must be reconciled at contract closeout. Even under the Item Unique Identification (IUID) program, the unit acquisition cost would be recorded at the total value of the proportionate lot. Under Wide Area Workflow (WAWF) system, the lot price could potentially be divided by the actual quantity. However, there would be no way to know if the items that comprise the total quantity are "like" items or not. Unless the actual unit of measure and actual unit acquisition cost were added, the proper distribution of price among the delivered items cannot be accurately determined. Page 6 of 30

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure The Use of "Lot" in Supply Contracts, Cont. So what is the best approach to resolve the "lot" issue? The unit of issue "lot" should be used by exception only. In most cases, subline items or an exhibit should be used to denote the actual deliverables and delivery schedule. There are no NSNs with a unit of issue of "lot," so purchasing supplies using "lot" may indicate a mistake. When selecting the unit of issue, it's vital to carefully consider how the item is to be delivered Page 7 of 30

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure The Use of "Lot" in Supply Contracts Cont. Generally speaking, "lot" should not be used when "each" can be used. Below is an example of the incorrect use of the unit "lot:" ITEM NO 0001 UNIT PRICE Page 8 of 30

SUPPLIES/SERVICE Processing Module/QTY 8 FFP Model No. 234-56-7890: FOB: Destination

QUANTITY UNIT

AMOUNT

0001AA Funding for Processing Module FFP Model No. 234-56-7809 FOB: Destination Purchase Request No. xxxxxxxxxxxxxxx ACRN:AA 0001AB Funding for Processing Module FFP Model No. 234-56-7809 FOB: Destination Purchase Request No. yyyyyyyyyyyyyyy ACRN:AB 0001AC Funding for Processing Module FFP Model No. 234-56-7809 FOB: Destination Purchase Request No. zzzzzzzzzzzzzzz ACRN:AC

Lot

$8,044.00 $8,044.00

Lot

$6,033.00 $6,033.00

In this example, it would have been more effective to indicate a unit price of $2,011 and show the actual quantities in each line. Reference: PGI 204.7104-2

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure The Use of "Kit" in Contracts Contracts often assign "kit" as the unit of issue for one or more line items. Kits include multiple, and usually dissimilar, items. The component items are not separately priced. Varying quantities of the kits on contract may be shipped with multiple shipments. The "kit" is not considered as having been received by the Government until all shipments have been received ("kit by set"). Page 9 of 30

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure The Use of "Kit" in Contracts, Cont. In accordance with DFARS 211.274-2, line items with a unit acquisition cost exceeding $5,000 require IUID for the item. This requirement may apply for a kit. The kit needs to be a discrete deliverable: The Government cannot record partial acceptance of a kit in WAWF WAWF requires a single shipment per Electronic Data Interchange (EDI) 856 (Ship Notice/Manifest) transaction No more than one radio frequency identification (RFID) tag can be associated with a quantity of "1" Page 10 of 30

Radio Frequency Identification (RFID) RFID is an automatic identification and data capture technology consisting of one or more reader/interrogators and one or more RF transponders in which data transfer is achieved by means of modulated inductive or radiating electromagnetic carriers. RFID serves as an "electronic bar code" in the distribution and inventory processes, allowing automated scanning and tracking of packages through a facility.

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure The Use of ''Kit'' in Contracts, Cont. Consider the following questions regarding the use of "kit": Are the contents better described as unpriced embedded items or as separately priced subline items (with IUID required where appropriate)? How should costs be segregated if a parent/child relationship is established? Page 11 of 30

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure The Use of "Kit" in Contracts, Cont. So, what is the best approach? If the kit really is genuinely used as a kit (such as a toolbox), then require IUID in accordance with the DFARS requirement for the toolbox and for any necessary components. Otherwise, apply the same solutions as recommended for lots: Use exhibits Use subline items Page 12 of 30

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure The Use of "Kit" in Contracts, Cont. Delivery schedule and price should be established for each identified part of the kit at the subline item level, and not for the kit at the contract line item level. Unit identification (UID) requirements can be expressed at the subline level, thus avoiding the need to generate a "dummy" UID for the kit. Below is an example that shows effective line item structuring. Note that the subline items are structured to identify parts of a kit. UNIT PRICE Page 13 of 30

ITEM 0031

SUPPLIES/SERVICE Conversion Kit to Convert Torpedo MK 45 Mod 0 to Torpedo MK 45 Mod (50 Kt @ $10,868.52; $543,426 total)

QUANTITY UNIT 1

AMOUNT

0031AA Integrator Assy LD 620106 0031AB Pulse Generator Assy LD 587569 0031AC Drive Shaft Assy LD 587559 * * * 0031BF Actual Panel Assy LD 542924 50

50 50 50 50

EA EA EA EA

$10,868.52 $543,426.00 NSP NSP NSP

Reference: PGI 204.7104-2

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure Checklist for Line Item Structure If you cannot clearly answer the questions below as they relate to effective contract line item structure, then the contract is not ready to be signed. 1. Precisely what do we expect the contractor to deliver (hardware, services, software data)? 2. Do we have a line item, subline item, or exhibit line item for each answer to question 1? 3. Is an ACRN assigned to each applicable item in Section B of the uniform contract format? 4. Do the totals by ACRN, CLIN, and line of accounting match? 5. When is each item supposed to be delivered? 6. How much will the contractor get paid? 7. Are there interim payments before delivery? If so, on what basis? How are billings apportioned across funding lines? 8. When will the contractor get paid? What documentation will be required to make payment? 9. How is the timing of contract payments related to deliveries? 10. Is it clear in the line item structure and from sections F through I exactly how payments relate to delivery? 11. What constitutes acceptable performance? How is it measured? 12. How do the inspection and acceptance criteria in section E relate to the answers to question 9? Page 14 of 30

ACRN The accounting classification reference number (ACRN) is a two-position alpha or alpha/numeric control code used to relate the accounting classification citation to detailed line item information contained in the contract schedule CLIN Contract Line Item Number (CLIN)

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure Contract Format and Structure The goal is to make the contract easy to understand and manage for you as a Government procurement professional and for Department of Defense (DOD) contractors. Follow the Ten Commandments of Effective Contracts. For additional information, consult the following references: Federal Acquisition Regulation (FAR) 15.204, Contract Format DFARS 204.71, Uniform Contract Line Item Numbering System FAR Part 16, Types of Contracts Page 15 of 30

Ten Commandments of Effective Contracts 1. Read the contract. 2. The contract is interpreted as a whole. 3. Only the Contracting Officer may change or agree to changes in the contract. 4. Requirements or material changes must be approved and documented. 5. Approved and documented requirements take precedence over verbal requests. 6. "No funding" means "no requirement." 7. The contract Schedule takes precedence over contract clauses. 8. Contract clauses take precedence over the other documents, exhibits and attachments. 9. Other documents, exhibits, and attachments take precedence over the specifications. 10. "Plain English" takes precedence over technical language. Ambiguous language is interpreted against the drafter!

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure Final Thoughts IUID/UID, RFID, and WAWF require greater care in the application of rules for writing contracts. Current contract quality problems cost American taxpayers millions of dollars in misspent funds and interest penalties. Buying activities need to concentrate on more precisely defining requirements and deliverables. Page 16 of 30

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure Knowledge Review Introduction It is now time for a brief knowledge review. You have the options knowledge review options list below. The Trivia Game is a Jeopardy game-like question format with different types of question and levels of difficulty. The multiple-choice selections are the same questions presented in a typical questioning format. Choose the method that you would like to take. Trivia Game Multiple Choice Page 17 of 30

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure Trivia Game Instruction You will now have an opportunity to practice your knowledge of Line Item Structure through the use of an interactive game. The game will appear on the next screen. The instructions for game play are as follows: 1. To begin, click any point value below a category. 2. A question appears in a screen to the right of the board. Read the question, and then click the correct answer. 3. If you answer correctly, points are added to your score according to the point value you chose. If you answer incorrectly, you are provided with an explanation of the correct answer. However, the point value you chose is deducted from your score. 4. Continue with the challenge until you have finished answering all of the questions. If you answer all of the questions correctly, your score will be 1,800! Click "Next" to start the game. Page 18 of 30

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CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure Knowledge Review The magnitude of the performance or delivery expressed in the contract must primarily be divisible by the "quantity" of each line item. True False That is correct. The magnitude of the performance or delivery expressed in the contract must primarily be divisible by the quantity of each line item. Page 20 of 30

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure Knowledge Review A separate delivery schedule should be established for each contract line item rather than for the subline items. True False That is correct. Delivery schedule and price should be established for each identified part of the kit at the subline item level, and not for the kit at the contract line item level. Page 21 of 30

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure Knowledge Review Contract clauses take precedence over the other documents, exhibits and attachments. True False That is correct. Contract clauses take precedence over the other documents, exhibits and attachments. Page 22 of 30

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure Knowledge Review A single ACRN is normally assigned at which level? Entire contract Uniform contract format section Contract line item Exhibit line item That is correct. A single ACRN is normally assigned at the contract line item. Page 23 of 30

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure Knowledge Review Which one of the following statements is the most accurate? The delivery schedule and price should be established for a kit with separate components at the contract line item level. The unit of issue lot should not be used when each can be used instead. Line items with a unit acquisition cost exceeding $2,500 require IUID for the item. If the unit of issue lot is clearly visible in Section B of the contract, the corresponding line item meets the DFARS requirements for a line item. That is correct. The most accurate statement is the unit of issue lot should not be used when each can be used instead. Page 24 of 30

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure Knowledge Review Which one of the following statements is NOT correct? The contract is interpreted as a whole. Only the Contracting Officer may change or agree to changes in the contract. UID, RFID, and WAWF require greater care in the application of rules for writing contracts. Specifications take precedence over other documents, exhibits, and attachments. That is correct. According to the uniform contract format specifications is last in the order of precedence following documents, exhibits, and attachments. Page 25 of 30

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure Knowledge Review Which one of the following is NOT an essential characteristic of a line item? Single line of text Single unit price Separately identifiable Separate delivery schedule That is correct. A single line of text is not a line item. Page 26 of 30

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure Knowledge Review Which of the following statements are correct? Select all that apply. Delivery schedule and price should be established for each identified part of a kit at the subline item level. NSNs that have a unit of issue of lot typically do not require breakout by subline item. A line item with a unit acquisition cost of $15,000 would require IUID for the item. The unit of issue lot should be used by exception only. That is correct. NSNs do not have a unit of issue of lot - that statement is incorrect. All the other statements are accurate. Page 27 of 30

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure Knowledge Review Which of the following statements are true? Select all that apply. A shipment must contain a whole number quantity of each line item delivered. The term as required qualifies as a proper and expressly stated delivery term. A separate delivery schedule should be established for each contract line item rather than for the component subline items. A kit is considered as having been received by the Government when at least 50% of all shipments have been received. That is correct. A shipment must contain a whole number quantity of each line item delivered, and the term as required qualifies as a proper and expressly stated delivery term are both true statements. Page 28 of 30

CLC033 - Contract Format/Structure DoD e-Biz Line Item Structure Lesson Summary During this lesson we identified specific elements of good contract line item and subline item structure. We examined how these elements are important for effective overall contract structure. Finally, we listed some self-check items for ensuring that the draft contract is clear and well-structured. If you would like some printable slides of the content in this module, please click here. You may also want to contact the UID Help Desk if you have a specific issue. They can be reached via email (info@uniqueid.org) or by calling (703) 848-7314. Page 29 of 30

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You have completed the content for this lesson. At this point you should have completed all of the lessons in this module. Please take the Final Exam and complete the Module Survey so you may receive credit for this course. If you have closed or hidden the Table of Contents, click the Show TOC button at the top in the Atlas navigation bar.