E7-2209. Defense Federal Acquisition Regulation Supplement; Radio Frequency Identification (DFARS Case 2006-D002)

AGENCY:

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

ACTION:

Final rule.

SUMMARY:

DoD has adopted as final, with changes, an interim rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to include additional commodities and locations that require package marking with passive radio frequency identification (RFID) tags. The rule requires contractors to affix passive RFID tags at the case and palletized unit load levels when shipping packaged petroleum, lubricants, oils, preservatives, chemicals, additives, construction and barrier materials, and medical materials to specified DoD locations.

EFFECTIVE DATE:

February 12, 2007.

FOR FURTHER INFORMATION CONTACT:

Ms. Robin Schulze, Defense Acquisition Regulations System, OUSD(AT&L)DPAP(DARS), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062; telephone [phone]; facsimile [phone]. Please cite DFARS Case 2006-D002.

SUPPLEMENTARY INFORMATION:

A. Background

DoD published an interim rule at 71 FR 29084 on May 19, 2006, to implement the second year of DoD's three-year roll-out plan for supplier implementation of RFID. The rule added requirements for contractors supplying materiel to DoD to affix passive RFID tags at the case and palletized unit load levels when shipping packaged petroleum, lubricants, oils, preservatives, chemicals, additives, construction and barrier materials, and medical materials to specified locations. Ten respondents submitted comments on the interim rule. A discussion of the comments is provided below.

1. Comment: The DoD Suppliers' Passive RFID Information Guide states that the Air Mobility Command Terminals at Charleston, Dover, and Travis Air Force Bases will be added to the locations that require passive RFID tags in 2006. Instead of Dover Air Force Base, the rule adds the Naval Air Station in Norfolk.

DoD Response: The locations identified in the DFARS rule are correct. DoD is updating the Suppliers' Passive RFID Information Guide to incorporate these changes.

2. Comment: The Air Mobility Commands should be excluded until 2007, when all ship-to locations will require RFID tags. For contracts with transshipment points, such as the Air Mobility Commands, vendors do not know whether or not the ship-to location requires RFID tags when they respond to the solicitation. Vendors are required to contact the Transportation Office for shipping instructions at time of shipment.

DoD Response: DoD has amended the rule to require RFID tags for all high-priority shipments (Transportation Priority 1). Therefore, vendors do not need to know the aerial shipping port. DoD also has amended the rule to exempt shipments to locations other than Defense Distribution Depots when the contract includes the clause at FAR 52.213-1, Fast Payment Procedure, because of limitations in the Wide Area WorkFlow-Receipt and Acceptance electronic system.

3. Comment: DoD should extend the ending date for use of Generation 1 tags, from October 1, 2006, to January or May 2007, or should consider an attrition-based alternative to phase out the Generation 1 tags. In the first year of DoD's supplier implementations of RFID, DoD encouraged vendors to buy large quantities of Generation 1 tags to help keep costs down. If the Generation 1 tags are not accepted after October 1, 2006, vendors who followed DoD's advice will have large inventories of the Generation 1 tags that are no longer acceptable.

DoD Response: DoD has amended the rule to make the Generation 1 tags acceptable under all new contracts until March 1, 2007. DoD's July 30, 2004, policy statement on RFID (available at http://www.acq.osd.mil/​log/​rfid/​rfid_​policy.htm) provided that the Generation 1 technology would no longer be accepted 2 years after the ratification of the UHF Generation 2 Standard. The UHF Generation 2 Standard was ratified in December 2004. DoD has extended the date an additional 5 months to ensure that vendors are not left with large, obsolete inventories of the Generation 1 tags. In addition, DoD will continue to accept Class 0 and Class 1 Generation 1 and Class 1 Generation 2 tags for all shipments under contracts awarded prior to the effective date of the interim rule, May 19, 2006.

4. Comment: The contract clause should reference the specific version or effective date of the applicable EPC Tag Data Standard instead of “the most recent EPC Tag Data Standards document,” because an open-ended requirement is inappropriate. Also, the clause should reference the specific versions or effective dates for the tag identity type instructions and receiving reports procedures, instead of the instructions and procedures at the cited Web sites.

DoD Response: DoD has amended the clause to specify that the contractor must use the tag data standards in effect at the time of contract award. Incorporating the version number or effective date of the standard, instructions, and procedures in the DFARS clause would not be practicable, since these requirements may change.

5. Comment: The rule should clarify whether RFID tags are required if a shipment contains both medical materials that require RFID tags and other products that do not require RFID tags.

DoD Response: If an individual case contains an exempted item, or if an individual pallet contains an exempted case, RFID tags are not required. The rule has been amended to clarify that suppliers should limit mixing of exempted and non-exempted materials.

6. Comment: DoD should retain the provision of the original clause that required the passive tag to be “readable at the time of shipment in accordance with MIL-STD-129 (Section 4.9.1.1) readability performance requirements,” instead of the current clause provision that only requires the tag to be “readable,” to ensure the requirement is appropriately bounded.

DoD Response: Suppliers must apply a readable tag before shipping products to DoD. The clause has been amended to allow suppliers more flexibility in meeting this requirement.

7. Comment: Contractors are required to ensure that each passive tag is “readable,” but the rule does not define “readable.” We understand “readable” to mean that the contents of the RFID tag can be read by an EPCglobal-compliant passive RFID reader.

DoD Response: The respondent's understanding is correct. Suppliers must apply a readable tag before shipping products to DoD.

8. Comment: DoD should establish a mechanism to address tags that are readable prior to shipment but non-readable at the point of receipt. A number of factors may affect tag readability during the shipping and receiving process (e.g., damage in transit, reader failure).

DoD Response: Suppliers are required to affix a readable tag before shipment. DoD maintains a collaborative approach to working with its suppliers. If a trend of non-readable tags is noted for a specific supplier, DoD will work with that supplier to develop a mutually agreeable resolution.

9. Comment: DoD should allow use of all ISO-approved RFID tag formats, instead of limiting the tag formats to either EPCglobal or the DoD tagging format utilizing the CAGE codes. Current product cases for medical materials utilize industry standard product bar codes. Medical material suppliers utilize two different consensus standards for bar code identification of their product cases, based on either Health Industry Business Council or GS1 (formerly the Uniform Code Council) formats. One format is predominately used to identify drug products (using the National Drug Code) and the other is used for medical devices or supplies. Each format has unique labeler codes assigned to each company. The data contained in the bar codes is currently used to identify the packages and their contents throughout the supply chain. DoD should allow the use of ISO-approved Issuing Agency Codes (IAC) instead of limiting supplier identification to the EPCglobal or CAGE code. The use of ISO-approved IACs is currently supported by DoD in its unique identification (UID) requirements. Allowing for this in the RFID would be consistent with other standards supported by DoD.

DoD Response: The acceptable tag encoding schemes are those identified in the version of the EPCglobal Tag Data Standard in effect at the time of contract award. These tag data standards include the DoD tag identity which utilizes the CAGE code.

10. Comment: DoD should allow RFID tag capacity of 128 Bit and higher. High capacity tags are now common, and are more likely to be used by suppliers. Many RFID tags have capacity of several kilobits.

DoD Response: Under the DFARS rule, DoD will only accept tags encoded according to the tag data standards defined in the EPCglobal Tag Data Standards documents available at http://www.epcglobalinc.org/​standards/​. DoD will review the potential for accepting higher capacity tag data types as the standards for those tags are ratified.

11. Comment: The RFID frequency specified in the DoD documents is 915 MHz. Electromagnetic interference can cause medical device failures and malfunctions. 915 MHz is within the frequency band that medical devices are tested and have been shown to function during and after exposure. Medical devices are immune to 915 MHz signals at FCC regulated levels.

DoD Response: DoD requires passive tags on the packaging of items, not on the item itself. The tags themselves do not emit any electromagnetic signal unless interrogated by an RF reader.

12. Comment: DoD should work with the U.S. Food and Drug Administration (FDA) and compare its Medical Federal Supply Classes to the FDA combination product codes. DoD's RFID program calls for tagging of medical devices but not pharmaceuticals, biological, or in vitro diagnostics. Drug, biologics, and devices can be used in combination to potentially enhance the safety and/or effectiveness of either product used alone. The appropriate classification of these combination products is sometimes unclear. FDA's Office of Combination Products addresses concerns with drug-device, drug-biologic, and device-biologic combination products. FDA is investigating the use of unique device identification to improve patient safety, by reducing medical errors, facilitating device recalls, and improving medical device adverse event reporting. No standard has been developed as of yet.

DoD Response: DoD is working with the FDA to ensure that the RFID requirements are clearly defined and appropriate. In addition, DoD is sharing lessons learned from its work with uniquely identifying items with the FDA.

13. Comment: Adding repairable and consumable items to the supplies that require passive RFID tags will add time and costs to low-dollar items. Small businesses are already burdened with the unique item identification (UID) requirements for certain items under $5,000. The RFID threshold is even lower. Is there any value added and cost trade-off to keep track of low-dollar DoD inventory on a resistor or relay, etc?

DoD Response: The benefits of applying RFID outweigh the costs. The dollar value of an item is not an accurate measure of its mission criticality (e.g., an inexpensive part that could keep a plane from flying its mission would be considered mission critical). Repair parts and components, including repairables and consumables, must be tagged for shipments to one of the specified locations. RFID technology is simply a faster, better way to acquire data for logistics and financial systems and will be a benefit for all items DoD manages.

14. Comment: The rule should exempt limited volume suppliers from RFID requirements, because implementation and operation of an RFID system can be costly. Also, many suppliers do not currently have RFID capability and do not have requirements for RFID tagging for other customers. The cost to implement an initial system in one shipping location is approximately $100,000. The cost for additional shipping locations is approximately $65,000. Additional implementation costs would be incurred for automatically generated advance shipment notices, or significant operational costs would be incurred for manually inputted advance shipment notices. Measurable benefits of RFID do not exceed the costs for small businesses. With only one contract that requires RFID tags, we are using a contract labeler to make the tags instead of investing significant amounts of money ($12,000 or more) in cutting edge technology. We are hesitant to invest in the technology, because we have no idea of the volume of future requirements. We have to price each tag to recoup our costs.

DoD Response: Outfitting an entire shipping location with RFID capability could be expensive. However, compliance with DoD's requirement is significantly less complex. The basic requirement is that materiel shipped to DoD must be tagged. A variety of low-cost solutions that enable suppliers to comply with DoD's requirement are available in the marketplace. A supplier can buy an RFID reader that reads and writes the tags for approximately $2,000 and can purchase pre-printed tags for as little as $0.70 per tag.

15. Comment: DoD should streamline the contract clause by referencing the locations that require RFID tags in an attachment to the contract instead of listing the locations in the clause, to be consistent with DoD's DFARS transformation initiative and to eliminate the need for additional changes to the clause to add additional ship-to locations.

DoD Response: In 2007, DoD plans to add the remaining locations that will require RFID tags and will consider a more generic clause that allows the contracting officer to specify the locations that require RFID tags. This change will be vetted through the rulemaking process.

16. Comment: DoD should add language to encourage the use of a Single Process Initiative (SPI) where practicable.

DoD Response: Suppliers can use an SPI, provided the single process meets contract requirements.

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. A copy of the analysis may be obtained from the point of contact specified herein. The analysis is summarized as follows:

DoD has developed a three-year roll-out plan for supplier implementation of RFID. This rule finalizes the interim rule published in the Federal Register at 71 FR 29084 on May 19, 2006, to address the second year of the plan. The rule amends the clause at DFARS 252.211-7006, Radio Frequency Identification. The rule contains requirements for DoD contractors supplying materiel to DoD to affix passive RFID tags at the case and palletized unit load levels when shipping packaged petroleum, lubricants, oils, preservatives, chemicals, additives, construction and barrier materials, and medical materials to specified DoD locations. Prior to this rule, DoD contractors were already required to print and affix military shipping labels to every package delivered to DoD. For packaged operational rations, clothing, individual equipment, tools, personal demand items, and weapon system repair parts shipped to the Defense Distribution Depot in Susquehanna, PA, or the Defense Distribution Depot in San Joaquin, CA, DoD contractors also were already required to affix passive RFID tags at the case and palletized unit load levels.

To create an automated and sophisticated end-to-end supply chain, DoD is dependent upon initiating the technology at the point of origin, the DoD commercial suppliers. Without the assistance of the DoD supplier base to begin populating the DoD supply chain with passive RFID tags, a fully integrated, highly visible, automated end-to-end supply chain is untenable.

As a result of comments received on the interim rule, the final rule extends the date for the acceptability of the EPC Class 0 and Class 1 Generation 1 tags until March 1, 2007, clarifies the shipments that require RFID tags, and exempts shipments to locations other than Defense Distribution Depots when the contract includes the clause at FAR 52.213-1, Fast Payment Procedures.

The rule may affect businesses interested in receiving contracts for packaged petroleum, lubricants, oils, preservatives, chemical, additives, construction and barrier materials, and medical materials that will be shipped to specified DoD locations. Options to comply with the requirements of the rule can be as simple as replacing existing military shipping label printers with RFID-enabled printers. This will allow DoD contractors to print military shipping labels with embedded RFID tags. The regulatory flexibility analysis DoD prepared for the three-year roll-out plan for supplier implementation of RFID at http://www.acq.osd.mil/​log/​rfid/​regflex.htm details other options and approximate costs to comply.

C. Paperwork Reduction Act

The rule increases the information collection requirements approved under Office of Management and Budget (OMB) Control Number 0704-0434. The rule requires contractors to provide an electronic advance shipment notice in accordance with the procedures at http://www.acq.osd.mil/​log/​rfid/​advance_​shipment_​ntc.htm,, to associate RFID tag data with the corresponding shipment. OMB has approved the increased information collection requirements for use through December 31, 2009.

List of Subjects in 48 CFR Parts 211 and 252

• Government procurement

Michele P. Peterson,

Editor, Defense Acquisition Regulations System.

Accordingly, the interim rule amending 48 CFR Parts 211 and 252, which was published at 71 FR 29084 on May 19, 2006, is adopted as a final rule with the following changes:

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

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

PART 211—DESCRIBING AGENCY NEEDS

2. Section 211.275-2 is revised to read as follows:

 211.275-2

Policy.

(a) Except as provided in paragraph (b) of this subsection, radio frequency identification (RFID), in the form of a passive RFID tag, is required for individual cases and palletized unit loads that—

(1) Contain items in any of the following classes of supply, as defined in DoD 4140.1-R, DoD Supply Chain Materiel Management Regulation, AP1.1.11:

(i) Subclass of Class I—Packaged operational rations.

(ii) Class II—Clothing, individual equipment, tentage, organizational tool kits, hand tools, and administrative and housekeeping supplies and equipment.

(iii) Class IIIP—Packaged petroleum, lubricants, oils, preservatives, chemicals, and additives.

(iv) Class IV—Construction and barrier materials.

(v) Class VI—Personal demand items (non-military sales items).

(vi) Subclass of Class VIII—Medical materials (excluding pharmaceuticals, biologicals, and reagents—suppliers should limit the mixing of excluded and non-excluded materials).

(vii) Class IX—Repair parts and components including kits, assemblies and subassemblies, reparable and consumable items required for maintenance support of all equipment, excluding medical-peculiar repair parts; and

(2) Will be shipped to one of the following locations:

(i) Defense Distribution Depot, Susquehanna, PA: DoDAAC W25G1U or SW3124.

(ii) Defense Distribution Depot, San Joaquin, CA: DoDAAC W62G2T or SW3224.

(iii) Defense Distribution Depot, Albany, GA: DoDAAC SW3121.

(iv) Defense Distribution Depot, Anniston, AL: DoDAAC W31G1Z or SW3120.

(v) Defense Distribution Depot, Barstow, CA: DoDAAC SW3215.

(vi) Defense Distribution Depot, Cherry Point, NC: DoDAAC SW3113.

(vii) Defense Distribution Depot, Columbus, OH: DoDAAC SW0700.

(viii) Defense Distribution Depot, Corpus Christi, TX: DoDAAC W45H08 or SW3222.

(ix) Defense Distribution Depot, Hill, UT: DoDAAC SW3210.

(x) Defense Distribution Depot, Jacksonville, FL: DoDAAC SW3122.

(xi) Defense Distribution Depot, Oklahoma City, OK: DoDAAC SW3211.

(xii) Defense Distribution Depot, Norfolk, VA: DoDAAC SW3117.

(xiii) Defense Distribution Depot, Puget Sound, WA: DoDAAC SW3216.

(xiv) Defense Distribution Depot, Red River, TX: DoDAAC W45G19 or SW3227.

(xv) Defense Distribution Depot, Richmond, VA: DoDAAC SW0400.

(xvi) Defense Distribution Depot, San Diego, CA: DoDAAC SW3218.

(xvii) Defense Distribution Depot, Tobyhanna, PA: DoDAAC W25G1W or SW3114.

(xviii) Defense Distribution Depot, Warner Robins, GA: DoDAAC SW3119.

(xix) Air Mobility Command Terminal, Charleston Air Force Base, Charleston, SC: Air Terminal Identifier Code CHS.

(xx) Air Mobility Command Terminal, Naval Air Station, Norfolk, VA: Air Terminal Identifier Code NGU.

(xxi) Air Mobility Command Terminal, Travis Air Force Base, Fairfield, CA: Air Terminal Identifier Code SUU.

(xxii) A location outside the contiguous United States when the shipment has been assigned Transportation Priority 1.

(b) The following are excluded from the requirements of paragraph (a) of this subsection:

(1) Shipments of bulk commodities.

(2) Shipments to locations other than Defense Distribution Depots when the contract includes the clause at FAR 52.213-1, Fast Payment Procedures.

PART 252—SOLICITATION PROVISIONS AND CONTRACT CLAUSES

3. Section 252.211-7006 is amended as follows:

a. By revising the clause date;

b. In paragraph (a) by revising the definition of “Passive RFID tag”;

c. By revising paragraph (b)(1)(i)(F);

d. By adding paragraph (b)(1)(ii)(V); and

e. By revising paragraphs (b)(2) and (c) and paragraph (d) introductory text to read as follows:

 252.211-7006

Radio Frequency Identification.

* * * * *

RADIO FREQUENCY IDENTIFICATION (FEB 2007)

(a) * * *

Passive RFID tag means a tag that reflects energy from the reader/interrogator or that receives and temporarily stores a small amount of energy from the reader/interrogator signal in order to generate the tag response.

(1) Until February 28, 2007, the acceptable tags are—

(i) EPC Class 0 passive RFID tags that meet the EPCglobal Class 0 specification; and

(ii) EPC Class 1 passive RFID tags that meet the EPCglobal Class 1 specification. This includes both the Generation 1 and Generation 2 Class 1 specifications.

(2) Beginning March 1, 2007, the only acceptable tags are EPC Class 1 passive RFID tags that meet the EPCglobal Class 1 Generation 2 specification. Class 0 and Class 1 Generation 1 tags will no longer be accepted after February 28, 2007.

* * * * *

(b)(1) * * *

(i) * * *

(F) Subclass of Class VIII—Medical materials (excluding pharmaceuticals, biologicals, and reagents—suppliers should limit the mixing of excluded and non-excluded materials).

* * * * *

(ii) * * *

(V) A location outside the contiguous United States when the shipment has been assigned Transportation Priority 1.

(2) The following are excluded from the requirements of paragraph (b)(1) of this clause:

(i) Shipments of bulk commodities.

(ii) Shipments to locations other than Defense Distribution Depots when the contract includes the clause at FAR 52.213-1, Fast Payment Procedures.

(c) The Contractor shall—

(1) Ensure that the data encoded on each passive RFID tag are unique (i.e., the binary number is never repeated on any and all contracts) and conforms to the requirements in paragraph (d) of this clause;

(2) Use passive tags that are readable; and

(3) Ensure that the passive tag is affixed at the appropriate location on the specific level of packaging, in accordance with MIL-STD-129 (Section 4.9.2) tag placement specifications.

(d) Data syntax and standards. The Contractor shall encode an approved RFID tag using the instructions provided in the EPC^TM Tag Data Standards in effect at the time of contract award. The EPC^TM Tag Data Standards are available at http://www.epcglobalinc.org/​standards/​.

* * * * *