Presented by: D. Bruce Propert, DPAP

Line Item Basics

PROCURE-TO-PAY DEFENSE PROCUREMENT AND ACQUISITION POLICY

TRAINING SYMPOSIUM

May 30 – June 1, 2017 ● Hyatt Regency Orlando FL 1

What problem are we trying to solve?

• Enable auditability by creating a clear trail from funding through contract to asset

• Enable analysis of contract data • In support of Federal Funding Accountability and

Transparency Act of 2006 – Improve traceability of funds from obligation through expenditure – Enable automated tracking and reporting of contract funding and

deliverables

What is a line item? Definitions*: • Line: A horizontal row of written or printed words. • Item: An individual article or unit, especially one that is part of a list, collection, or set:

– the items on the agenda – an item of clothing – Anyone wishing to donate saleable items to the auction can contact any of the following members to

arrange collection – Rate the following items on a scale of 1 to 5 – Hannah paced through the busy crowds towards a small shop that sold every item of clothing under the

sun. • Line item: An entry that appears on a separate line in a bookkeeping ledger or a fiscal

budget. – Court funding, lacking a separate line item in the federal budget, was haphazard and severely inadequate. – The budget line item has been level funded year after year, despite the fact that the national economy

keeps growing, the national budget keeps growing, and now we have record profits. – Internet games, 411 services and other types of content cost 5 cents to 50 cents, with each transaction

appearing as a line item on the customer's bill, separate from the listing of voice calls. *Oxford American English Dictionary (Online), Oxford University Press

What is a line item? (Commercial Example of 4 line items: order written on B&H Photo web site)

ORDER NUMBER: xxxxx Shipping Method: STANDARD BILLING ADDRESS: xxxxx SHIPPING ADDRESS: Same As Billing Address QTY B&H Number Price Total Price B&H Item Description

5 FUV100F36 6.99 34.95 RVP 135-36 Fujichrome Velvia 100-F Professional Color Slide (Transparency) Film (ISO-100)

6 KOE10036 5.25 31.50 135-36 35mm Ektar 100 Color Negative Film (36 Exposure)

1 KOP40036PP 35.95 35.95 35mm Professional Portra 400 Color Negative Film (Pro Pack, Five 36 Exposure Rolls)

1 PLOF8100 269.95 269.95 OpticFilm 8100 Film Scanner

What is a line item? (Commercial Example – ten line items of two types – Order written on Giant Peapod web site)

Item Size Qty Item Price

Apples Gala 3 LB BAG 1 $4.99 $4.99 Oscar Mayer Bacon Naturally Hardwood Smoked - 24 ct 16 OZ PKG 1 $7.99 $7.99 Giant Half & Half 14 OZ BTL 1 $1.59 $1.59 Giant Milk Low Fat 1% 1 GAL 1 $3.59 $3.59 LAND O LAKES Butter Salted Sticks - 4 qrtrs 1 LB BOX 1 $4.69 $4.69 Kauai Coffee Koloa Estate Medium Roast Coffee (Ground) 10 OZ BAG 1 $7.99 $7.99 Spring Mill Bread Co. Bread Cinnamon Swirl Natural 32 OZ PKG 1 $5.49 $5.49 Subtotal: $36.33 Tax: $0.91 Delivery Fee: $9.95 Fuel Surcharge: $0.99 Total: $48.18

Earlier example of use of line items Administrative Tablet from the Third Dynasty of Ur (ca. 21st century BC)

Text of tablet

Insert image

Image and translation are provided courtesy of the Oriental Institute of the University of Chicago. Translation by Andrew Wilent.

119 sheep 31 ewes 17 goats 48 she-goats 37 lambs from Nalu

Note: reverse reads: Ur-kununa took (them).

Month 11 Year 47 Shulgi

Note the resemblance to the receiving report requirements of FAR 32.905(c).

Quantity Description

Contractor

Acceptor Acceptance

Date

Quantity Description

Contractor

Earliest Example of Line Items You Can Remember Dear Santa,

I have tried to be really good this year. I was even nice to my little brother. For Christmas I would like:

A new puppy A 12 speed bike New rollerblades (now I wear a size 13!) A remote controlled helicopter (red and black) A new baseball bat and glove An official Red Ryder, carbine action, two-hundred shot range model air rifle New Lego sets

Star Wars Death Star X-Wing fighter Millennium Falcon

Note the use of subline items

Should be two line items unless wrapped as a set

Summary

• Using line items to describe things is a long standing and widespread practice

• Contract line items list products or services to be delivered under a contract

• Each line item can be assigned a number to facilitate reference

• Use of line items enables tracking assets to expenditures in a uniform way

Subline items • Subline Items

– Subline items provide a way of organizing data for ease of administration – Line items and subline items can be characterized as either deliverable or

informational • Deliverable line items denote what the contractor is supposed to deliver • Informational line items organize information applicable to the deliverables

– Two informational line item use cases: • Parent line items to capture information common to many deliverables to avoid

having to repeat it on each line item, such as the type of boots when the deliverable subline items are for different sizes

• Informational subline item to identify parts of the deliverable for purposes of inspection or other administrative needs (e.g. contents of a kit)

• DoD uses informational subline items to identify separate sources of funding for a single deliverable, e.g. first article test

– Informational line items are never deliverable or billable

How do I implement line items and line item identification?

How do I build my line items?

1. List each of the things you want delivered or tasks you want performed

2. Assign a quantity and unit of measure that describes how the items are going to be delivered or tasks performed – Consider how supplies will be packaged and shipped – Consider how often services will be accepted and paid for

3. Assign a line item number to each line item in accordance with DFARS

How do I build my line items (continued)? 4. Work through each section of the solicitation or contract and ensure that for

each deliverable item you have defined: • Price or cost and fee (unless Not Separately Priced), note that for the solicitation this

consists of identifying what items require prices or estimated costs so the offeror knows what to fill in

• For supplies, how items are to be packaged and marked • Where, by whom (organization), and against what criteria inspection and acceptance

will occur • A delivery schedule or period of performance (not both) • A delivery or performance location • The funding • Any clauses or special provisions applicable to that line item and not applicable to the

entire effort • If there is the potential for separate evaluation by line item to enable separate awards,

ensure this is clearly addressed in the proposal instructions and evaluation criteria

Example of an informational parent line item

Item QTY Item Description Price Total Price 0001 Kodak Professional Portra 400 Film 0001AA 4 each 35mm 36 exposure $ 6.99 $ 27.96

0001AB 5 each 120 size single box $ 6.99 $ 34.95

0001AC 2 pack 120 size pro-pack $33.99 $ 67.98

0002 1 each Shipping and Handling $ 5.99 $ 5.99

Total $136.88

Example of informational subline items Item QTY Item Description Price Total Price 0001 2 each Bookcase kit 72 inch by 36 inch $124.99 $249.98 Each containing: 000101 2 each side pieces 000102 1 each back 000103 1 each top 000104 1 each bottom 000105 4 each shelves 000106 20 each nails 000107 8 each cam locks 000108 8 each cam bolts 000109 16 each shelf supports 000110 4 each feet

Example of line items with more than one source of funding

• Nachos 1 each Shared by Joe, Mark, Diane, and Carol

• Beef burrito 1 each Joe

• Chicken Chimichanga 1 each Mark

• Quesadilla – Diane 1 each – Carol 1 each

• Sangria 1 pitcher Shared by Joe, Mark, and Carol

Separate subline items for funding

sources

Single line item with multiple

funding sources

Single line item with multiple

funding sources

Line item and subline item numbers used to describe multiple deliverables with multiple sources* of funding

0001 Nachos 1 each 000101 Joe*, 000105 Mark*, 000103 Diane*, and 000104 Carol*

0002 Beef burrito 1 each Joe

0003 Chicken Chimichanga 1 each Mark

0004 Quesadilla 0004AA Diane 1 each 0004AB Carol 1 each 0005 Sangria 1 pitcher

000501 Joe*, 000502 Mark*, and 000503 Carol*

Working Definition of What Constitutes a Proper Line Item

• All deliverables on a given line item must have identical requirements • Performance or delivery must not be divisible except by the quantity, i.e. if

you can deliver part of one unit separately, it needs to be a separate item – Thus, a delivery must contain a whole number quantity of each line item

delivered* • All deliverables on a given line item must be funded and accounted for in the

identical way

* Bulk products that are delivered by weight or volume, such as gasses and liquids, are the notable exception. It is not inherently improper to deliver and pay for 6.5 kilograms on a line item for 13.5 kilograms, provided that the delivery provisions allow for partial deliveries. It is always improper to have a line item for 1 Lot, 1 Job, 1 Kit, 1 Batch, or something similar and expect more than one delivery or payment.

Example

1. Ingredients for Beef and Barley Soup with Mushrooms*

The Wrong Way

1. 2 Tbsp unsalted butter 2. 2-3 pounds beef chuck 3. 3 cups chopped onions 4. 1 pound button or cremini mushrooms 5. 1 quart beef or chicken broth 6. 2 teaspoons dried marjoram 7. 1 cup pearl barley 8. 3 carrots 9. 1 bunch celery 10. 1/2 cup sour cream 11. 1 bunch Dill

The Right Way

*Source: http://www.simplyrecipes.com/recipes/beef_and_barley_stew_with_mushrooms/#ixzz3U5u62V1I

Note that in actual practice the line items above would need to have quantities adjusted to the minimum sale quantity uncovered through market research (see FAR 10). For example, the amount of butter purchased for this recipe alone would be 1 bar or stick. In practice, economic order quantities of one pound are more likely (see FAR 7.2)

How to make use of line item numbers in writing clear requirements

Line item identification

• Line item number: A set of characters assigned to the line item for tracking purposes – Provides shorthand for referencing the item in publishing delivery

schedules, referencing sections of statements of work, tracing funding data, etc.

– Enables collection of data about items by creating a unique record in the contract database

– Enables connection of data across data bases by using a unique key consisting of procurement instrument identifier and line item number

Do not use the same number for different things

Note that George Foreman, even though he named all five sons George, used an equivalent of subline items to conform to the rule. His five sons are George Jr., George III, George IV, George V, and George VI.

A wrong way: 0001 Bookcases 5 Each 0001 Desks 3 Each 0001 Chairs 6 Each

Another: 0001 Furniture consisting of 5 Bookcases, 3 Desks, and 6 Chairs

Wrong Ways

A right way 0001 Bookcases 5 Each 0002 Desks 3 Each 0003 Chairs 6 Each

Another 0001 Furniture 0001AA Bookcases 5 Each 0002AB Desks 3 Each 0003AC Chairs 6 Each

Right Ways

Informational parent line item

Deliverable subline items

Selecting Units of Measure • The unit of measure should describe how the item is going to be

– Delivered – Accepted – Paid for (if fixed price) – Stocked – Managed – Accounted for

• Do not use units of measure that lump several things together as one lot, kit, or batch unless the item will be delivered, managed , and accounted for that way

• Market research can be used to determine standard ordering and delivery practices in an industry

• Work with accounting to ensure the line items support accounting for the assets

Units of Measure

0001 LEGOs 1 Lot Star Wars Death Star, X-Wing fighter, Millennium Falcon, and a bag of assorted bricks

The Wrong Way

0001 LEGOs 0001AA Star Wars Death Star 1 Kit 0001AB X-Wing fighter 1 Kit 0001AC Millennium Falcon 1 Kit 0001AD Assorted bricks 1 Bag

The Right Way

Units of Measure

1. Unmanned Aircraft 1 Lot Design, develop, test, and deliver four prototypes and support Government testing

The Wrong Way

0001 Unmanned Aircraft Prototypes 4 Each 0002 Non-recurring design and development 1 Lot 0003 Contractor Testing 1 Lot 0004 Maintenance Support for Government testing 6 Months 0005 Test Report 1 Each

The Right Way

Note that items 0002, 0003, and 0005 contemplate one delivery each, and on a fixed price contract would not result in any other payments except financing payments.

Note the inability to accept or pay for any performance prior to completion of entire effort. Also note the inability to assign any acquisition value to the aircraft.

Use of Line Item Numbers in Contract Schedule Packaging and Marking

Items 0001, 0004, 0005 – Items shall be packaged and marked in accordance with MIL-STD-129F and MIL-STD-130M

Items 0002 and 0003 – Items shall be packed in accordance with best commercial practices to ensure safe delivery at the destinations

Use of Line Item Numbers in Contract Schedule Inspection and Acceptance

Items 0001, 0004, 0005 – Inspection and acceptance are to be performed at the contractor’s plant in accordance with the item inspection requirements set forth in attachment 1, XYZ Item Detailed Specification

Items 0002 and 0003 – Inspection and acceptance shall be performed at destination by the contracting officer’s representative designated herein in accordance with the criteria in the quality assurance surveillance plan (QASP), attachment 2.

Use of Line Item Numbers in Contract Schedule Deliveries or Performance

Quantity to be delivered Days after award of contract Item 30 60 90 120 Destination*

0001 9 19 20 34 F123245

0002 70 64 62 38 WV1234

0003 39 33 35 35 N12345

0004 35 38 48 58

S12345

* Use of DOD Activity Address Codes (DODAACs ) as organizational identifiers enables automated tracking and routing of data. Ensure that any DODAACs used are accurate, and, if acceptance is to be performed, registered in WAWF IRAPT as an acceptance location.

How to know if the line items are properly constructed

• Items should be bought the way they will be delivered, shipped, and managed

• Performance or delivery must not be divisible except by the quantity, i.e. if you will deliver part of one unit separately, it needs to be a separate item

• Thus, a shipment must contain a whole number quantity of each line item delivered* *The exception to this rule is for things bought by weight or volume. For example, a

delivery may be 13.28 gallons @ $3.289 per gallon, for example, with the price paid for that delivery rounded to $43.68

Sesame Street test One of These Things Is Not Like the Others

Look carefully at the items below. Which object does not belong? Circle it. How is it different from the others?

Make this two line items Do not make this, “Clothing, 1 Lot”

Use cases and examples

Unit of Measure – Do Not Use “Dollars” CLIN Supplies / Services Quantity Unit Unit Price Total 0001 PLUS Performance Plan 16500 US$ $1.00 $16,500.00 Serial#: Catalog #: Line Pricing Type : FFP Not to Exceed Amount: $16,500.00 Period of Performance: From 19-NOV-2011 To 18-NOV-2012A

Wrong Way CLIN Supplies / Services Quantity Unit Unit Price Total 0001 PLUS Performance Plan 1 Year $ 16,500.00 $16,500.00 Serial#: Catalog #: Line Pricing Type : FFP Period of Performance: From 19-NOV-2011 To 18-NOV-2012A

A Right Way CLIN Supplies / Services Quantity Unit Unit Price Total 0001 PLUS Performance Plan on 1 Year Estimated Cost $15,750.00 Serial#: Catalog #: Fixed Fee $750.00 Line Pricing Type :CPFF Period of Performance: From 19-NOV-2011 To 18-NOV-2012A A Right Way

Commercial services example Item QTY Item Description Price Total Price 0001 1 each State Vehicle Inspection $12.00 $12.00 0002 1 job Oil change $29.99 $29.99 5 quarts @1.99 filter @ 6.99 labor 0003 1 job Rotate tires $19.99 $19.99 0004 1 lot Tax $ .85 $ .85

Non-commercial services example Fixed Price vs. Cost Plus

Item Item Description QTY Unit Price Total Price 0001 Perimeter Guard Services 12 Months $233,688 $2,804,256 in accordance with Performance Work Statement dated 20 July 2016

Item Item Description QTY Unit Price Total Price 0001 Perimeter Guard Services 12 Months in accordance with Performance Work Statement dated 20 July 2014 Estimated Cost $2,664,000 Fixed Fee $ 125,000 Total Estimated Cost and Fixed Fee $2,789,000

Note that cost type line items do not have unit prices

Example of Informational Parent Deliverable subline items structured to identify different sizes of

items that are identically priced

ITEM NO. SUPPLIES/ SERVICE QUANTITY UNIT UNIT PRICE AMOUNT

0013 Boots Insulated, Cold Weather White, Type II, Class 1

0013AA 8430-00-655-5541 Size 5N 50 PAIR $38.35 $13,422.50

0013AB 8430-00-655-5544 Size 8N 70 PAIR $38.35 $13,422.50

0013AC 8430-00-655-5551 Size 9N 30 PAIR $38.35 $13,422.50

0013AD 8430-00-655-5535 Size 9R 200 PAIR $38.35 $13,422.50

Informational parent line item gives information common to all deliverable line items

Deliverable line items with data unique to each

Example of subline items structured to identify parts of an item*

ITEM SUPPLIES/SERVICE QUANTITY UNIT UNIT PRICE AMOUNT 0003 Computer Workstation (50 ea @ $2,061; $103,050 total) 0003AA CPU, 6.0 GHz, 8GB SDRAM 50 Each $ 2,061.00 $104,122.00 1GB Graphic Card 4TB SATA 30Gb/s 7200 RPM Hard Drive 0003AB Monitor, 17 inch Flat Panel 50 Each NSP 0003AC Keyboard and Mouse 50 Set NSP 0003AD Speakers 50 Set NSP

* Delivery schedule and price shall be established for each identified part at the subline item level, not for the assembly at the contract line item level.

This is a good method for handling items that have components that are shipped in multiple shipments.

Example – Services

ITEM SUPPLIES/SERVICE QUANTITY UNIT UNIT

PRICE AMOUNT 0001 Task Order (TO) Management 15 Months Estimated Cost: $12.456.00 Purchase Request Number: HQ0102512345678

Purchase Request Line Item Number: 0001AA

Product Service Code: D306 Fixed Fee $650.00 Cost Plus Fixed Fee ACRN: AA 0002 Data Standard Development 1 Lot Estimated Cost: $368.964.00 Purchase Request Number: HQ0102512345678

Purchase Request Line Item Number: 0001AB

Product Service Code: D306 Fixed Fee $16,500.00 Cost Plus Fixed Fee ACRN: AA 0003 Data Map Updates 5 Each Estimated Cost: $1,278,951.00

Purchase Request Number: HQ0102512345678 Purchase Request Line Item Number: 0001AC

Product Service Code: D306 Fixed Fee $81,950.00 Cost Plus Fixed Fee ACRN: AA

PROCURE PAY TO

TRAINING SYMPOSIUM

May 30 – June 1, 2017 ● Hyatt Regency Orlando FL

DEFENSE PROCUREMENT AND ACQUISITION POLICY

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