On October 19, 2011, the Department of Defense (“DoD”) proposed a new rule to amend DFARS § 252.211-7007 to remove the $5000 threshold from reporting requirements for Government-furnished property.  The proposed rule would require contractors to report Government-furnished property to the DoD Item Unique Identification (“IUID”) registry regardless of value.  DoD states that the intent of the rule is to standardize and simplify reporting.  DoD’s goal is to move away from strict reporting by dollar value alone and toward reporting designed to increase traceability.  Non-serially managed material will be required to be reported to the IUID registry in the same unit of pack as acquired (e.g., box, container).

DoD does not intend to incorporate the proposed property management rule into existing contracts.  Therefore, the Government does not believe there will be any need for equitable adjustments in association with the rule.  Because the rule will not apply to existing programs, the rule should not require duplicate records either.  Reporting requirements under the proposed rule will not apply to: (1) contractor-acquired property that has not been delivered to, and accepted by the Government; (2) property under a statutory leasing authority; (3) property to which the Government has acquired a lien or title solely because of partial, advance, progress, or performance-based payments; (4) intellectual property or software; (5) real property; or (6) material released for work in process.

Some contractors have expressed concern that the rule could be burdensome as hundreds of thousands of new items are subjected to DoD reporting requirements.  If the rule is adopted, contractors will need to ensure that their employees are diligent in accounting for small, every-day items, that previously may have simply been discarded if broken or worn-out.  However, DoD states that it hopes that the rule will simplify overall reporting and result in greater efficiency and considerable cost savings to both government and industry.  A public meeting will be held on November 17, 2011, and comments are due on or before December 19, 2011.