Common use of System criteria Clause in Contracts

System criteria. The MMAS shall have adequate internal controls to ensure system and data integrity, and shall— (1) Have an adequate system description including policies, procedures, and operating instructions that comply with the Federal Acquisition Regulation and Defense Federal Acquisition Regulation Supplement; (2) Ensure that costs of purchased and fab- ricated material charged or allocated to a contract are based on valid time-phased re- quirements as impacted by minimum/eco- nomic order quantity restrictions. (i) A 98 percent bill of material accuracy and a 95 percent master production schedule accuracy are desirable as a goal in order to ensure that requirements are both valid and appropriately time-phased. (ii) If systems have accuracy levels below these, the Contractor shall provide adequate evidence that— (A) There is no material harm to the Gov- ernment due to lower accuracy levels; and (B) The cost to meet the accuracy goals is excessive in relation to the impact on the Government; (3) Provide a mechanism to identify, re- port, and resolve system control weaknesses and manual override. Systems should iden- tify operational exceptions, such as excess/ residual inventory, as soon as known; (4) Provide audit trails and maintain records (manual and those in machine–read- able form) necessary to evaluate system logic and to verify through transaction test- ing that the system is operating as desired; (5) Establish and maintain adequate levels of record accuracy, and include reconcili- ation of recorded inventory quantities to physical inventory by part number on a peri- odic basis. A 95 percent accuracy level is de- sirable. If systems have an accuracy level below 95 percent, the Contractor shall pro- vide adequate evidence that— (i) There is no material harm to the Gov- ernment due to lower accuracy levels; and (ii) The cost to meet the accuracy goal is excessive in relation to the impact on the Government; (6) Provide detailed descriptions of cir- cumstances that will result in manual or system generated transfers of parts; (7) Maintain a consistent, equitable, and unbiased logic for costing of material trans- actions as follows: (i) The Contractor shall maintain and dis- close written policies describing the transfer methodology and the loan/pay-back tech- nique. (ii) The costing methodology may be standard or actual cost, or any of the inven- tory costing methods in 48 CFR 9904.411– 50(b). The Contractor shall maintain consist- ency across all contract and customer types, and from accounting period to accounting period for initial charging and transfer charging. (iii) The system should transfer parts and associated costs within the same billing pe- riod. In the few instances where this may not be appropriate, the Contractor may accom- plish the material transaction using a loan/ pay-back technique. The ‘‘loan/pay-back technique’’ means that the physical part is moved temporarily from the contract, but the cost of the part remains on the contract. The procedures for the loan/pay-back tech- nique must be approved by the ACO. When the technique is used, the Contractor shall have controls to ensure— (A) Parts are paid back expeditiously; (B) Procedures and controls are in place to correct any overbilling that might occur; (C) Monthly, at a minimum, identification of the borrowing contract and the date the part was borrowed; and (D) The cost of the replacement part is charged to the borrowing contract; (8) Where allocations from common inven- tory accounts are used, have controls (in ad- dition to those in paragraphs (d)(2) and (7) of this clause) to ensure that— (i) Reallocations and any credit due are processed no less frequently than the routine billing cycle; (ii) Inventories retained for requirements that are not under contract are not allocated to contracts; and (iii) Algorithms are maintained based on valid and current data; (9) Have adequate controls to ensure that physically commingled inventories that may include material for which costs are charged or allocated to fixed-price, cost-reimburse- ment, and commercial contracts do not com- promise requirements of any of the stand- ards in paragraphs (d)(1) through (8) of this clause. Government-furnished material shall not be— (i) Physically commingled with other ma- terial; or (ii) Used on commercial work; and (10) Be subjected to periodic internal re- views to ensure compliance with established policies and procedures.

System criteria. The MMAS shall have adequate internal controls to ensure system and data integrity, and shall— (1) Have an adequate system description including policies, procedures, and operating instructions that comply with the Federal Acquisition Regulation and Defense Federal Acquisition Regulation Supplement; (2) Ensure that costs of purchased and fab- ricated material charged or allocated to a contract are based on valid time-phased re- quirements as impacted by minimum/eco- nomic order quantity restrictions. (i) A 98 percent bill of material accuracy and a 95 percent master production schedule accuracy are desirable as a goal in order to ensure that requirements are both valid and appropriately time-phased. (ii) If systems have accuracy levels below these, the Contractor shall provide adequate evidence that— (A) There is no material harm to the Gov- ernment due to lower accuracy levels; and (B) The cost to meet the accuracy goals is excessive in relation to the impact on the Government; (3) Provide a mechanism to identify, re- port, and resolve system control weaknesses and manual override. Systems should iden- tify operational exceptions, such as excess/ residual inventory, as soon as known; (4) Provide audit trails and maintain records (manual and those in machine–-read- able form) necessary to evaluate system logic and to verify through transaction test- ing that the system is operating as desired; (5) Establish and maintain adequate levels of record accuracy, and include reconcili- ation of recorded inventory quantities to physical inventory by part number on a peri- odic basis. A 95 percent accuracy level is de- sirable. If systems have an accuracy level below 95 percent, the Contractor shall pro- vide adequate evidence that— (i) There is no material harm to the Gov- ernment due to lower accuracy levels; and (ii) The cost to meet the accuracy goal is excessive in relation to the impact on the Government; (6) Provide detailed descriptions of cir- cumstances that will result in manual or system generated transfers of parts; (7) Maintain a consistent, equitable, and unbiased logic for costing of material trans- actions as follows: (i) The Contractor shall maintain and dis- close written policies describing the transfer methodology and the loan/pay-back tech- nique. (ii) The costing methodology may be standard or actual cost, or any of the inven- tory costing methods in 48 CFR 9904.411– 50(b). The Contractor shall maintain consist- ency across all contract and customer types, and from accounting period to accounting period for initial charging and transfer charging. (iii) The system should transfer parts and associated costs within the same billing pe- riod. In the few instances where this may not be appropriate, the Contractor may accom- plish the material transaction using a loan/ pay-back technique. The ‘‘loan/pay-back technique’’ means that the physical part is moved temporarily from the contract, but the cost of the part remains on the contract. The procedures for the loan/pay-back tech- nique must be approved by the ACO. When the technique is used, the Contractor shall have controls to ensure— (A) Parts are paid back expeditiously; (B) Procedures and controls are in place to correct any overbilling that might occur; (C) Monthly, at a minimum, identification of the borrowing contract and the date the part was borrowed; and (D) The cost of the replacement part is charged to the borrowing contract; (8) Where allocations from common inven- tory accounts are used, have controls (in ad- dition to those in paragraphs (d)(2) and (7) of this clause) to ensure that— (i) Reallocations and any credit due are processed no less frequently than the routine billing cycle; (ii) Inventories retained for requirements that are not under contract are not allocated to contracts; and (iii) Algorithms are maintained based on valid and current data; (9) Have adequate controls to ensure that physically commingled inventories that may include material for which costs are charged or allocated to fixed-price, cost-reimburse- ment, and commercial contracts do not com- promise requirements of any of the stand- ards in paragraphs (d)(1) through (8) of this clause. Government-furnished material shall not be— (i) Physically commingled with other ma- terial; or (ii) Used on commercial work; and (10) Be subjected to periodic internal re- views to ensure compliance with established policies and procedures.