pools that will be allocated to the contract as indirect costs.

(x) Identify management reserves and undistributed budget.

(xi) Provide that the contract target cost plus the estimated cost of authorized but unpriced work is reconciled with the sum of all internal contract budgets and management reserves.

(3) Accounting. (i) Record direct costs on an applied or other acceptable basis in a formal system that is controled by the general books of account.

(ii) Summarize direct costs from cost accounts into the WBS without allocation of a single cost account to two or more WBS elements.

(iii) Summarize direct costs from the cost accounts into the contractor's functional organizational elements without allocation of a single cost account to two or more organizational elements.

(iv) Record all indirect costs which will be allocated to the contract.

(v) Identify the bases for allocating the cost of apportioned effort.

(vi) Identify unit costs, equivalent unit costs, or lot costs as applicable.

(vii) The contractor's material accounting system will provide for:

(A) Accurate cost accumulation and assignment of costs to cost accounts in [ a manner consistent with the budgets using recognized, acceptable costing techniques.

(B) Determination of price variances by comparing planned versus actual commitments.

(C) Cost performance measurement at the point in time most suitable for the category of material involved, but no earlier than the time of actual receipt of material.

(D) Determination of cost variances attributable to the excess usage of material.

(E) Determination of unit or lot costs when applicable.

(F) Full accountability for all material purchased for the contract, including the residual inventory.

(4) Analysis. (i) Identify at the cost account level on a monthly basis using data from, or reconcilable with, the accounting system:

(A) Budgeted cost for work scheduled and budgeted cost for work performed.

(B) Budgeted cost for work performed and applied (actual where appropriate) direct costs for the same work.

(C) Variances resulting from the above comparisons classified in terms of labor, material, or other appropriate elements together with the reasons for significant variances.

(ii) Identify on a monthly basis, in the detail needed by management for effective control, budgeted indirect costs, actual indirect costs, and variances along with the reasons.

(iii) Summarize the data elements and associated variances listed in (i) and (ii) above through the contractor organization and WBS to the reporting level specified in the contract.

(iv) Identify significant differences on a monthly basis between planned and actual schedule accomplishment and the reasons.

(v) Identify managerial actions taken as a result of criteria paragraphs (i) through (iv) of this section.

(vi) Based on performance to date and on estimates of future conditions, develop revised estimates of cost at completion for WBS elements identified in the contract and compare these with the contract budget base and the latest statement of funds requirements reported to the Government.

(5) Revisions and access to data. (i) Incorporate contractual changes in a timely manner recording the effects of such changes in budgets and schedules. In the directed effort prior to negotiation of a change, base such revisions on the amount estimated and budgeted to the functional organizations.

(ii) Reconcile original budgets for those elements of the work breakdown structure identified as priced line items in the contract, and for those elements at the lowest level of the DoD Project Summary WBS, with current performance measurement budgets in terms of (A) changes to the authorized work and (B) internal replanning in the detail needed by management for effective control.

(iii) Prohibit retroactive changes to records pertaining to work performed

that will change previously reported amounts for direct costs, indirect costs, or budgets, except for correction of errors and routine accounting adjustments.

(iv) Prevent revisions to the contract budget base § 206.6(b)(11) except for Government directed changes to contractual effort.

(v) Document, internally, changes to the performance measurement baseline (§ 206.6(b)(24)) and, on a timely basis, notify the procuring activity through prescribed procedures.

(vi) Provide the contracting officer and his duly authorized representatives access to all of the foregoing information and supporting documents.

PART 207-ACQUISITION AND DISTRIBUTION OF COMMERCIAL PRODUCTS (ADCP)

Sec.

207.1 Purpose.

207.2 Applicability and scope.

207.3 Definitions.

207.4 Objectives.

207.5 Policy.

207.6 Responsibilities.

AUTHORITY: Pub. L. 93-400, sec. 6.

SOURCE: 43 FR 57874, Dec. 11, 1978, unless otherwise noted.

§ 207.1 Purpose.

This part establishes the policies and responsibilities for the acquisition and distribution of commercial products (ADCP) within the Department of Defense.

§ 207.2 Applicability and scope.

(a) The provisions of this part apply to the Office of the Secretary of Defense, the Military Departments and the Defense Agencies (hereafter referred to as "DoD Components").

(b) The policies for ADCP expressed in this part apply to requirements for all end items, weapons, equipment, components or material for which commercial products are used or can be used, including principal and secondary items.

§ 207.3 Definitions.

(a) Commercial, off-the-shelf (OTS), products (also referred to as "commer

cial products"). Products in regular production sold in substantial quantities to the general public and/or industry at established market or catalog prices.

(b) Established commercial market acceptability. Commercial market acceptability is an evaluation of the product offered, performed for the purpose of determining a prospective contractor's ability to provide a commercial product that will conform to the Government's need. To be market acceptable, a product must be marketed in substantial quantities to the general public. To be substantial, sales to the general public must predominate over sales to the Government. If the commercial products were previously defined by a Government specification, offers of products which were acceptable under the Government specification may be considered under solicitations requiring a product to have established commercial market acceptability.

(c) Principal item. End items and replacement assemblies of such importance that the Military Departments require centralized individual item management throughout the supply system, to include depot level, base level, and items in the hands of the using units. Specifically included are items, where in the judgment of the DoD Component, there is a need for centralized inventory control, computation of requirements, acquisition, direction of distribution, and availability of the principal assets owned by that DoD Component.

(d) Secondary items. End items, replacement assemblies, parts and consumables, other than principal items.

§ 207.4 Objectives.

The objectives of this part are to:

(a) Acquire commercial, off-theshelf, products when such products will adequately serve the Government's requirements provided such products have an established market acceptability.

(b) Encourage, recognize the evaluate technological innovations in commercial items that are applicable to Defense needs.

(c) Optimize research, engineering, acquisition and support costs and enhance the opportunity for life cycle cost saving.

(d) Eliminate unnecessary Government specifications for commercial products and/or adopt non-Government specifications and standards where feasible. When Government specifications are used, tailor their application, where possible, to reflect the best commercial practices in form, fit, function or performance.

(e) Implement acquisition procedures designed to optimize the Government's advantage while minimizing the administrative burden to the contractor and Government.

(f) Validate feasible commercial item logistics support alternatives ensuring the least costly, acceptable life cycle support plan is chosen.

(g) Foster competitive industrial sources for acquisition, distribution and support of Government requirements for items managed by the Department of Defense.

§ 207.5 Policy.

In accordance with the Office of Federal Procurement Policy (OFPP) Memorandum, "Procurement and Supply of Commercial Products," May 24, 1976, as implemented by OFPP Memoranda, "Incremental Implementation of Policy on Procurement and Supply of Commercial ProductsPlanning and Analysis Phase," December 6, 1976, and "Implementation of Policy on Acquisition and Distribution of Commercial Products (ADCP)," December 27, 1977, DoD Components shall:

(a) Purchase commercial, off-theshelf, products when such products will adequately serve the Government's requirement, provided such products have an established commercial market acceptability, and

(b) Use commercial distribution channels in supplying commercial products to users when it is economically advantageous to do so and the impact on military readiness is acceptable.

§ 207.6 Responsibilities.

(a) The Under Secretary of Defense for Research and Engineering

cies (hereafter referred to as "DoD Components”).

§ 209.3 Background.

(a) The Metric Conversion Act of 1975, Title 15 U.S.C. section 205a-k (Pub. L. 94-168) establishes a national policy of coordinating the use of the metric system in the United States. To comply with that policy, the Department of Defense must establish guidelines and procedures to ensure that conversion from the U.S. customary system of weights and measures (inchpound) to the metric system shall be accomplished with minimum cost and disruption of operations.

(b) Use of the metric system shall promote interchangeability and interoperability of equipment and materiel with our allies, facilitate joint military production programs, and simplify supply operations.

(c) DoD Components shall keep pace with industry by using metric items when commercially available and economically and technically practicable.

(a) It is the policy of the Department of Defense to consider the use of the metric system in all of its activi ties, consistent with operational, economical, technical, and safety requirements.

(b) The metric system shall be used in all new designs, unless such use is not in the best interest of the Department of Defense. In the latter instance, justification shall be documented. Adoption of the metric system shall also be considered in the acquisition of supplies and services. In general, DoD Components shall adopt the metric system in:

(1) Developing materiel to be used jointly with the North Atlantic Treaty Organization (NATO) and other allied nations.

(2) Developing military materiel that has potential for significant foreign sales or multinational joint acquisition programs.

(3) Areas where industry has made significant progress in the design and production of metric products.

(4) Areas where defense-industry preparedness or defense production readiness may be enhanced.

(5) Areas that offer an economical, operational, or other advantage, or where no disadvantage is incurred.

§ 209.5 Objectives.

(a) Physical and operational interfaces between metric items and inchpound items shall be designed to ensure that interchangeability and interoperability shall not be adversely affected.

(b) Existing designs dimensioned in inch-pound units shall be converted to metric units only if determined to be necessary or advantageous. Unnecessary retrofit of existing systems with new metric components shall be avoided when both the metric and inchpound components are interchangeable and interoperable. Normally, the measurement units in which a system is originally designed shall be retained for the life of the system.

(c) During the metric transition phase, use of hybrid metric and inchpound designs may be necessary and will be acceptable. Materiel components, parts, subassemblies, and semifabricated materials that are of commercial design shall be specified in metric units when economically available and technically adequate, when it is otherwise specifically determined to be in the best interest of the Department of Defense. Bulk materials shall be specified and accepted in metric units when expediency and economy dictates.

or

(d) Defense Systems Acquisition Review Council (DSARC) reviews and associated Decision Coordinating Papers (DoD Directive 5000.21 "Major System Acquisition Process," January 18, 1977) shall address the use of metric units of measurement or reasons for their nonuse.

(e) Technical reports, studies, and position papers (except those pertaining to items dimensioned in inchpound units) shall include metric units of measurement in addition to or in

1Copies may be obtained, if needed, from the U.S. Naval Publications and Forms Center, 5801 Tabor Avenue, Philadelphia, PA 19120. Attention: Code 301.

place of inch-pound units. With respect to existing contracts, this requirement applies only if such documentation can be obtained without an increase in contract costs.

(f) Programing and budgeting actions shall include resources required to support the DoD effort in converting to the use of metric units. Use of the metric system shall be identified, justified, and planned so that costs can be included in the budget cycle on an orderly basis.

(g) The Department of Defense shall use the metric system of the International System of Units (SI) described by the American Society for Testing and Materials, E-380, "Standard for metric Practice, DoD Index of Specifications and Standards."

(h) To the extent that there is DoD interest, representatives shall participate in the development of national and international standards using the metric system. NATO and other international metric standards shall be used to the maximum practical extent. However, if a U.S. standard is established with greater definition and restriction than the international standard, the U.S. standard shall be used.

(i) Emphasis shall be placed on converting or developing specifications, standards, and other general-purpose technical data to keep pace with overall metric conversion activity. When a military item has no commercial counterpart, the developing agency shall assume a leadership role in developing the applicable metric document when the need arises.

(j) When purchasing new shop and laboratory equipment, DoD Components are encouraged to specify features that will allow direct measurement of metric units or both metric and inch-pound units. Use of conversion kits is also encouraged.

(k) Training in metric practices and usage shall be provided to personnel whose duties require such knowledge.

(1) Use of dual dimensions (such as both metric and inch-pound dimensions on drawings) shall be avoided, unless it is determined in specific instances that such usage is beneficial. The use of tables on documents to translate dimensions from one system