1. DFARS CASE 2003-D009 Payment and Billing Instructions
Roseann Hurst
Contract Pay Systems Branch
Commercial Pay Business Line
Defense Finance and Accounting Service
March 2005

2. Integrity - Service - Innovation
Presentation Outline
Background
Local Clause Review
Oldest Funds First Example
Local Clause Problems
Purpose
Major Changes
Benefits
Additional Information
Today we’ll be discussing the...
background behind DFARS Case 2003-D009
purpose of DFARS Case 2003-D009,
major changes you’ll see as the result of this case,
benefits that will be realized from the implementation of this case,
and finally where you can obtain additional information about this case.
Payment and Billing Instructions (DFARS Case 2003-D009) (Comments due August 24, 2004)
Proposed change improves contract payment and billing instructions. The changes include:
(1) addition of a clause addressing contract line item information needed in financing and interim payment requests;
(2) amendment of Material Inspection and Receiving Report instructions to address electronic submissions; and
(3) relocation of text addressing distribution of contracts and numbering of contract line items to the new DFARS companion resource,
Procedures, Guidance, and Information (PGI). In addition, to eliminate the need for non-standard local payment clauses, PGI will
contain a menu of standard payment instructions from which the contracting officer will make a selection for inclusion in Section G
of the contract. A proposed rule describing the purpose and structure of PGI was published on February 23, 2004
(DFARS Change Notice ).
03/18/2005
Integrity - Service - Innovation

3. Integrity - Service - Innovation
Background
Working group established
Conducted review of local payment clauses
Provided recommendations
The contract payment process is complex with many types of payments (e.g.
delivery payments and various types of contract financing payments).
Payment clauses are required to reflect the negotiated agreement with the
contractor and instruct DFAS how they should make payments. Many of
these clauses are standardized within the FAR (Federal Acquisition
Regulation and DFARS (Defense Federal Acquisition Regulation Supplement).
Standard clauses permit DFAS to program their systems and avoid manual
intervention.
Many buying activities construct and negotiate unique payment provisions
known as local payment clauses. These clauses are not programmed into
the DFAS systems and therefore require manual intervention on the part
of DFAS.
In 2002 an interagency (DFAS, DCMA, USD(C), USD(AT&L)(DP)) working group
was established to review the use of local payment clauses and make
recommendations for reducing them.
03/18/2005
Integrity - Service - Innovation

4. Background: Local Clause Review
No clear guidance on constructing payment instructions resulted in numerous non-standard clauses
a. The paying office shall ensure that the voucher is disbursed for each ACRN in sequential order
beginning with ACRN AA.
The review found that agency-specific (local clauses) were in use
primarily because there was no DoD “standard” for constructing such
clauses. And the review also determined that although the instructions
were unique depending on service and buying activity, the majority of
the clauses were just variations of the same clause.
DFARS (e)(3) provided the only guidance on constructing payment instructions and it was
vague.
As you can see from these few examples some of these instructions appear to be saying the same thing
they’re just doing it differently.
03/18/2005
Integrity - Service - Innovation

5. Background: Oldest Funds First Example
Using the “oldest ACRN/oldest funds first” citation how would you pay this?
AA 97X4930.5CK0 01 O.C. 26 S33150
AB A1GW 312 SA SWS D GW
AC ETL F F03000
AD N6N7HP S01021
Take a look at the 4 accounting lines on the screen and think for a
minute how you would pay this if you were a payment technician at DFAS.
Some things to consider would be;
Does oldest ACRN mean the ACRN that was put on the contract first?
If so, then ACRN AA should be used first.
Does oldest funds mean the appropriation with the oldest fiscal year?
If so, then how should ACRNs AB, AC, and AD be disbursed since they
all have the same fiscal year? Where does ACRN AA fit in since it has
an “X” for a fiscal year?”
These are all things that need to be considered and when the instructions
are not clear you’ll end up with a misapplied payment.
In any case, if you’re goal is to prevent the funds from canceling
then you’ll want to consider the type of funds as well as the fiscal year
of the appropriation.
[CLICK THE MOUSE ONCE TO MAKE EACH LINE APPEAR]
1st
AD (O&M 1-year funds)
2nd
AC (RDT&E 2-year funds)
3rd
AB (Procurement 3-year funds)
4th
AA 97X4930 (Revolving No-year funds)
03/18/2005
Integrity - Service - Innovation

6. Background: Local Clause Problems
Use of numerous non-standard clauses results in…
Manual handling of payment requests
Increase in payment error rate
Increase in payment processing time
Increase in operating costs
Increase in payment error rate
Clerks must find, review, interpret, and implement
Prone to errors of interpretation or application
Increase in payment processing time - affects:
DFAS
Contracting Officers (DD Form 1716, Contract Data Package
Recommendation/Deficiency Report)
Contractors
Increase in operating costs for:
Services and agencies
Since local payment clauses are non-standard the problems associated
with them all have one thing in common,
THEY COST YOU MONEY!!!!!
03/18/2005
Integrity - Service - Innovation

7. Integrity - Service - Innovation
Purpose
Modify DFARS to implement working group recommendations to include a standard set of payment instructions that…
Will reduce the need for local clauses
Can eventually be programmed into DFAS payment systems
Incorporate several noncomplex DFARS transformation proposals
DFARS Case 2003-D009 was developed as a result of the recommendations
from the working group to add standardized payment and
billing instructions in the DFARS to eliminate the problems encountered
with the local payment clauses. In addition, several noncomplex DFARS
transformation proposals were also included in this case.
DFARS Transformation is a major DoD initiative to dramatically change
the purpose and content of theDFARS. The transformed DFARS will contain
requirements of law, DoD-wide policies, delegations of FAR authorities,
deviations from FAR requirements, and policies/procedures that have a
significant effect on the public. Our objective is to improve the
efficiency and effectiveness of the acquisition process, while allowing
the acquisition workforce the flexibility to innovate. Additional
information on the DFARS Transformation initiative is available at .
Anticipate DPAP submission by 2/15/2005.
03/18/2005
Integrity - Service - Innovation

8. Integrity - Service - Innovation
Major Changes
Requires that payment instructions be provided for all contracts that…
Include contract line items funded by multiple accounting classification citations,
Contain cost-reimbursement line items, or
Authorize financing payments
Improves contract payment instructions by providing a standard list the contracting officer can select from for inclusion in section G
Relocates information to the new DFARS companion resource, Procedures, Guidance, and Information (PGI)
Establishes a new billing instructions clause for contract financing and interim payments under cost-reimbursement service contracts
Proposed change improves contract payment and billing instructions. The changes include:
(1) addition of a clause addressing contract line item information needed in financing and interim payment requests;
(2) amendment of Material Inspection and Receiving Report instructions to address electronic submissions; and
(3) relocation of text addressing distribution of contracts and numbering of contract line items to the new DFARS companion resource, Procedures, Guidance, and Information (PGI).
In addition, to eliminate the need for non-standard local payment clauses, PGI will contain a menu of standard payment instructions from which the contracting officer will make a selection for inclusion in Section G of the contract. A proposed rule describing the purpose and structure of PGI was published on February 23, 2004 (DFARS Change Notice ).
03/18/2005
Integrity - Service - Innovation

9. Integrity - Service - Innovation
Benefits
Eliminate guesswork utilized today
Reduce prevalidation delays/rejects
Reduce reconciliation effort
Reduce the dollars provided due to cancelled funds and interest
Facilitate Electronic Processing
Since the DFARS PGI will contain standard clauses the benefits
associated with them all have one thing in common,
THEY CAN SAVE YOU MONEY!!!!!
03/18/2005
Integrity - Service - Innovation

10. Additional Information
Federal Register Notice and Rule Verbiage
Procedures, Guidance and Information (PGI)
DFARS Transformation
The most recent update for this case said that on 03/02/2005 the DAR editor requested DoD approval to publish draft final rule.
03/18/2005
Integrity - Service - Innovation

11. Your Financial Partner @ Work
DFAS
Your Financial Work
Thank you for your attention and now I’ll
try to answer any questions you might have.