252.242-7004 — Material Management and Accounting System.

DFARS 252.242-7004 — Material Management and Accounting System.. This clause is part of the Defense Federal Acquisition Regulation Supplement and applies specifically to Department of Defense contracts.

252.242-7004 Material Management and Accounting System. As prescribed in 242.7204, use the following clause: Material Management and Accounting System (Jan 2025) (a) Definitions. As used in this clause— Acceptable material management and accounting system means a material management and accounting system that generally complies with the system criteria in paragraph (d) of this clause. Contractor means a business unit as defined in Federal Acquisition Regulation (FAR) 2.101. Material management and accounting system (MMAS) means the Contractor's system or systems for planning, controlling, and accounting for the acquisition, use, issuing, and disposition of material. Material management and accounting systems may be manual or automated. They may be stand-alone systems, or they may be integrated with planning, engineering, estimating, purchasing, inventory, accounting, or other systems. Material weakness means a deficiency or combination of deficiencies in the internal control over information in contractor business systems, such that there is a reasonable possibility that a material misstatement of such information will not be prevented, or detected and corrected, on a timely basis. A reasonable possibility exists when the likelihood of an event occurring is— (1) Probable; or (2) More than remote but less than likely (section 806 of Pub. L. 116-283). Valid time-phased requirements means material that is— (1) Needed to fulfill the production plan, including reasonable quantities for scrap, shrinkage, yield, etc.; and (2) Charged or billed to contracts or other cost objectives in a manner consistent with the need to fulfill the production plan. (b) General. The Contractor shall— (1) Maintain an MMAS that— (i) Reasonably forecasts material requirements; (ii) Ensures that costs of purchased and fabricated material charged or allocated to a contract are based on valid time-phased requirements; and (iii) Maintains a consistent, equitable, and unbiased logic for costing of

• The Contractor shall— (1) Maintain an MMAS that— (i) Reasonably forecasts material requirements; (ii) Ensures that costs of purchased and fabricated material charged or allocated to a contract are based on valid time-phased requirements; and (iii) Maintains a consistent, equitable, and unbiased logic for costing of material transactions; and (2) Assess its MMAS and take reasonable action to comply with the MMAS standards in paragraph (e) of this clause.
• The Contractor shall— (1) Have policies, procedures, and operating instructions that adequately describe its MMAS; (2) Provide to the Administrative Contracting Officer (ACO), upon request, the results of internal reviews that it has conducted to ensure compliance with established MMAS policies, procedures, and operating instructions; and (3) Disclose significant changes in its MMAS to the ACO at least 30 days prior to implementation.
• 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 fabricated material charged or allocated to a contract are based on valid time-phased requirements as impacted by minimum/economic order quantity restrictions.
• (ii) If systems have accuracy levels below these, the Contractor shall provide adequate evidence that— (A) There is no material harm to the Government 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, report, and resolve system control weaknesses and manual override.
• If systems have an accuracy level below 95 percent, the Contractor shall provide adequate evidence that— (i) There is no material harm to the Government 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 circumstances that will result in manual or system generated transfers of parts; (7) Maintain a consistent, equitable, and unbiased logic for costing of material transactions as follows: (i) The Contractor shall maintain and disclose written policies describing the transfer methodology and the loan/pay-back technique.
• The Contractor shall maintain consistency across all contract and customer types, and from accounting period to accounting period for initial charging and transfer charging.
• The procedures for the loan/pay-back technique 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 inventory accounts are used, have controls (in addition 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-reimbursement, and commercial contracts do not compromise requirements of any of the standards in paragraphs (d)(1) through (8) of this clause.
• Government-furnished material shall not be— (i) Physically commingled with other material; or (ii) Used on commercial work; and (10) Be subjected to periodic internal reviews to ensure compliance with established policies and procedures.
• (2) The Contractor shall respond within 30 days to a written initial determination from the Contracting Officer that identifies material weaknesses in the Contractor's MMAS.
• If the Contractor disagrees with the initial determination, the Contractor shall state, in writing, its rationale for disagreeing.
• (f) If the Contractor receives the Contracting Officer's final determination of material weaknesses, the Contractor shall, within 45 days of receipt of the final determination, either correct the material weaknesses or submit an acceptable corrective action plan showing milestones and actions to eliminate the material weaknesses.