§ 101-27.206-3 Packaging.

To the extent feasible and economical, shelf-life material shall be packaged in such a way as to provide for minimum deterioration.

[40 FR 59595, Dec. 29, 1975)

§ 101-27.207 Control and inspection. § 101-27.207-1 Agency controls.

nec

Agencies shall establish the essary controls to identify shelf-life items on their stock records (and in other appropriate elements of their supply system), and shall determine the appropriate shelf life for other than GSA managed items. Shelf-life items shall be stored in such a way as to ensure that the oldest stock on hand is issued first. Agencies shall issue the oldest stock of shelf-life items first except when it is not feasible as in shipments to overseas activities.

[40 FR 59596, Dec. 29, 1975]

§ 101-27.207-2 Inspection.

Type II items remaining in stock immediately before the end of the designated shelf-life period shall be inspected to determine whether the shelf life can be extended, except items having a line item inventory value of $300 or less, or if the cost of inspection or testing is significant in relation to the value of the item. If the material is found suitable for issue on the date of inspection, the shelf life should be extended for a period equal to 50 percent of the original shelf-life period and the next reinspection date established accordingly. Material should be reinspected before the end of each extended shelf-life period and the shelf life extended again up to 50 percent of the original shelf life as long as the material conforms to the established criteria. Material on which the shelf life has been extended shall not be shipped to overseas activities if the time remaining in the extended shelf-life period is relatively short.

[40 FR 59596, Dec. 29, 1975]

items as described below) is extended, only the exterior containers of bulk stocks need be annotated or labeled to indicate the date of inspection and date material is to be reinspected. Individual units of issue not classified as having a critical end-use application are not required to be annotated or labeled as long as controls are established to preclude issuance of unserviceable material to a user. (A critical end-use item is any item which is essential to the preservation of life in emergencies; e.g., parachutes, marine life preservers, and certain drug products, or any item which is essential to the performance of a major system; e.g., aircraft, the failure of which would cause damage to the system or endanger personnel.) At the time of shipment, the date of inspection and date for reinspection shall be affixed by label or marked by other means on each unit of issue of Type II items having a critical end-use application.

[42 FR 61861, Dec. 7, 1977]

§ 101-27.208 Inventory analyses.

(a) An inventory analysis shall be conducted periodically for each Type I item to determine whether the quantity on hand will be used within the established shelf-life period. If the analysis indicates there are quantities which will not be used within the shelf-life period, arrangements shall be made to ensure use of the item(s) within the holding agency or for redistribution to other agencies.

(b) An inventory analysis shall be conducted periodically for each Type II item with a shelf life of 60 months or less to determine whether issue of the quantity on hand is anticipated prior to the expiration of the designated shelf life. This analysis shall be made as follows:

When the shelf-life period of Type II material (except for critical end-use

(1) If the analysis indicates that the quantity on hand will not be issued within the shelf-life period and the cost of inspection or testing is not significant in relation to the line item value, the items shall be inspected to determine if the shelf-life period can be extended.

(2) If the analysis indicates that the quantity on hand will be issued within the shelf-life period, inspection is not required. However, such items shall be viewed again during the last month of the shelf-life period to determine whether quantities are sufficient to warrant inspection. The guidelines in §101-27.207-2 shall be used to determine whether quantities are sufficient to warrant inspection and for extending the shelf-life period.

(3) If an agency does not have an inspection capability and the quantity and value of an indicated overage is sufficiently large to warrant special consideration, arrangements shall be made for qualified inspection or laboratory testing to determine whether the material is suitable for issue.

[40 FR 59596, Dec. 29, 1975]

§ 101-27.209 Utilization and distribution of shelf-life items.

Where it is determined that specified quantities of both Type I and Type II shelf-life items will not be used within the shelf-life period, such quantities shall be utilized or distributed in accordance with this section.

[35 FR 5010, Mar. 24, 1970]

§ 101-27.209-1 GSA stock items.

Shelf-life items that meet the criteria for return under the provisions of subpart 101-27.5 of this part may be offered for return to GSA.

[35 FR 12721, Aug. 11, 1970]

§ 101-27.209-2 Items to be reported as

excess.

Shelf-life items which do not meet the criteria in subpart 101-27.5 of this part, which would, if returned to GSA, adversely affect the GSA nationwide stock position, or which are returned to GSA and are determined unsuitable for issue, will be reported as excess

under the provisions of part 101-43 of this chapter.

[35 FR 12721, Aug. 11, 1970]

§ 101-27.209-3 Disposition of unneeded property.

If no transfer is effected and no donation requested, the property shall be assigned for sale, abandonment, or destruction in accordance with part 10145 of this chapter.

[32 FR 6493, Apr. 27, 1967]

Subpart 101-27.3-Maximizing Use of Inventories

SOURCE: 32 FR 13456, Sept. 26, 1967, unless otherwise noted.

§ 101-27.300 Scope.

This subpart prescribes policy and procedures to assure maximum use of inventories based upon recognized economic limitations.

§ 101-27.301 [Reserved]

§ 101-27.302 Applicability.

The provisions of this subpart are applicable to all civil executive agencies. § 101-27.303 Reducing long supply. Through effective interagency matching of material and requirements before the material becomes excess, unnecessary procurements and investment losses can be reduced. Timely action is required to reduce inventories to their normal stock levels by curtailing procurement and by utilizing and redistributing long supply. (The term long supply means the increment of inventory of an item that exceeds the stock level criteria established for that item by the inventory manager, but excludes quantities to be declared excess.) In this connection, requirements for agency managed items should be obtained from long supply inventories offered by agencies rather than by procurement from commercial sources. Because supply requirements usually fluctuate over a period of time, a long supply quantity which is 10 percent or less of the total stock of the item is

considered marginal and need not be reduced.

[41 FR 3858, Jan. 27, 1976]

§ 101-27.303–1 Cancellation or transfer.

When the long supply of an item, including quantities due in from procurement, is greater than 10 percent of the total stock of that item, the inventory manager, or other appropriate official, shall cancel or curtail any outstanding requisitions or procurements on which award has not been made for such items, and may also cancel contracts for such items (if penalty charges would not be incurred) or transfer the long supply, if economical, to other offices within the agency in accordance with agency utilization procedures. In such cases, acquisition of long supply items shall not be made from other sources such as requirements contracts.

§ 101-27.303-2 Redistribution.

If the long supply of an item remains greater than 10 percent of the total stock of an item despite efforts to cancel or transfer the long supply as provided in §101-27.303-1, the inventory manager shall offer the long supply to another agency or other agencies in accordance with this §101-27.303-2. Before offering a long supply to any agency, the inventory manager shall determine whether the item to be offered is a centrally managed item or an agency managed item. A centrally managed item is an item of supply or equipment which forms part of an inventory of an agency performing a mission of storage and distribution to other Government activities; e.g., GSA and DSA. An agency managed item is a procured item that forms a part of a controlled inventory of an agency and its activities for issue internally for its own use. After determining whether the item to be offered is an agency or centrally managed item, the inventory manager shall:

(a) Offer centrally managed items to the agency managing the item for return and credit in accordance with the procedures established by that agency; and

(b) Offer agency managed items to other agencies which manage the same item. Reimbursement shall be arranged

by the agencies effecting the inventory transfer. The responsibility of locating agencies or activities requiring these items shall rest with the agency holding the long supply. However, agencies may receive a list of Government activities using particular national stock numbers by writing to the General Services Administration (FFL), Washington, DC 20406.

[32 FR 13456, Sept. 26, 1967, as amended at 41 FR 3858, Jan. 27, 1976]

§ 101-27.304 Criteria for economic retention limits.

If a long supply continues to exceed 10 percent of the total stock of an item despite efforts to redistribute the long supply as provided in §101-27.303-2, the inventory manager shall establish an economic retention limit for the item in accordance with the provisions of this §101-27.304. An economic retention limit is the maximum quantity of an item that can be held in stock without incurring greater costs for carrying the stock than the costs for disposal and resulting loss of investment. The economic retention limit shall be used to determine which portion of the inventory may be economically retained and which portion should be disposed of as

excess.

[41 FR 3858, Jan. 27, 1976]

§ 101–27.304–1 Establishment of economic retention limit.

An economic retention limit must be established for inventories so that the Government will not incur any more than the minimum necessary costs to provide stock of an item at the time it is required. Generally, it would be more economical to dispose of stock in excess of the limit and procure stock again at a future time when the need is more proximate rather than incur the cumulative carrying costs.

(a) The agency managing a centrally managed or agency managed item shall establish an economic retention limit so that the total cumulative cost of carrying a stock of the item (including interest on the capital that is tied up in the accumulated carrying costs) will be no greater than the reacquisition cost of the stock (including the procurement or order cost). Consideration

NOTE: The entries in the tables were calculated by determining how long an item must be carried in inventory before the total cumulative carrying costs (including interest on the additional funds that would be tied up in the accumulated annual carrying costs) would exceed the acquisition costs of the stock. at that time (reacquisition costs). For example, assuming no net return from disposal, the accumulated carrying costs computed at the rate of 25 percent per year on the reacquisition cost of the stock and compounded annually at 10 percent (GSA's recommended rate of interest on Government investments) would be:

At 25 percent a year, accumulated carrying costs would be equivalent to the reacquisition costs after 32 years. Three and one-half years is, therefore, the economic retention limit for items with a 25 percent annual carrying cost rate. Where an activity has not yet established an estimate of its carrying cost, an annual rate of 10 percent may be used as an interim rate thereby resulting in an economic retention limit of 74 years when the net return on disposal is zero. The elements of carrying (holding) cost are given in the GSA Handbook, The Economic Order Quantity Principle and Applications. The handbook is listed in the GSA Supply Catalog and may be ordered in the same manner as other items in the catalog.

(b) The economic retention limit at a user stocking activity can best be determined by the item manager (for centrally managed or agency managed items) on the basis of overall Government requirements and planned procurement. Since stocks in long supply at a user stocking activity are less likely to find utilization outlets, the retention limit at these these activities should be relatively small. Generally the economic retention limit at a user stocking activity should be computed in the same manner as in paragraph (a) of this section and then reduced by 70 percent.

[39 FR 27902, Aug. 2, 1974]

§ 101-27.304-2 Factors affecting the economic retention limit.

(a) The economic retention limit may be increased where:

(1) The item is of special manufacture and relates to an end item of equipment which is expected to be in use beyond the economic retention time limit; or

(2) Costs incident to holding an additional quantity are insignificant and obsolescence and deterioration of an item are unlikely.

(b) The economic retention limit should be reduced under the following conditions:

(1) The related end item of equipment is being phased out or an interchangeable item is available; or

(2) The item has limited storage life, is likely to become obsolete, or the age and condition of the item does not justify the full retention limit.

§ 101-27.305 Disposition of long supply.

Where efforts to reduce the inventory below the economic retention limit have been unsuccessful, appropriate disposition should be effected in accordance with subpart 101-43.3 of this chapter. Any remaining inventory which is within the economic retention limit shall be retained. However, the item shall be reviewed at least annually and efforts made to reduce the long supply inventory in accordance with § 101-27.303.

Subpart 101-27.4-Elimination of Items From Inventory

SOURCE: 32 FR 12401, Aug. 25, 1967, and 32 FR 12721, Sept. 2, 1967, unless otherwise noted.

§ 101-27.400 Scope of subpart.

This subpart establishes policy and procedures designed to assure that items which can be obtained more economically from readily available sources, Government or commercial, are eliminated from inventory. For items which are not readily available from Government or commercial sources or are being held in inventory for a one time construction project, this subpart shall be applied to the extent feasible by the activity managing or controlling such inventories.

§ 101-27.401 [Reserved]

§ 101-27.402 Applicability.

The provisions of this subpart are applicable to all executive agencies in connection with inventory items maintained at stocking activities other than Government wholesale supply

sources.

§ 101-27.403 General.

By eliminating inactive items and slow-moving items which are readily available, when needed, from Government wholesale supply activities or from commercial sources, the costs to the Government in inventory investment and for maintaining the items in inventory can be eliminated. An “inactive item" is an item for which no current or future requirements are recognized by previous users and the item manager. A "slow-moving item" is an item for which there are current or future requirements, but the frequency and quantity of such requirements do not make it economical to stock them in lieu of obtaining requirements from other sources when needed. However, "standby or reserve items" are not to be eliminated from inventories. "standby or reserve item" is an item for which a reserve stock is held so that the items will be available immediately to meet emergencies for which there is insufficient time to procure or requisition the items without endan

A

gering life or causing substantial financial loss to the Government.

[41 FR 3859, Jan. 27, 1976]

§ 101-27.404 Review of items.

Except for standby or reserve stocks, items in inventory shall be reviewed periodically (at least annually) to identify those which are inactive and slowmoving. This review may be conducted coincidently with the normal replenishment or long supply reviews. The estimate of current or future requirements for an item shall be based on its recent history of recurring requirements. Standby items shall also be reviewed at appropriate intervals to substantiate their qualification for inclusion in that category.

§ 101-27.405 Criteria for elimination.

Inactive items, items which no longer qualify as standby, and slowmoving items which are readily available, when needed, from Government or commercial sources shall be eliminated from inventory. The determination of a slow-moving item shall be based on a comparison of the costs for continuing to maintain it in stock as opposed to the costs for ordering it from outside sources each time it is requested. This comparison shall also consider any difference in price and transportation costs for each alternative. In the absence of criteria for stockage of an item developed and used by an agency, the desired results will be obtained through application of the following table: