FAR 4.1003—Establishing line items.
Plain-English Summary
FAR 4.1003 explains when contracting officers must establish separate contract line items for deliverables and what characteristics make a deliverable suitable for its own line item. It covers five core tests: whether the deliverable is separately identifiable, whether it has a single unit price or total price, whether it can be tied to a single accounting classification citation, whether it has a separate delivery schedule, destination, period of performance, or place of performance, and whether it uses a single contract pricing type. The section also addresses special treatment for services, supplies, and first article requirements, including when a first article must be a separate line item and when a lot may be treated as one line item. In practice, this rule is about structuring the contract so each deliverable can be tracked, priced, funded, delivered, and administered cleanly. Proper line-item structure supports payment, property accountability, funding control, inspection and acceptance, schedule management, and reporting. The exception in 4.1005-2 means the rule is not absolute, so users must also check the related exception provisions before finalizing the contract structure.
Key Rules
Separate identifiable deliverables
Establish separate line items for deliverables that can be distinctly identified. Supplies are separately identifiable when they have their own identification, such as an NSN, item description, or manufacturer’s part number; services are separately identifiable when they are limited to no more than one statement of work or performance work statement.
First article line items
If the procurement includes first article requirements, create a separate line item for each item that needs separate approval. If the first article is a lot made up of mixed items that will be approved together as one lot, a single line item may be used.
Single price structure
Each line item should have a single unit price or a single total price. The rule is intended to keep pricing tied to a discrete deliverable rather than combining multiple priced outcomes into one line item.
Single accounting citation
A line item should normally be funded by one accounting classification citation. Multiple accounting citations are allowed only when the deliverable effort cannot reasonably be subdivided any other way.
Separate schedule or location
Use separate line items when the deliverable has a different delivery schedule, destination, period of performance, or place of performance. Different timing or location usually means the government needs separate tracking and administration.
Single pricing type
Each line item must use one contract pricing type, such as fixed-price or cost-reimbursement. Mixing pricing types within one line item is not the norm and undermines clear administration and payment control.
Check the exception rule
These line-item requirements apply except as provided at 4.1005-2. Before finalizing the contract structure, the contracting officer must confirm whether a specific exception permits a different treatment.
Responsibilities
Contracting Officer
Determine whether each deliverable meets the criteria for a separate line item, structure the contract accordingly, apply the first article rule, ensure pricing and accounting citations are properly aligned, and verify whether any exception in 4.1005-2 applies.
Contractor
Provide clear product and service descriptions, pricing information, delivery and performance details, and any data needed to support proper line-item structuring, including first article distinctions and funding or schedule separability.
Agency
Provide the funding, program, technical, and acquisition inputs needed to define deliverables, support accounting classification citations, and ensure the contract line-item structure matches program and administrative needs.
Program/Technical Office
Define deliverables, statements of work, performance work statements, delivery milestones, and first article requirements with enough precision to allow proper line-item identification and separation.
Finance/Accounting Office
Supply valid accounting classification citations and confirm whether multiple citations are necessary because the deliverable cannot be subdivided otherwise.
Practical Implications
This section is mainly about contract clarity: if a deliverable is not set up as a proper line item, payment, acceptance, funding, and reporting can become difficult or inconsistent.
A common mistake is combining multiple distinct supplies or services into one line item even though they have different delivery dates, locations, or performance periods; that can create administration and invoicing problems.
Another frequent issue is using one line item for multiple services with more than one SOW or PWS, which conflicts with the rule that services should be separately identifiable by a single statement of work or performance work statement.
First article requirements need special attention because each separately approved item generally needs its own line item; failing to separate them can complicate approval and acceptance.
Contracting officers should also watch for pricing and funding mismatches, such as one line item with mixed pricing types or multiple accounting citations without a clear reason, because those structures can obscure accountability and make the contract harder to manage.
Official Regulatory Text
Establish separate line items for deliverables that have the following characteristics except as provided at 4.1005-2 : (a) Separately identifiable. (1) A supply is separately identifiable if it has its own identification ( e.g. , national stock number (NSN), item description, manufacturer's part number). (2) Services are separately identifiable if they have no more than one statement of work or performance work statement. (3) If the procurement instrument involves a first article (see subpart 9.3 ), establish a separate line item for each item requiring a separate approval. If the first article consists of a lot composed of a mixture of items that will be approved as a single lot, a single line item may be used. (b) Single unit price or total price. (c) Single accounting classification citation. A single deliverable may be funded by multiple accounting classifications when the deliverable effort cannot be otherwise subdivided. (d) Separate delivery schedule, destination, period of performance, or place of performance. (e) Single contract pricing type (e.g., fixed-price or cost-reimbursement).