Contractors struggling to comply with Pentagon smart-tag mandate.

As the deadline nears for contractors to install smart tags on shipments of critical military supplies, an industry survey reveals that many companies have yet to come to grips with the new regulations.

The smart-tag technology, known as passive radio frequency identification (RFID), will become mandatory this month for all Defense Department suppliers shipping repair parts, clothing and other military gear to Defense Logistics Agency depots in Pennsylvania and California.

RFID tags electronically store information about the contents of a shipment, making it easier to sort and track the equipment during transportation. Unlike "active" RFID tags, the passive tags require a scanner or reader device in order to retrieve the data.

According to a recent survey, however, "a majority of companies have no formal plans in place to support the Jan. 1, 2005, U.S. government requirement to initiate use of radio frequency identification."

The annual Aerospace and Defense Industry Survey was conducted by Computer Sciences Corporation, the Aerospace Industry Association and Aviation Week magazine. More than 160 companies responded to the survey.

"A surprisingly large percentage of the companies surveyed indicated that they had no finalized plans to implement RFID," said Pete Wiese, head of the aerospace and defense consulting practice at CSC. "However, it was encouraging to see that nearly 75 percent of the companies are aware of the requirement and have initiated dialogue."

Most of the respondents are aware of the RFID requirement, but almost three quarters of them are unsure as to how they are going to pay for or use these technologies, Wiese said.

Companies have received a 30-day extension until February 2005, but the additional month is "largely symbolic" and will not help address the compliance problems, said Ken Mason, an RFID expert at CSC.

However, a Defense Department spokesperson said there was no such extension and that the January deadline was firm.

Regardless of whether the Pentagon decides to authorize any waivers to the policy, the fundamental problem remains that many contractors have yet to grasp the technical requirements, Wiese said.

"We are still struggling to understand how RFID adds value," he said. "The survey unveiled that 75 percent of survey respondents are aware of the requirements. They just don't know how their actions provide additional value ... We expect waivers to be 'limited.' The message from the Defense Department is that 'this is policy.'"

The RFID mandate caught many people off guard because it's a relatively unproven technology, Mason said. The Defense Department often has been conservative about adopting technologies that have not matured in the commercial sector. "We were all very surprised that they would take such bold step," he said. "They understood that, even though it wasn't completely proven."

A catalyst of the Pentagon's policy was the decision by Wal-Mart to mandate passive RFID tags for its suppliers. According to Wiese, the undersecretary of defense for acquisition, logistics and technology, Michael Wynne, told contractors that the Defense Department could not pass up on the opportunity to capitalize on the push Wal-Mart was making to get the technology in place. The giant retailer has about 10,000 suppliers, compared to 43,000 for the Defense Department.

Not all Wal-Mart suppliers will be complying on time, Wiese said. "RFID remains an emerging technology. Organizations need to be educated."

On the military side, it could be a long time before passive RFID technology is ready for prime time. Recent tests conducted for U.S. Central Command by the Military Surface Deployment and Distribution agency showed a "10 percent success rate," said an industry source.