The 5 cent solution?

For the past 18 months, the radio frequency identification (RFID) industry has chased its version of a Holy Grail: the development of a tag that would cost 5 cents. Such an RFID tag would be affordable to use on a variety of inexpensive consumer goods sold by retailers such as Wal-Mart Stores Inc.

Defense Department officials have also embraced the idea of the 5 cent tag, which has been elusive for suppliers to the Pentagon and major retailers. The suppliers are racing to meet a Jan. 1, 2005, deadline to start using tags on some shipments.

Alan Estevez, assistant deputy undersecretary of Defense for supply chain integration, said economies of scale will eventually drive down tag prices to a nickel, but costs now hover around 20 cents a tag. Speaking at a high-level RFID confab in Baltimore last week, Estevez said DOD officials would definitely like to see tag costs reduced to 5 cents to encourage suppliers of consumables such as toilet paper to use RFID.

But, unlike Wal-Mart, Estevez said DOD officials plan to use RFID to track subsystems such as avionics and engines used on multimillion-dollar F-18 aircraft, for example. A nickel is not even noticed for such projects.

Wal-Mart does not yet stock F-18s, but we are sure when it does, they will come backed by the company's "Everyday low prices" policy.

Who pays the RFID bill?

Wal-Mart officials made it clear from the start of their RFID initiative that they intend for suppliers to absorb the costs of the tags and installation of the pricey infrastructure — readers, networks, middleware.

At today's cost of 20 cents per tag, that's a big hit on items such as Scott paper towels, but suppliers to Wal-Mart, the world's biggest retailer, have little choice but to absorb the cost of the technology. Kenneth Porad, Boeing Co.'s automated identification program manager, elicited laughter from the 1,000-plus audience members at the RFID gabfest last week when he answered "nope" to the question of whether Boeing officials intended to give suppliers a break on the costs of introducing RFID technology.

Estevez said Pentagon officials expect to see suppliers build the cost of RFID into new contracts, which could be a nice way of saying they have to absorb the costs. The bottom line of RFID is that its costs will be passed along to the consumer in the case of retailers or the taxpayer in the case of DOD.

Aren't you glad you are funding a technology revolution at a nickel an item?


We hear they are shuffling the top civilian deck at the Defense Information Systems Agency, with a new chief technology officer appointment due soon.

Cyber Security Awareness Month Tip #2

We're passing along security tips as our contribution to helping the Homeland Security Department celebrate National Cyber Security Awareness Month.

Forget "Redskins" as a password. Half of Washington uses it already. Instead use "Dan Snyder," which no one will ever think of, and make the ego-driven 'Skins owner happy — or at least as happy as he will ever be without a Super Bowl win.

Intercept something? Send it to

The Fed 100

Save the date for 28th annual Federal 100 Awards Gala.


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