Acquisition Initiatives 2005 Aviation Business Conference


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  • Initiative underway. Revision to DFARS final published. Informative as to questions being rsaised Awaiting completion of contractual wording to implement DFARS clause.
  • Show cover pages included in package to audience.
  • Acquisition Initiatives 2005 Aviation Business Conference

    1. 1. Acquisition Initiatives 2005 Aviation Business Conference
    2. 2. AGENDA <ul><li>UID/RFID </li></ul><ul><ul><li>Tom McElwee </li></ul></ul><ul><ul><li> </li></ul></ul><ul><li>Multi-source Contracting </li></ul><ul><ul><li>Mel Croll </li></ul></ul><ul><ul><li>[email_address] </li></ul></ul><ul><li>Price Analysis </li></ul><ul><ul><li>Tim Serfass </li></ul></ul><ul><ul><li>[email_address] </li></ul></ul><ul><li>Q&A </li></ul>
    3. 3. Acquisition Initiatives UID/RFID Tom McElwee
    4. 4. Unique Identification (UID) <ul><li>UID is being championed by OASD as a means to provide unique identification of tangible items providing better asset accountability, valuation and life cycle management </li></ul><ul><li>UID is primarily a finance driven initiative designed to provide data to allow DOD to purchase assets on an informed and timely basis. </li></ul><ul><li>Programmed implementation date for UID was Jan 1 2004 </li></ul>
    5. 5. UID (cont) <ul><li>UID will be accomplished through the use of various Automated Identification Technologies (AIT) i.e. linear barcodes, 2D barcodes, RFID tags and labels. </li></ul><ul><li>Basically UID is bare item marking (engraving, tagging etc.) of items meeting the below requirements: </li></ul><ul><li> 1. Have a purchase $ value of 5K or more </li></ul><ul><li> 2. Are serially managed </li></ul><ul><li> 3. Are Critical Safety Items (CSI) </li></ul><ul><li> 4. Are designated by program managers as UID candidates </li></ul>
    6. 6. UID (cont) <ul><li>DLA is partnering with DCMA to work with the top 30 DOD suppliers on an incremental implementation strategy for UID </li></ul><ul><li>DCMA has authority to temporarily waive contract requirements for UID </li></ul><ul><li>DLA is not actively implementing UID at this time </li></ul>
    7. 7. UID (cont) <ul><li>… AGAIN …DLA is not implementing UID in contracts at this time pending completion of the following actions:  </li></ul><ul><ul><li>Completion of the DCMA/DLA Top 30 DOD Supplier initiative </li></ul></ul><ul><ul><li>Revision to the DFARS (Final rule published in FR 22 Apr 05, Pages 20831-20838) </li></ul></ul><ul><ul><li>Development of implementing clauses for DFARS Rule </li></ul></ul>
    8. 8. UID Summary <ul><li>Heads Up on UID </li></ul><ul><li>It is coming and will be a requirement for all </li></ul><ul><li>Get a copy of Mil Std 130L w Change 1 (Rev M coming) </li></ul><ul><li>Download a copy of “Unique Identification 101, The Basics” and </li></ul><ul><li>the DOD Defense Guide to UID from </li></ul><ul><li>(UID) Bare Item part marking has a large number of Commercial providers . (LIST) Many more on web. </li></ul><ul><li>Access for more detailed info </li></ul>
    9. 9. Radio Frequency Identification (RFID) <ul><li>The DOD RFID vision is to implement knowledge-enabled logistics through fully automated visibility and management of assets in support of the warfighter . </li></ul>
    10. 10. RFID (cont) <ul><li>There are two types of RFID tags, Active and Passive </li></ul><ul><ul><li>Active RFID Tags: </li></ul></ul><ul><ul><ul><li>Are a mature technology </li></ul></ul></ul><ul><ul><ul><li>Hold more data </li></ul></ul></ul><ul><ul><ul><li>Require a battery </li></ul></ul></ul><ul><ul><ul><li>Are bulky and expensive </li></ul></ul></ul><ul><ul><ul><li>Used on transport containers, RR cars and other industrial operations. </li></ul></ul></ul><ul><li>Active tags have been invaluable to the DOD in tracking its materials into theaters of war. </li></ul>
    11. 11. RFID (cont) <ul><ul><li>Passive RFID Tags are an evolving technology and DOD is in the forefront of their development and usage. </li></ul></ul><ul><ul><ul><li>A passive RFID tag has no internal power source. </li></ul></ul></ul><ul><ul><ul><li>The tag is activated by the reader/transponder. </li></ul></ul></ul><ul><ul><ul><li>Passive tags are currently being used for Case and pallet tagging operations </li></ul></ul></ul><ul><ul><ul><li>DOD plans to expand their use to unit pack tagging in the future. </li></ul></ul></ul>
    12. 12. RFID (cont) <ul><li>OSD has mandated a phased implementation (10 Years) as of 1 January 2005. </li></ul><ul><li>DLA is going to test delivery of tagged material of designated classes of material to 2 sites after 1 October 2005. Some voluntarily tagged receipts are being received now </li></ul><ul><li>DLA has an Implementation Team identified and in place for RFID. This team has adopted a Concept of Operations plan (CONOPS) and an Implementation Plan for DLA. </li></ul><ul><li>DLA is aggressively planning for RFID and pursuing implementation. </li></ul>
    13. 13. RFID Summary <ul><li>BE AWARE </li></ul><ul><li>RFID is here…(Reference Suppliers Implementation plan) </li></ul><ul><ul><li>If you have a contract requiring delivery (after 1 October 2005) of Class I, II,VI or IX items to DDSP Susquehanna or DDJC San Joaquin the shipping containers and pallets will be required to have RFID tags. </li></ul></ul><ul><ul><li>Additional Classes of material and delivery sites will require RFID tags after 1 Jan 06 (ref as above) </li></ul></ul><ul><ul><li>All classes of material will require tags after 1 Jan 2007 </li></ul></ul><ul><ul><li>Long term contracts will be modified ASAP </li></ul></ul>
    14. 14. RFID Summary (cont) <ul><li>For more information: </li></ul><ul><ul><li>Access / </li></ul></ul><ul><ul><li>Download a copy of: The US DOD Suppliers Passive RFID Information Guide from: </li></ul></ul><ul><ul><li>Download a copy of: The Supplier Implementation Plan from: </li></ul></ul>
    15. 15. RFID Summary (cont) <ul><li>OASD RFID Training Program. See particulars as below: </li></ul><ul><li>Get a copy of Mil Std 129 w change 3 from The DOD Single Stock Point for Specifications and Standards (DODSSP) </li></ul>
    16. 16. Acquisition Initiatives MULTISOURCE CONTRACTING By Mel Croll
    17. 17. Agenda <ul><li>Defining Multisource Contracting </li></ul><ul><li>Procedures for the use of Multisource Contracting </li></ul><ul><li>Multisource Contracting at DSCR </li></ul><ul><li>Process at DSCR </li></ul><ul><ul><li>Firm Fixed Price </li></ul></ul><ul><ul><li>Long Term Contracts </li></ul></ul><ul><li>Overview </li></ul><ul><li>Questions </li></ul>
    18. 18. Definition <ul><li>Multisource Contracting: </li></ul><ul><li>More than one awardee selected to fulfill a given requirement for supplies or services </li></ul>
    19. 19. Multisource Contracting at DSCR <ul><li>Utilized for the Purpose of Supply Assurance </li></ul><ul><ul><li>History of poor performance unrelated to Government caused delay </li></ul></ul><ul><ul><li>Complex or difficult specification with requirements that must be satisfied in a relatively constrained timeframe </li></ul></ul><ul><ul><li>First Article Testing requirements </li></ul></ul>
    20. 20. Procedures <ul><li>Single Use Firm Fixed Price Contracts </li></ul><ul><li>DSCR Provision 52.217-9G34 Supply Assurance Through Multisource Contracting </li></ul><ul><li>DSCR Clause 52.217-9G36 Multisource Contracting Supply Assurance Option </li></ul><ul><li>Criteria </li></ul><ul><li>Reduce or eliminate supply availability problems </li></ul><ul><li>Benefits must outweigh increased costs </li></ul><ul><li>All awardees must be determined responsible </li></ul><ul><li>Price reasonableness </li></ul>
    21. 21. Example Evaluation <ul><li>Requirement for 100 EA </li></ul><ul><li>40 EA on backorder </li></ul><ul><li>First Article Testing is required </li></ul><ul><li>Contractor A </li></ul><ul><ul><li>2 FA @ $500.00 EA 120 DARO </li></ul></ul><ul><ul><li>100 Production @ $219.00 EA 120 DAFAA </li></ul></ul><ul><li>Contractor B </li></ul><ul><ul><li>FA Waived </li></ul></ul><ul><ul><li>100 Production @ $264.00 EA 120 DARO </li></ul></ul>
    22. 22. Example Evaluation (Cont’d)
    23. 23. Requirements <ul><li>Proven source shall be awarded no more than 40% of the requirement – Contractor B 40 EA </li></ul><ul><li>Unproven source shall be awarded the balance of the requirement – Contractor A 60 EA </li></ul><ul><li>40 EA </li></ul><ul><li>60 EA </li></ul><ul><li>100 EA </li></ul>
    24. 24. Performance <ul><li>If the unproven source fails to perform their contract may be cancelled or terminated </li></ul><ul><li>Under 52.217-9G36 the Government may award an option of up to 150% to the proven source </li></ul>
    25. 25. 150% Option <ul><li>Contractor A fails to perform, their contract for 60 EA is cancelled </li></ul><ul><li>The Government exercises its 150% option on Contractor B </li></ul><ul><li>40 EA x 150% = 60 EA </li></ul><ul><li>Base Quantity 40 EA </li></ul><ul><li>150% Option 60 EA </li></ul><ul><li>Total 100 EA </li></ul>
    26. 26. Procedures <ul><li>Long Term Contracts </li></ul><ul><li>DSCR Provision 52.217-9G43 Single or Multiple Awards </li></ul><ul><li>FAR Provision 52.216-27 Single or Multiple Awards </li></ul>
    27. 27. Prerequisites <ul><li>Reduce or eliminate supply availability problems </li></ul><ul><li>Benefits must outweigh increased costs </li></ul><ul><li>All awardees must be determined responsible </li></ul><ul><li>Price reasonableness </li></ul>
    28. 28. Example Evaluation <ul><li>Five year IQC consisting of a base plus four option years </li></ul><ul><li>Backorders Exist </li></ul><ul><li>First Article Testing Applies </li></ul><ul><li>Contractor A (Unproven) submits a best value proposal </li></ul><ul><li>Contractor B (Proven) submits a proposal under which the First Article Requirement has been waived </li></ul>
    29. 29. Awards <ul><li>Contractor A and Contractor B are both awarded Long Term Contracts </li></ul><ul><li>Both contractors will receive Guaranteed minimum orders as described in the solicitation </li></ul><ul><li>Unproven contractor will submit to First Article Testing </li></ul><ul><li>Orders after guaranteed minimums have been met are to be competed </li></ul><ul><li>All awardees must be afforded fair opportunity for consideration </li></ul><ul><li>Streamlined processes may be used </li></ul>
    30. 30. Ordering (Cont’d) <ul><li>Requirements in FAR Part 6 and Policies in FAR Part 13.5 do not apply, however the Contracting Officer must; </li></ul><ul><ul><li>Ensure fair opportunity for consideration </li></ul></ul><ul><ul><li>Tailor the procedures to each acquisition </li></ul></ul><ul><ul><li>Include the procedures in the solicitation and contract </li></ul></ul><ul><ul><li>Consider price or cost as an evaluation factor </li></ul></ul>
    31. 31. Ordering (Cont’d) <ul><li>Exceptions to the Fair Opportunity Process </li></ul><ul><ul><li>Order value is less than $2500 </li></ul></ul><ul><ul><li>Agency need is so urgent that competition would cause an unacceptable delay </li></ul></ul><ul><ul><li>Only one awardee is capable of meeting the requirements of the specification </li></ul></ul><ul><ul><li>Logical follow-on to an already competed order </li></ul></ul><ul><ul><li>Order is a guaranteed minimum </li></ul></ul>
    32. 32. Ordering (Cont’d) <ul><li>Should One Contractor Fail to Perform </li></ul><ul><ul><li>The Contract awarded to the non-performing contractor will be cancelled </li></ul></ul><ul><ul><li>Competition of orders ceases </li></ul></ul><ul><ul><li>The contract awarded to the remaining, performing contractor reverts to a standard Long Term Contract and the pricing submitted in the proposal applies </li></ul></ul>
    33. 33. Overview <ul><li>Reasons for Multisource Contracting </li></ul><ul><li>Single Use Contracts </li></ul><ul><ul><li>Requirements are split between awardees </li></ul></ul><ul><ul><li>Provisions for non-performance </li></ul></ul><ul><li>Long Term Contracts </li></ul><ul><ul><li>Orders are competed between awardees </li></ul></ul><ul><ul><li>Provisions for non-performance </li></ul></ul>
    34. 34. Reasons for the Use of Multisource Contracting <ul><li>Establishing or Maintaining Alternative Sources FAR 6.202 </li></ul><ul><li>Industrial Mobilization FAR 6.302-3 </li></ul><ul><li>Production Testing FAR 6.101 </li></ul><ul><li>Prospective Contractor Not Responsible for Entire Quantity FAR 9.103 </li></ul><ul><li>Supply Assurance FAR 6.101 </li></ul>
    36. 36. Price Analysis Required by FAR Performed when adequate price history is available. Comparison made with representative price history.
    37. 37. Analysis Factors Q uantity Price Relationship P revious Prices Paid A nnual Escalation Rates
    38. 38. Escalation Rates D efault escalation rate 3% P roducers Price Index (PPI) O ther factors considered
    39. 39. Quantity Price Relationship D efault 95% Curve (why?)
    40. 40. Quantity & Escalation Calculation <ul><li>Calculation Formula (Projected Unit Price)= </li></ul><ul><li>(Prior Unit Price) x (QPR Adjustment) x (Escalation Adjustment) </li></ul><ul><li>QPR Adjustment = </li></ul><ul><li>(Current Qty/Prior Qty)^(LOG(QPR Curve)/LOG 2) </li></ul><ul><li>Escalation Adjustment = </li></ul><ul><li>(1 + Annual Escalation Rate)^(Elapsed Time in Years) </li></ul>
    41. 41. Quantity & Escalation <ul><li>Example </li></ul><ul><li>Projected Unit Price = </li></ul><ul><li>(Prior Unit Price) x (QPR Adjustment) x (Escalation Adjustment) </li></ul><ul><ul><li>Prior Unit Price = $100 </li></ul></ul><ul><ul><li>Quantities: Current = 200 and Prior = 100 </li></ul></ul><ul><ul><li>QPR Curve = 95% </li></ul></ul><ul><ul><li>Elapsed Time = 2 years </li></ul></ul><ul><ul><li>Annual Escalation Rate = 3% </li></ul></ul><ul><li>Projected U/P = $100 x [(200/100)^(LOG 0.95/LOG 2)] x (1.03)^2 </li></ul><ul><li>= $100 x (0.95) x (1.061) </li></ul><ul><li>Projected Unit Price = $100.79 </li></ul>
    42. 42. Summary C onsiderations R ough measurement Q uestions / Discussion
    43. 43. Questions?