FMS Financial Management

1
FMS FinancialManagement

• Pricing

2
FMS Pricing ConceptsSAMM C9.T1

• SECTION 21 Sales from stock
• SECTION 22 Sales from procurement

3
FMS Pricing Concepts

• "General USG pricing policy"
• Fair
• Understandable
• Recover total cost
• AECA - statutory pricing requirements
• Uniform DoD pricing procedures

SAMM C9.3.1
4
Uniform DOD Pricing Procedures

• Single selling price ("roll-up")
• Price quotations
• Estimates only
• Subject to future adjustment
• Add-on percentages not shown
• Letter of Offer and Acceptance (LOA)

SAMM C9.3.3 C9.3.4
5
FMS Price Formula
FMS PRICE
BASE PRICE
AUTHORIZED CHARGES

• Training
• Stock
• Catalog/Spares
• Major Item
• Excess
• Services
• New Procurement

• Investment Costs
• Nonrecurring Cost

• Operating Costs
• Contract Admin. Services
• (CAS 0.2-1.7)
• Small Case Management Line
• (cases less than 400,000)
• Packing (PCH 3.5)
• Transportation
• (3.75-16.25)
• Administrative costs
• (2.5-5)

LOA
BILLING STATEMENT DD-645
6
Security Cooperation TrainingFMR, DoD 7000.14-R,
Vol. 15,

• Pricing Procedure
• Prices computed annually
• Training MASL published by MILDEP
• In effect for full year (w/adjustments)
• Multi-tier pricing structure

7
Factors to Be Considered in Pricing Services

• Military (composite standard pay rates)
• Civilian (standard pay rates)
• OSD compound inflation factor
• Acceleration factors
• Leave and holidays
• Fringe benefits
• Unfunded retirement
• Travel (PCS/TDY)
• Materials
• Type of funding (Cash/FMFP)

8
Example Civ Pay PricingRate YA-02, 38,039, 100
Hours
Direct Labor hours
100 hours Hourly Rate (38,039/2087)
18.23 Direct Labor 1,823.00 Leave
Holiday (18) 328.14 Sub total
2,151.14 Unfunded Ret (14.7)
316.22 Fringe benefits (15.8) 339.88 Pay
Cost / with acceleration 2,807.24 Plus TDY
and other associated cost to discern the FMS
selling price
9
Example Civ Pay PricingRate YA-02, 38,039
Direct Labor 1 year
Salary 38,039.00 Sub total 38,039.00
Unfunded Ret (14.7)
5,591.74 Fringe benefits (15.8)
6,010.16 Pay Cost / with acceleration 49,648.09
Plus TDY and other associated cost to discern
the FMS selling price
10
Working Capital Fund Pricing

• Formerly DBOF/Stock Fund
• Most spares/parts covered

Overhead O M funds
Contract price Stock funds

• Doesnt include
• Ammo
• CAD/PAD
• TRAP
• Classified
• Crypto
• Publications
• MapsCharts

2.00
4.00
Catalog price
6.00
11
Non-Excess Major Item From Inventory

• To be,
• or not to be
• that is the question?

William Shakespeare - Hamlet
12
Pricing Non-Excess Major Item From Inventory
Not to be replaced?
To be replaced?
Most Recent Acquisition Cost Estimated
Procurement Cost Modification/Improvement
Costs Remaining Service Life (cost
adjusted) Nonrecurring Charges
(adjust) Overhaul Costs (prorated)
13
Example MDE Pricing20 Years life span 10 Years
Remaining
Adjust by remaining life of item Adjust by
remaining life until next required overhaul
NTBRNot To be Replaced, TBR To Be Replaced
14
Pricing Excess MaterialsFrom Inventory

• Above the force acquisition objective
• Sold in "as - is, where is" condition
• Use highest value of
• Market value nc (prorated)
• Scrap value nc/overhaul (prorated)
• Fair value rate nc/overhaul (prorated)
• Never sold for less than scrap value

15
Excess Fair Value
Condition Percent Price Serviceable
Unused good 50 Serviceable Used good
40 Serviceable Unused fair / Used good
30 Serviceable with qualification
20 Serviceable / Unserviceable
Poor 10 Unserviceable Major repair required
5
16
Excess Example
50,000.00 2,000.00 3,000.00 10 5,000.00 200.0
0 3,000.00 6,200.00
Standard Inventory Price Nonrecurring charges per
unit Overhaul costs before sale date Condition
- A-3 (serviceable, unused, poor) Standard Price
50,000 x 10 Nonrecurring charge x 10 Overhaul
costs before sale date FMS Selling Price
17
Factors to Be Considered in Pricing an Item From
New Procurement

• Prime contract cost
• GFM from inventory
• Precious metals
• DoD funded services
• GFM from another contractor

18
FMS Price Formula
FMS PRICE
BASE PRICE
AUTHORIZED CHARGES

• Training
• Stock
• Catalog/Spares
• Major Item
• Excess
• Services
• New Procurement

• Investment Costs
• Nonrecurring Cost

• Operating Costs
• Contract Admin. Services
• (CAS 0.2-1.7)
• Small Case Management Line
• (cases less than 400,000)
• Packing (PCH 3.5)
• Transportation
• (3.75-16.25)
• Administrative costs
• (2.5-5)

LOA
BILLING STATEMENT DD-645
19
Recoupment of Nonrecurring Costs (NC)

• Non-USG purchasers shall pay fair price for DoD
  investment (DODD 2140.2)
• Basis for Waivers
• Standardization with NATO, JA, AT, NZ
• Loss of Sale
• Cost reduction for DoD - EOQ
• Blanket waivers not authorized
• Need concurrence of DSCA, USD(C), and USD(ATL)
• Not retroactive

20
Contract Administration Services (CAS)
0.65 - Contract admin 0.65 - Quality
control 0.2 - Contract audit 0.2 - OCONUS
21
Accessorial Charge
22
PCH Rates
3.5 _at_ 50,000 1.0 _at_ PORTION
gt 50,000 UNIT PRICE 62,000 3.5 _at_
50,000 1,750 1.0 _at_ 12,000
120 62,000 1,870
23
Transportation Pricing Methods

• Directly Fund Transportation
• Separate LOA line
• Transportation Look-up Table
• SAMM Appendix 2

24
Transportation Cost Look-up Table
25
Transportation Pricing Matrix
26
Accessorial Charges(GBL/DTS Transportation)
Applicable percentage rate times lt 10,000 (unit
price) 25 of applicable rate times gt 10,000
Example
Delivery to -Country in rate area 2 -In-country
destination (DTC 7) -Unit price 40,000
22.25 x 10,000 2,225 5.56 x 30,000
1,668 40,000 3,893
27
Administrative Charges

• 3.0 prior to 1 JUN 99
• 2.5 1 JUN 99 - 1 AUG 06
• 3.8 after 1 AUG 06
• 5.0 for CLSSA (FMSO I)
• Funds the following (not inclusive)
• Standard Level of Service
• Headquarters functions
• Security Cooperation Offices (SCOs)
• Information technology initiatives

28
Small Case Management Line (SCML)

• 15,000 Minimum Admin Fee
• Affects Cases lt 400,000
• Separate SCM Line Added
• SCML value adjusted as case value changes via
  Amend. or Mod.
• No SCM Fee once Case Value gt 400,000

SAMM C9.4.7
29
Small Case Management Line (SCML)

• 394,737
• X 3.8
• 15,000

30
Small Case Management Line (SCML)

• Original Case Value 300,000
• X 3.8
• Calculated Admin 11,400
• SCML 3,600
• Total Admin 15,000

31
Small Case Management Line (SCML)

• Increase case value 310,000
• Modification 1
• X 3.8
• Increased calculated Admin 11,780
• Reduced SCML 3,220
• Total Admin 15,000

32
Small Case Management Line (SCML)

• Reduce case value 275,000
• Modification 2
• X 3.8
• Reduce calculated Admin 10,450
• Increase SCML 4,550
• Total Admin 15,000

33
Small Case Management Line (SCML)

• Increase case value 410,000
• Modification 3
• X 3.8
• Increase calculated Admin 15,580
• Zero out SCML 0
• Total Admin 15,580

34
FMS Price Formula
FMS PRICE
BASE PRICE
AUTHORIZED CHARGES

• Training
• Stock
• Catalog/Spares
• Major Item
• Excess
• Services
• New Procurement

• Investment Costs
• Nonrecurring Cost

• Operating Costs
• Contract Admin. Services
• (CAS 0.2-1.7)
• Small Case Management Line
• (cases less than 400,000)
• Packing (PCH 3.5)
• Transportation
• (3.75-16.25)
• Administrative costs
• (2.5-5)

LOA
BILLING STATEMENT DD-645
35
FMS FinancialManagement

• Pricing