Acquisition Initiatives

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Acquisition Initiatives

• 2005 Aviation Business Conference

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AGENDA

• UID/RFID
• Tom McElwee
• thomas.mcelwee_at_dla.mil
• Multi-source Contracting
• Mel Croll
• melvin.croll_at_dla.mil
• Price Analysis
• Tim Serfass
• timothy.Serfass_at_dla.mil
• QA

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Acquisition Initiatives

• UID/RFID

Tom McElwee
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Unique Identification (UID)

• 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
• UID is primarily a finance driven initiative
  designed to provide data to allow DOD to purchase
  assets on an informed and timely basis.
• Programmed implementation date for UID was Jan 1
  2004

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UID (cont)

• UID will be accomplished through the use of
  various Automated Identification Technologies
  (AIT) i.e. linear barcodes, 2D barcodes, RFID
  tags and labels.
• Basically UID is bare item marking (engraving,
  tagging etc.) of items meeting the below
  requirements
• 1. Have a purchase value of 5K or more
• 2. Are serially managed
• 3. Are Critical Safety Items (CSI)
• 4. Are designated by program managers as UID
  candidates

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UID (cont)

• DLA is partnering with DCMA to work with the top
  30 DOD suppliers on an incremental implementation
  strategy for UID
• DCMA has authority to temporarily waive contract
  requirements for UID
• DLA is not actively implementing UID at this time

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UID (cont)

• AGAINDLA is not implementing UID in contracts
  at this time pending completion of the following
  actions 
• Completion of the DCMA/DLA Top 30 DOD Supplier
  initiative
• Revision to the DFARS (Final rule published in
  FR 22 Apr 05, Pages 20831-20838)
• Development of implementing clauses for DFARS
  Rule

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UID Summary

• Heads Up on UID
• It is coming and will be a requirement for all
• Get a copy of Mil Std 130L w Change 1 (Rev M
  coming)
• Download a copy of Unique Identification 101,
  The Basics and
• the DOD Defense Guide to UID from
  http//www.acq.osd.mil/log/rfid/index.htm
• (UID) Bare Item part marking has a large number
  of Commercial providers . (LIST) Many more on
  web.
• Access http//www.acq.osd.mil/dpap/UID/ for more
  detailed info

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Radio Frequency Identification (RFID)

• The DOD RFID vision is to implement
  knowledge-enabled logistics through fully
  automated visibility and management of assets in
  support of the warfighter.

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RFID (cont)

• There are two types of RFID tags, Active and
  Passive
• Active RFID Tags
• Are a mature technology
• Hold more data
• Require a battery
• Are bulky and expensive
• Used on transport containers, RR cars and other
  industrial operations.
• Active tags have been invaluable to the DOD in
  tracking its materials into theaters of war.

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RFID (cont)

• Passive RFID Tags are an evolving technology and
  DOD is in the forefront of their development and
  usage.
• A passive RFID tag has no internal power source.
• The tag is activated by the reader/transponder.
• Passive tags are currently being used for Case
  and pallet tagging operations
• DOD plans to expand their use to unit pack
  tagging in the future.

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RFID (cont)

• OSD has mandated a phased implementation (10
  Years) as of 1 January 2005.
• 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
• 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.
• DLA is aggressively planning for RFID and
  pursuing implementation.

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RFID Summary

• BE AWARE
• RFID is here(Reference Suppliers Implementation
  plan)
• 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.
• Additional Classes of material and delivery sites
  will require RFID tags after 1 Jan 06 (ref as
  above)
• All classes of material will require tags after 1
  Jan 2007
• Long term contracts will be modified ASAP

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RFID Summary (cont)

• For more information
• Access http//www.acq.osd.mil/log/rfid/index.htm
  /
• Download a copy of The US DOD Suppliers Passive
  RFID Information Guide from http//www.acq.osd.mi
  l/log/rfid/Events/DoD_Suppliers_Passive_RFID_Infor
  mation_Guide_v7.0.pdf
• Download a copy of The Supplier Implementation
  Plan from http//www.acq.osd.mil/log/rfid/impleme
  ntation_plan.htm

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RFID Summary (cont)

• OASD RFID Training Program. See particulars as
  below http//www.acq.osd.mil/log/rfid/suppliered_
  training.htm
• Get a copy of Mil Std 129 w change 3 from The DOD
  Single Stock Point for Specifications and
  Standards (DODSSP) http//dodssp.daps.dla.mil/

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Acquisition Initiatives

• MULTISOURCE CONTRACTING

By Mel Croll
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Agenda

• Defining Multisource Contracting
• Procedures for the use of Multisource Contracting
• Multisource Contracting at DSCR
• Process at DSCR
• Firm Fixed Price
• Long Term Contracts
• Overview
• Questions

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Definition

• Multisource Contracting
• More than one awardee selected to fulfill a given
  requirement for supplies or services

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Multisource Contracting at DSCR

• Utilized for the Purpose of Supply Assurance
• History of poor performance unrelated to
  Government caused delay
• Complex or difficult specification with
  requirements that must be satisfied in a
  relatively constrained timeframe
• First Article Testing requirements

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Procedures

• Single Use Firm Fixed Price Contracts

• DSCR Provision 52.217-9G34 Supply Assurance
  Through Multisource Contracting

• DSCR Clause 52.217-9G36 Multisource Contracting
  Supply Assurance Option

• Criteria
• Reduce or eliminate supply availability problems
• Benefits must outweigh increased costs
• All awardees must be determined responsible
• Price reasonableness

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Example Evaluation

• Requirement for 100 EA
• 40 EA on backorder
• First Article Testing is required

• Contractor A
• 2 FA _at_ 500.00 EA 120 DARO
• 100 Production _at_ 219.00 EA 120 DAFAA
• Contractor B
• FA Waived
• 100 Production _at_ 264.00 EA 120 DARO

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Example Evaluation (Contd)
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Requirements

• Proven source shall be awarded no more than 40
  of the requirement Contractor B 40 EA
• Unproven source shall be awarded the balance of
  the requirement Contractor A 60 EA
• 40 EA
• 60 EA
• 100 EA

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Performance

• If the unproven source fails to perform their
  contract may be cancelled or terminated
• Under 52.217-9G36 the Government may award an
  option of up to 150 to the proven source

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150 Option

• Contractor A fails to perform, their contract for
  60 EA is cancelled
• The Government exercises its 150 option on
  Contractor B
• 40 EA x 150 60 EA
• Base Quantity 40 EA
• 150 Option 60 EA
• Total 100 EA

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Procedures

• Long Term Contracts

• DSCR Provision 52.217-9G43 Single or Multiple
  Awards

• FAR Provision 52.216-27 Single or Multiple Awards

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Prerequisites

• Reduce or eliminate supply availability problems
• Benefits must outweigh increased costs
• All awardees must be determined responsible
• Price reasonableness

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Example Evaluation

• Five year IQC consisting of a base plus four
  option years
• Backorders Exist
• First Article Testing Applies

• Contractor A (Unproven) submits a best value
  proposal
• Contractor B (Proven) submits a proposal under
  which the First Article Requirement has been
  waived

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Awards

• Contractor A and Contractor B are both awarded
  Long Term Contracts
• Both contractors will receive Guaranteed minimum
  orders as described in the solicitation
• Unproven contractor will submit to First Article
  Testing
• Orders after guaranteed minimums have been met
  are to be competed
• All awardees must be afforded fair opportunity
  for consideration
• Streamlined processes may be used

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Ordering (Contd)

• Requirements in FAR Part 6 and Policies in FAR
  Part 13.5 do not apply, however the Contracting
  Officer must
• Ensure fair opportunity for consideration
• Tailor the procedures to each acquisition
• Include the procedures in the solicitation and
  contract
• Consider price or cost as an evaluation factor

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Ordering (Contd)

• Exceptions to the Fair Opportunity Process
• Order value is less than 2500
• Agency need is so urgent that competition would
  cause an unacceptable delay
• Only one awardee is capable of meeting the
  requirements of the specification
• Logical follow-on to an already competed order
• Order is a guaranteed minimum

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Ordering (Contd)

• Should One Contractor Fail to Perform
• The Contract awarded to the non-performing
  contractor will be cancelled
• Competition of orders ceases
• The contract awarded to the remaining, performing
  contractor reverts to a standard Long Term
  Contract and the pricing submitted in the
  proposal applies

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Overview

• Reasons for Multisource Contracting
• Single Use Contracts
• Requirements are split between awardees
• Provisions for non-performance
• Long Term Contracts
• Orders are competed between awardees
• Provisions for non-performance

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Reasons for the Use of Multisource Contracting

• Establishing or Maintaining Alternative
  Sources FAR 6.202
• Industrial Mobilization FAR 6.302-3
• Production Testing FAR 6.101
• Prospective Contractor Not Responsible for Entire
  Quantity FAR 9.103
• Supply Assurance FAR 6.101

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PRICE ANALYSIS

• DSCR-CB

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Price Analysis
Required by FAR
Performed when adequate price history is
available.
Comparison made with representative price
history.
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Analysis Factors
Annual Escalation Rates
Quantity Price Relationship
Previous Prices Paid
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Escalation Rates
Default escalation rate 3
Producers Price Index (PPI)
Other factors considered
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Quantity Price Relationship
Default 95 Curve (why?)
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Quantity EscalationCalculation

• Calculation Formula (Projected Unit Price)
• (Prior Unit Price) x (QPR Adjustment) x
  (Escalation Adjustment)
• QPR Adjustment
• (Current Qty/Prior Qty)(LOG(QPR Curve)/LOG 2)
• Escalation Adjustment
• (1 Annual Escalation Rate)(Elapsed Time in
  Years)

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Quantity Escalation

• Example
• Projected Unit Price
• (Prior Unit Price) x (QPR Adjustment) x
  (Escalation Adjustment)
• Prior Unit Price 100
• Quantities Current 200 and Prior 100
• QPR Curve 95
• Elapsed Time 2 years
• Annual Escalation Rate 3
• Projected U/P 100 x (200/100)(LOG 0.95/LOG
  2) x (1.03)2
• 100 x (0.95) x
  (1.061)
• Projected Unit Price 100.79

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Summary
Considerations
Rough measurement
Questions / Discussion
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Questions?