Emily Jay

1
Acquisition Policy Update
Air Armament Center

• Emily Jay
• AAC/PK
• emily.jay_at_eglin.af.mil
• 882-4398

DISTRIBUTION STATEMENT A Approved for public
release distribution is unlimited.
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Agenda

• Update on Anticipated Changes from Last Year
• Contract Incentives
• Changes to Source Selection Process
• Firm Fixed Price Development Contracts
• Other Hot Topics

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Update From Last Year

• Congress and DAPA Conspiracy of Hope
• Advocated Change in our Processes
• Source Selection Improvement Team
• Requirements Traceability Matrix
• More Education of Teams Dos and Donts
• DFARS Guidance Regarding Downselects
• Increased Use of Oral Proposals
• Increased Emphasis on Cost Realism/Risk
• Increased Emphasis on Structuring Contracts to
  Limit Overruns
• Move to Risk Based Source Selection
• Award Fee Policy Revisions

4
Contract Incentives

• April/May 2006 OSD/AF letters
• June 2007 OSD/AF letters
• More OSD and AFFARS change pending
• AAC Local Procedures
• CPFF (PI) Contract Type allows Min Base Fee with
  Performance Incentives
• Cost, Schedule, and Performance are tied
• Incentives Need to Consider Length of Effort,
  Scope of Work and determine if
• Graduated Plans Should Be Used
• Interim Evaluations Should Be used

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Incentive Fee Example 1Non-Graduated, Complete
in 1 Year

• Small Fixed Fee
• The Cost, Schedule, and Technical criteria are
  "final performance criteria" for a Performance
  Incentive Fee of X
• Only be earned if the combined criteria are all
  accomplished.
• The criteria are interdependent, all criteria
  must be met to earn the performance incentive
  fee.
• Sample Criteria
• Cost CPI of 1.0 or higher at contract
  completion
• Schedule All SDD major events complete IAW kt
• Performance Successful completion of DT

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Incentive Fee Example 2

• Cost Plus 3 Fixed Fee with 12 Incentive Fee for
  meeting Cost AND Schedule AND Performance

Cost AND Schedule AND Performance Cost AND Schedule AND Performance Cost AND Schedule AND Performance Incentives Earned 3
Excellent Zero or positive variance Completes ahead of contract milestones Meets ALL Thresholds and some objectives 100 15
Very Good Within - 2 Meets contract milestones Meets ALL Thresholds 90 13.8
Satisfactory Within - 5 Misses contract milestones Does Not Break Baseline Meets ALL KPPs, other thresholds with workarounds 70 11.4
Unsatisfactory Greater than - 5 Misses contract milestones Breaks Baseline Misses Key Performance Parameters (KPPs) 0 3
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Changes to Source Selection

• AF Standardized Source Selection Process
• All source selection plans approved on or after
  31 Mar 08 must comply with the revised procedures
• Individual Deviations approved at AFMC
• Program Tailoring Comes In Developing Evaluation
  Criteria
• Changes will be implemented in AFFARS

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Integrated Risk BasedSource Selection Criteria
Cost Risk Cost Risk Mission Capability Mission Capability Mission Capability Mission Capability Past Performance Past Performance Cost/Price Cost/Price
Cost Risk Cost Risk Technical Rating Technical Rating Risk Rating Risk Rating Past Performance Past Performance Cost/Price Cost/Price
Example Sub factor Rating ExampleSub factor Rating ExampleSub factor Rating ExampleSub factor Rating ExampleSub factor Rating
Instant Kt Cost/Price AUPP LCC Realism High Moderate Low Reqts Support-ability Blue Green Yellow Red Reqts Support-ability Low Moderate High Unacceptable Cost Schedule Perform-ance SB Subcon-tracting Compliance Substantial Confidence Sat Confidence Limited No Confidence Unknown Inst KT Cost/Price AUPP LCC Reason-ableness
Tools Tools Tools Tools Tools Tools Tools Tools Tools Tools
LHA SEA TRA MRA Demos IBR IMP/IMS Test Plan PoPS MPC Proposed Management Reserve LHA SEA TRA MRA Demos IBR IMP/IMS Test Plan PoPS MPC Proposed Management Reserve Spec ILSP Spec ILSP LHA SEA TRA MRA Demos IBR IMP/IMS Test Plan PoPS LHA SEA TRA MRA Demos IBR IMP/IMS Test Plan PoPS CPARS Questionnaires PoPS MRA CPARS Questionnaires PoPS MRA APC MPC APC MPC
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Source Selection Evaluation Matrix
CURRENT
NEW
Cost/Price Risk
Mission Capability
Mission Capability
Subfactor 1
Subfactor 3
Subfactor 2
Subfactor 1
Subfactor 2
Subfactor 3
Proposal Risk
Risk Rating
Risk Rating
Risk Rating
Technical Rating
Technical Rating
Technical Rating
Past Performance
Past Performance
Cost/Price This factor may require a risk
assessment as described in Paragraph 5.5.4.
Cost/Price
For use on cost reimbursement or fixed-price
incentive contracts where Cost/Price Risk is an
Evaluation Factor Most Probable Cost is utilized
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Cost / Price Risk Ratings
NEW
CURRENT
TABLE 2 - PROPOSAL RISK RATINGS TABLE 2 - PROPOSAL RISK RATINGS
Rating Description
High Likely to cause significant disruption of schedule, increased cost or degradation of performance. Risk may be unacceptable even with special contractor emphasis and close government monitoring.
Moderate Can potentially cause disruption of schedule, increased cost, or degradation of performance. Special contractor emphasis and close government monitoring will likely be able to overcome difficulties.
Low Has little potential to cause disruption of schedule, increased cost or degradation of performance. Normal contractor effort and normal government monitoring will likely be able to overcome any difficulties.
TABLE 4 COST/PRICE RISK RATINGS TABLE 4 COST/PRICE RISK RATINGS
Rating Description
Low Little difference exists between the offerors proposed cost/price and the government most probable cost which may cause minor or even negligible impact to programs probability of success. Cost growth is unlikely to occur as indicated by this difference and/or other anomalies related to cost/price, but the impact is manageable.
Moderate Some difference exists between the offerors proposed cost/price and the government most probable cost that may impact the programs probability of success. Cost growth is possible to occur as indicated by this difference and/or other anomalies related to cost/price.
High Significant difference exists between the offerors proposed cost/price and the government most probable cost which may substantially impact the programs probability of success. Cost growth is likely to occur as indicated by this difference and/or other anomalies related to cost/price.
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Cost Risk Ratings

• Cost
• The Offerors proposal will be assigned a cost
  proposal risk rating to characterize the extent
  to which the proposed costs indicate a clear
  understanding of solicitation requirements and
  reflect a sound approach to satisfying those
  requirements, including the planning for
  sufficient Management Reserve to accommodate
  risk. This will be accomplished by assessing the
  difference between the Offerors Cost Proposal
  and the Governments Most Probable Cost estimate
  (MPC) of the Offerors approach, including the
  Governments estimate of risk associated with the
  Offerors approach.
• High Risk ( Estimate is gt 20 above or below MPC)
• Moderate Risk ( Estimate is 11-20 above or
  below MPC)
• Low Risk (Estimate is lt 10 above or below MPC)
• Individual programs may tailor and upper
  boundary for high risk

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Factors Cost/Price Risk

• Elevated Cost/Price Risk as a separate evaluation
  factor
• Moves Cost/Price risk from within the Cost/Price
  evaluation factor.
• Only applies to ACAT programs in a System
  Development and Demonstration (SDD) phase
  utilizing Most Probable Cost (Cost Reimbursement
  or Fixed-Price Incentive contract)
• Mandatory discussions of cost model prior to RFP
  release
• Requires robust discussions with each offeror on
  how the governments best estimate of Probable
  Costs is calculated
• Each offeror will have its own MPC based on their
  unique approach
• When used, Cost/Price Risk shall be a significant
  factor

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Mission Capability Technical Ratings
NEW
CURRENT
TABLE 1 - MISSION CAPABILITY TECHNICAL RATINGS TABLE 1 - MISSION CAPABILITY TECHNICAL RATINGS TABLE 1 - MISSION CAPABILITY TECHNICAL RATINGS
Color Rating Description
Blue Exceptional Exceeds specified minimum performance or capability requirements in a way beneficial to the government. A proposal must have one or more strengths and no deficiencies to receive a blue.
Green Acceptable Meets specified minimum performance or capability requirements. A proposal must have no deficiencies to receive a green but may have one or more strengths.
Yellow Marginal There is doubt regarding whether an aspect of the proposal meets a specified minimum performance or capability requirements, but any such uncertainty is correctable.
Red Unacceptable Fails to meet specified minimum performance or capability requirements. The proposal has one or more deficiencies and is not awardable.
TABLE 1 - MISSION CAPABILITY RATINGS TABLE 1 - MISSION CAPABILITY RATINGS TABLE 1 - MISSION CAPABILITY RATINGS
Color Rating Description
Blue Exceptional Exceeds specified minimum performance or capability requirements in a way beneficial to the government proposal must have one or more strengths and no deficiencies to receive a blue.
Green Acceptable Meets specified minimum performance or capability requirements delineated in the Request for Proposal proposal rated green must have no deficiencies but may have one or more strengths.
Yellow Marginal Does not clearly meet some specified minimum performance or capability requirements delineated in the Request for Proposal, but any such uncertainty is correctable.
Red Unacceptable Fails to meet specified minimum performance or capability requirements proposal has one or more deficiencies. Proposals with an unacceptable rating are not awardable.
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Mission Capability RiskRatings
CURRENT
NEW
TABLE 2 MISSION CAPABILITY RISK RATINGS TABLE 2 MISSION CAPABILITY RISK RATINGS
Rating Description
Low Has little potential to cause disruption of schedule, increased cost or degradation of performance. Normal contractor effort and normal government monitoring will likely be able to overcome any difficulties.
Moderate Can potentially cause disruption of schedule, increased cost or degradation of performance. Special contractor emphasis and close government monitoring will likely be able to overcome difficulties.
High Likely to cause significant disruption of schedule, increased cost or degradation of performance. Extraordinary contractor emphasis and rigorous government monitoring may be able to overcome difficulties.
Unacceptable The existence of a significant weakness (or combination of weaknesses) that is very likely to cause unmitigated disruption of schedule, drastically increased cost or severely degraded performance. Proposals with an unacceptable rating are not awardable.
TABLE 2 - PROPOSAL RISK RATINGS TABLE 2 - PROPOSAL RISK RATINGS
Rating Description
High Likely to cause significant disruption of schedule, increased cost or degradation of performance. Risk may be unacceptable even with special contractor emphasis and close government monitoring.
Moderate Can potentially cause disruption of schedule, increased cost, or degradation of performance. Special contractor emphasis and close government monitoring will likely be able to overcome difficulties.
Low Has little potential to cause disruption of schedule, increased cost or degradation of performance. Normal contractor effort and normal government monitoring will likely be able to overcome any difficulties.
Used when risk is in the upper boundaries of a
Mission Capabilities Risk Rating but not enough
to merit the next inferior rating
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Proposal Risk Pre SDD
TRL/Integration IMP/IMS Planning Risk Management Producibility
Low All technologies required for tech solution are gt TRL 5, Integration begun Scope of integration and test efforts are benchmarked and relected in robust ingtegrated IMP IMS Contractors plan and proposed costs reflect robust risk management and a methodology to conduct iterative trade studies to offer options as needed to complete the program within target cost and schedule Key Suppliers are selected, and are an integral part of the team/proposal. Key processes are identified and producibility planning is part of early design process
Low to Moderate All technologies required for tech solution are gt TRL 5 X X Majority of key suppliers are selected and their work is reflected robustly in the proposal. Producibility planning is part of early design
Moderate All technologies required for the tech solution are gt TRL 4 Integration and test efforts are planned but lack sufficient detail within the IMP/IMS. Benchmarking is poorly implemented Contractors plan reflects limited risk management and/or limited methodology to conduct iterative trade studies needed to complete program on cost and schedule Majority of key suppliers are selected and their work is reflected robustly in the proposal.
Moderate to High More than one key technology is only at a TRL 3 X X Major suppliers are identified but not selected.
High More than one key technology is lt a TRL 3 Integration and test efforts are not yet planned so the IMIP/IMS are insufficient to establish cost and schedule targets. No benchmarking is implemented The program plan assumes success and does not include trade study methodology Key Suppliers are not identified and are not part of the team or incorporated into the proposal process. Key processes are not identified, and no evidence of procducibiity planning
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Past Performance Ratings
NEW
CURRENT
TABLE 3- PERFORMANCE CONFIDENCE ASSESSMENTS TABLE 3- PERFORMANCE CONFIDENCE ASSESSMENTS
Rating Description
SUBSTANTIAL CONFIDENCE Based on the offerors performance record, the government has a high expectation that the offeror will successfully perform the required effort.
SATISFACTORY CONFIDENCE Based on the offerors performance record, the government has an expectation that the offeror will successfully perform the required effort.
LIMITED CONFIDENCE Based on the offerors performance record, the government has a low expectation that the offeror will successfully perform the required effort.
NO CONFIDENCE Based on the offerors performance record, the government has no expectation that the offeror will be able to successfully perform the required effort.
UNKNOWN CONFIDENCE No performance record is identifiable or the offerors performance record is so sparse that no confidence assessment rating can be reasonably assigned.
TABLE 3- PERFORMANCE CONFIDENCE ASSESSMENTS TABLE 3- PERFORMANCE CONFIDENCE ASSESSMENTS
Rating Description
HIGH CONFIDENCE Based on the offerors performance record, the government has high confidence the offeror will successfully perform the required effort
SIGNIFICANT CONFIDENCE Based on the offerors performance record, the government has significant confidence the offeror will successfully perform the required effort
SATISFACTORY CONFIDENCE Based on the offerors performance record, the government has confidence the offeror will successfully perform the required effort. Normal contractor emphasis should preclude any problems.
UNKNOWN CONFIDENCE No performance record is identifiable.
LITTLE CONFIDENCE Based on the offerors performance record, substantial doubt exists that the offeror will successfully perform the required effort.
NO CONFIDENCE Based on the offerors performance record, extreme doubt exists that the offeror will successfully perform the required effort.
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Fixed Price Development Contracts

• FY07 Authorization Act PL 109-364, sec 818
• DFARS Case 2006-D053
• MS B MDA, with advice of the Contracting
  Officer, selects contract type for development
  program
• Basis for Contract Type Documented in Acq
  Strategy
• Include explanation of level of risk
• If high risk, steps taken to taken to reduce
  program risk and reasons for proceeding despite
  the high level of program risk
• Cost Type Contract Requires a Written
  Determination
• Program is so complex and technically
  challengingnot practicable to reduce program
  risk to a level permitting FP contract
• Complexity and technical challenge is not a
  result of failure to meet 10USC2366a

DFARS Case Out for Public Comment - Closes 24
March 08
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MDA Certification

• National Defense Authorization Act for 2006
• Implemented in USD/ATL letter dated 2 May 06
• Prior to MSB approval, MDA must certify
• Technology has been demonstrated in a relevant
  environment
• Program demonstrates high likelihood of
  accomplishing its mission
• Program is affordable when considering the per
  unit cost and total acquisition cost
• AoA has been conducted
• Program is affordable when considering
  alternative systems
• JROC has completed review, including analysis of
  reqts
• Program complies with all policies, regs,
  directives

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Other Hot Topics

• Sole Source Negotiations
• Receive same level of Risk Assessment/Review
  Prior to Handshake
• Congressional requirement for Service Contract
  Reviews
• OSD looking at broader applications
• UCA Definitizations
• Increased Emphasis on 180 Day Definitization

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Summary

• Congress, OSD, and AF continue to advocate
  realism and accountability in estimates and
  contracts
• Risk is now assessed in POM Submissions, MDA
  Certifications, Source Selections and Sole Source
  Awards
• OSD and AF increasing use of Standardized
  Procedures to ensure min level of quality/realism