Acquisition Initiatives

2005 Aviation Business Conference

AGENDA

UID/RFID Tom McElwee thomas.mcelwee@dla.mil

Multi-source Contracting Mel Croll melvin.croll@dla.mil

Price Analysis Tim Serfass timothy.Serfass@dla.mil

Q&A

Acquisition Initiatives

UID/RFID

Tom McElwee

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

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

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

UID (cont)

…AGAIN…DLA 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

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

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.

RFID (cont)• There are two types of RFID tags, Active and

Passive• Active RFID Tags:

1. Are a mature technology 2. Hold more data3. Require a battery4. Are bulky and expensive 5. 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.

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.

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.

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

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.mil/log/rfid/Events/DoD_Suppliers_Passive_RFID_Information_Guide_v7.0.pdf

Download a copy of: The Supplier Implementation Plan from: http://www.acq.osd.mil/log/rfid/implementation_plan.htm

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/

Acquisition Initiatives

MULTISOURCE CONTRACTING

By Mel Croll

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

Definition

Multisource Contracting:

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

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

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 OptionCriteria

Reduce or eliminate supply availability problems

Benefits must outweigh increased costs

All awardees must be determined responsible

Price reasonableness

Example Evaluation

Requirement for 100 EA

40 EA on backorder

First Article Testing is required

Contractor A

2 FA @ $500.00 EA 120 DARO

100 Production @ $219.00 EA 120 DAFAA

Contractor B

FA Waived

100 Production @ $264.00 EA 120 DARO

Example Evaluation (Cont’d)

Contracor A (Unproven)Prod Unit Price 219.00$ Production Quantity 100Production Total Price 21,900.00$ FAT Unit Price 500.00$ FAT Quantity 2FAT Total Price 1,000.00$ Subtotal 22,900.00$ FAT Eval Factor 2,150.00$ Contract Total Price 25,050.00$ ABVS 96.2

Contractor B (Proven)Prod Unit Price 264.00$ Production Quantity 100Production Total Price 26,400.00$ FAT Unit Price -$ FAT Quantity 0FAT Total Price -$ Subtotal 26,400.00$ FAT Eval Factor -$ Contract Total Price 26,400.00$ ABVS 86.9

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

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

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

Procedures

Long Term Contracts

DSCR Provision 52.217-9G43 Single or Multiple Awards

FAR Provision 52.216-27 Single or Multiple Awards

Prerequisites

Reduce or eliminate supply availability problems

Benefits must outweigh increased costs

All awardees must be determined responsible

Price reasonableness

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

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

Ordering (Cont’d)

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

Ordering (Cont’d)

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

Ordering (Cont’d)

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

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

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

PRICE ANALYSISPRICE ANALYSIS

DSCR-CB

Price Analysis

Required by FAR

Performed when adequate price history is available.

Comparison made with representative price history.

Analysis Factors

Quantity Price Relationship

Previous Prices Paid

Annual Escalation Rates

Escalation Rates

Default escalation rate 3%

Producers Price Index (PPI)

Other factors considered

Quantity Price Relationship

Default 95% Curve (why?)

828486889092949698

100102

50 100 150 200 250

Quantity

price

Quantity & Escalation

Calculation

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)

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

Summary

Considerations

Rough measurement

Questions / Discussion

Questions?