Defense Supply Center Richmond DLAs Aviation Supply Demand

Defense Supply Center Richmond DLA's Aviation Supply & Demand Chain Manager Pricing SEPRT 12 April 7 -9, 2008

Agenda Items DLA's Aviation Supply & Demand Chain Manager • Truth in Negotiations Act (TINA) - Sallee Justis • Contracting for Commercial Items - Sallee Justis • One Pass Pricing – Brian Benfer • Panel Discussion – • • • Honeywell – Mr. Hal Miller Moog – Mr. Marty Bobak Parker – Mr. Bob Dickie Rolls Royce – Mr. Jeff Thomas Sikorsky - Mr. Jan Ostrander ARMY- Rodger Pearson Air Force – Cecelia Benford DOD IG- Mr. Henry Kleinknecht DLA- Mr. John Kazlo

Agenda DLA's Aviation Supply & Demand Chain Manager • Environment • Certified Cost/Pricing Data • Certificate Requirements • Exceptions • Waivers • Commerciality Determinations • The Way Ahead

Environment DLA's Aviation Supply & Demand Chain Manager DPAP Director is implementing requirements: • Established Cost Price Finance Office in 2006 • DPAP Memo, subject: Waivers Under the Truth in Negotiations Act (TINA), dated Mar 23, 2007 Section 817 of Public Law 107 -314 (FY 2003 NDAA) established requirements for Do. D Waivers: • Limited to the most exceptional cases. • No waivers solely because the price can be determined fair and reasonable. • No waivers when price cannot be determined fair and reasonable. KOs must request the data and the certificate and the company must refuse to comply with the requirements.

Certified Cost/Pricing Data DLA's Aviation Supply & Demand Chain Manager • Certified Cost or Pricing Data shall be required if the sum of the maximum quantity dollar value for the base year and all options and Surge exceeds $650, 000. • For Add-ons and Modifications (except option exercise), the value of the modification establishes the dollar threshold for TINA. • When exercising an option, TINA applicability was covered when the award was let – unless the option prices were NOT evaluated at time of the base award. The total dollar value of all NSNs in a multi -NSN procurement must be considered to determine if the TINA threshold is met.

Certificate Requirements DLA's Aviation Supply & Demand Chain Manager • Contracting Officer must determine if the submitted Cost or Pricing Data is adequate. The data must be: • Factual • Verifiable • Contractor must submit the certificate in a format that is in accordance with FAR 15. 406 -2(a) • Certificate must be dated on the date the final price was negotiated • Contractor must certify that the data is accurate, complete, and current as of that date • Data must include, at a minimum the contractor's explanations regarding each element of their cost breakdown, and all supporting data • Any subsequent agreements will require that the contractor execute a new certificate.

Exceptions DLA's Aviation Supply & Demand Chain Manager • Certified Cost or Pricing Data is not required if any of the following exceptions apply: • • Commercial Item is being acquired Adequate price competition exists Prices are set by law or regulation Waiver has been granted • If contractor refuses to provide Certified Cost or Pricing Data, a waiver may be granted • Determining a price fair and reasonable is not an exception to obtaining Certified Cost or Pricing Data. (FAR 15. 403 -1(c )(4) does not apply to Do. D: “The Head of the Contracting Activity (HCA) may consider waiving the requirement if the price can be determined to be fair and reasonable without submission of cost or pricing data. ”)

Seeking a Waiver: Do. D Rules DLA's Aviation Supply & Demand Chain Manager • DFARS 215. 403 -1(c )(4) limits the Do. D flexibility for waivers to the most exceptional instances. When a contractor refuses to provide Certified Data, a waiver may be granted, by the HCA, if ALL of these determinations are met: • The item(s)/service(s) cannot be reasonably obtained unless the waiver is granted • The price can be determined fair and reasonable without submission of cost or pricing data; and • There are demonstrated benefits to granting a waiver (i. e. other than admin savings)

Waiver Review Process DLA's Aviation Supply & Demand Chain Manager • Negotiations must continue to be elevated up the chain as long as the required data is not obtained • How the 3 determinations were met are greatly scrutinized because of the visibility on TINA compliance • All waivers must be elevated to the Senior Acquisition Executive in the agency for review/concurrence prior to the HCA granting a waiver. • Requirement for quarterly reporting of all waivers to DPAP.

Contracting for Commercial Items DLA's Aviation Supply & Demand Chain Manager Commercial item: (1) Any item, other than real property, that is “of a type” customarily used by the general public or by non-governmental entities for purposes other than governmental purposes, and has been sold, leased, or licensed to the general public; or has been offered for sale, lease, or license to the general public. . is tion. . i n i f De ad. o r B Very ? ? ? An item may be commercial, but the vendor may still be required to provide “Information Other than Cost or Pricing Data” (i. e. uncertified) so that the Contracting Officer can make a determination of fair & reasonable.

Commerciality Determinations DLA's Aviation Supply & Demand Chain Manager • Item is reasonably expected to be purchased by the general or industrial public at the offered price; • Description of the item’s use in the commercial or industrial sector; • Published Commercial Price List • Commercial Sales Invoices/Supplier Quotes with quantities and Dates of transactions (i. e. the customer should not be reselling the item back to Govt). • Description of the exact differences between the item and its commercial equivalent. • Price reasonableness determination required – even if the item is determined to be commercial. Contracting Officer makes decision on the Commercial Item Determination

Commercial Pricing Changes DLA's Aviation Supply & Demand Chain Manager • National Defense Authorization Act of 2008, Title VIII Section 815: Clarification of Rules Regarding Procurement of Commercial Items Summary: This section addresses (narrows) when weapon system and their subsystems, components, and spare parts can be treated as commercial items. Components and spare parts for major weapon systems can only be considered commercial if 1) bought for use in weapon systems or subsystems bought under commercial item procedures, or 2) the Contracting Officer can determine the part is commercial and that the offeror can submit enough information to evaluate price reasonableness. Implementation guidance from OSD via the DAR Council process

The Way Ahead DLA's Aviation Supply & Demand Chain Manager • Efforts we have initiated in the past include Lean Events; Forward Pricing Agreements (FPAs); comprehensive pricing agreements – all produced only marginal overall improvement in LTC growth. • The goal is to Establish One Pass Pricing (OPP) agreements with SSA holders with the expectation that we will experience strong LTC growth. • The challenge to LTC growth is the ability to price large numbers of NSNs quickly. • We have proven success with OPP and our next briefing will introduce the One Pass Price Project plan. FOCUS ON ONE PASS PRICING TO GROW LTCS