One team one voice delivering global acquisition insight
One team, one voice delivering global acquisition insight that matters. Supplier Workload Transfers and Consolidations Lessons Learned Presented By: June 11, 2018
Background • Contractor work transfers and consolidations appear to experience recurring negative impacts such as: – Schedule slippages – Product nonconformance • DCMA studied 10 cases: Key Takeaways • Knowledge loss impacted all relocations • Resuming production with less experienced personnel resulted in unplanned delays and increased nonconformances • Cost savings were actually cost avoidances One team, one voice delivering global acquisition insight that matters. 2
Internal Restructuring Contractor Identifies the need to restructure their operations to increase competitiveness. This may include closing one facility and expanding another, or streamlining a business segment. Program Are Managers key stakeholders and are directly impacted by these contractor actions. DCMA • Contractors conduct Internal Restructuring to reduce or eliminate idle capacity • Government approval/disapproval is not required • FAR requirements for External Restructuring do not apply • Direct costs are charged as incurred • Direct costs include the increased labor cost due to the loss of learning/reduced efficiency • Indirect restructuring costs may be amortized over NTE 5 years • Personnel costs (e. g. , relocations, severance, retraining, early retirement incentives) • Facility and asset costs (e. g. , relocations, rearrangements, dispositions) One team, one voice delivering global acquisition insight that matters. Monitors ongoing contract performance throughout the transition. The ACO issues the contract modification to change the place of performance. DCAA Audits the contractor’s forward pricing rate proposals and incurred costs to include relocation expenses. 3
Transition Timeline RISK One team, one voice delivering global acquisition insight that matters. 4
Questions a PM Might Ask a Contractor • What cost impact do you project on current contracts? • What manufacturing processes are being relocated? • What’s your plan to maintain schedule? • How was your production plan developed? • Why do you believe the number of personnel projected to relocate is credible? • What is the plan for requalifying special tooling and test equipment transitioning to the new site? • Are there labor agreement covered employees involved at either the gaining or losing location? If so, are they with the same labor union? • Has the labor supply in the gaining location been analyzed? Are all necessary skills available? If not, what is your plan to develop needed skills? • Does the gaining facility have the capacity to absorb the new work? • How will product qualification/requalification impact resuming operations at the gaining location? • Does the schedule account for the loss of employee proficiency? • Do the losing and gaining facilities use the same Information Technology (IT) systems to route work, manage material and drawings? One team, one voice delivering global acquisition insight that matters. 5
Best Practices PEO directed monthly briefings to Program Office and DCMA which resulted in a unified Government oversight team. Contractor managed the transition as a. “program” with a PM, IMS and PMRs DCMA established a joint (gaining and losing CMO) team and provided monthly transition status reports to PMs highlighting risks One team, one voice delivering global acquisition insight that matters. 6
Backup One team, one voice delivering global acquisition insight that matters. 7
Lessons Learned - Contractor • Contractor projections were consistently unrealistic (optimistic) as to the number of personnel that relocated with the work: • Final number of employees relocated was typically significantly lower than initial estimates • Transitions from union to non-union locations were problematic due to employee loss of seniority and resultant pay differential • High demand career fields were challenging to retain and/or backfill • Contractor employee turnover at new site exceeded projections • Loss of personnel with appropriate security clearances required workarounds One team, one voice delivering global acquisition insight that matters. 8
Lessons Learned - Contractor • Complexity of standing up manufacturing lines at the new location was not appreciated: • Initial schedule projections proved unrealistic • Higher level of rework than planned • Plans did not recognize differing employee experience and turnover rates • Pass rate assumptions based on losing location did not account for loss of learning • Work instructions differed between sites in level of detail and did not match employee skill and experience levels • Time for testing and validation of production lines was underestimated • Program-specific technical requirements were not recognized in the planning • Differing DPAS priority ratings may reprioritize production One team, one voice delivering global acquisition insight that matters. 9
Lessons Learned - Contractor • Knowledge Continuity: • If knowledge is not captured early in the transition timeline, employee attrition hinders transfer of critical knowledge and skills • The willingness of personnel losing their jobs to transition knowledge to new employees may be limited • Security requirements (TS) can limit the ability to document knowledge • Differing IT platforms impacted production transfer: • Different corporate heritages resulted in sites within the same company utilizing different automated tools, reports, processes, and quality control practices • Contractor performance risk increases at both the losing and gaining sites until process capability is restored One team, one voice delivering global acquisition insight that matters. 10
Lessons Learned – Contractor • • • Increase the level of manufacturing engineering support during a transition above the normal production planned levels to accommodate review, verification, and generation of appropriate documentation in the new location. Widespread use of “practice articles” to demonstrate successful knowledge transfer should be incorporated in technician certification. Use of SMEs with past experience to inspect and review products to ensure consistency with heritage builds. "Giver" (heritage) production/engineer participation was made mandatory in later reviews. Ensure the test equipment is re-calibrated and proofed using engineering/golden units prior to use on flight hardware at the new site. • • • Tabletop reviews of Manufacturing Work Instructions by a broad audience were effective in identifying gaps and ambiguity when SMEs familiar with production processes were engaged. Tabletop reviews (line-by-line) routinely caught problems but were not always performed. Make an early effort to identify critical processes that would require special attention. Treat the first time assembly through each area and program as a first article with additional inspections as necessary. MRRs did not contain specificity regarding the training and experience of the personnel assigned to work on the product, which resulted in unmet expectations in the actual readiness. One team, one voice delivering global acquisition insight that matters. 11
Lessons Learned - Government • Contractor moves and consolidations often affect multiple programs, but the government team did not always work as a cohesive team: • PEOs, PMs, DCMA, and DCAA all play a role, but did not always effectively share information • Contractor was challenged by conflicting Government priorities • Competition among programs for limited contractor resources at the gaining location disrupts planned activities One team, one voice delivering global acquisition insight that matters. 12
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