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RESPONSIBILITY FOR SPARE-PARTSACQUISITION

January 1984 LE ICOELECTE

AAR2 9 1987f

John F. OlioFrank W. Parsons

Prepared pursuant to Department of Defense Contract No.MDA903-77-C0370 (Task ML327). Views or conclusionscontained in this document should not be interpreted asrepresenting official opinion or policy of the Depart- iisent of Defense. Except for use for Governmentpurposes, permission to quote from or reproduce por-tions of this document must be obtained from theLogistics Management Institute.

LOGISTICS MANAGEMENT INSTITUTE4701 Sangamore Road

Washington, D.C. 20016 A -O.TF 2 iT S'ON SATt.MrNT A 28 0 1'9Approved for public release,

Distribution Unlimited

-~ . -. , . .-' .' - ' '.r.,',j.L ..... ' . -

UNCL ASIFIEDSECU RITY CLASSIFICA TIO N O F THIS PA G ER P R O U M N A I N P GREPORT DOCUMENTATION PAGE

la. REPORT SECURITY CLASSIFICATION lb. RESTRICTIVE MARKINGSUnclassified

2a. SECURITY CLASSIFICATION AUTHORITY 3. DISTRIBUTION/AVAILABILITY OF REPORTN/DOWNGRADING SCHEDULE "A" Approved for Public Release,

2b. DECLASSIFICATION /Distribution Unlimited

4. PERFORMING ORGANIZATION REPORT NUMBER(S) S. MONITORING ORGANIZATION REPORT NUMBER(S)

LMI-ML327

6a. NAME OF PERFORMING ORGANIZATION 6b. OFFICE SYMBOL 7a. NAME OF MONITORING ORGANIZATION(If applicable)

Logistics Management Institute6c. ADDRESS (City, State, and ZIP Code) 7b. ADDRESS (City, State, and ZIP Code)

6400 Goldsboro RoadBethesda, Maryland 20817-5886

Sa. NAME OF FUNDING/SPONSORING 8b. OFFICE SYMBOL 9. PROCUREMENT INSTRUMENT IDENTIFICATION NUMBER

ORGANIZATION (If applicable)

OASD (MI&L) MDA903-77-C-03708c. ADDRESS (City, State, and ZIP Code) 10. SOURCE OF FUNDING NUMBERS

PROGRAM PROJECT I TASK WORK UNITThe Pentagon ELEMENT NO. NO. NO. ACCESSION NO.Washington, D.C. 20301-8000

11. TITLE (Include Security Classification)

Responsibility for Spare-Parts Acquisition12. PERSONAL AUTHOR(S)

John F. Olio, Frank W. Parsons13a. TYPE OF REPORT 13b. TIME COVERED 14. DATE OF REPORT (Year, Month, Day) 5. PAGE COUNT

Final I FROM TO January 1984 2616. SUPPLEMENTARY NOTATION

17. COSATI CODES 18. SUBJECT TERMS (Continue on reverse if necessary and identify by block number)FIELD GROUP SUB-GROUP

Acquisition, Spare Parts

19. ABSTRACT (Continue on reverse if necessary and identify by block number)Responsibility for developing spare-parts acquisition policy and monitoring programexecution with the Office of the Secretary of Defense is split between the Under Secretaryof Defense for Research and Engineering and the Assistant Secretary of Defense (Manpower,Installations and Logistics). The split, however, has not been defined in a systematicmanner, nor at a level of detail that clearly establishes the responsibilities of theorganizations of the two officials, resulting in overlaps and omissions.

This report

1. Describes the various functions comprising the spare-parts acquisition process anddocuments the interrelationships among those functions.

2. Determines current assignments of spare-parts acquisition responsibilities forUSDRE and ASD(MI&L)

20 DISTRIBUTION/AVAILABILITY OF ABSTRACT 21 ABSTRACT SECURITY CLASSIFICATION13UNCLASSIFIED/UNLIMITED 0 SAME AS RPT. 0 OTIC USERS

22a NAME OF RESPONSIBLE INDIVIDUAL 22b TELEPHONE (Include Area Code) 22c. OFFICE SYMBOL

DO FORM 1473,84 MAR 83 APR edition may be used until exhausted SECURITY CLASSIFICATION OF THIS PAGEAll other editions are obsolete Unc lassi fied

zw,

.......................................

111CUPeYv CLAWICATION OF T"111 PA69

73. Recommends and specifies detailed assignments of spare-parts acquisitionresponsibilities to the LJSDRE and ASD(MI&L) to eliminate current overlaps ando missions.

SECURITY CLASSIFICATION OF TMIS PACE

RESPONSIBILITY FOR SPARE-PARTS ACQUISITION

Responsibility for developing spare-parts acquisition policy and monitor-

ing program execution within the Office of the Secretary of Defensea4OW is

split between the Under Secretary of Defense for Research and Engineering

(USDRE) and the Assistant Secretary of Defense (Manpower, Installations and

Logistics) (ASD(MI&L)). The split, however, has not been defined in a system-

atic manner, nor at a level of detail that clearly establishes the responsi-

bilities of the organizations of the two officials, resulting in overlaps and

omissions.

In this reportwe--

1. Describethe various functions comprising the spare-parts acquisitionprocess and documenti, the interrelationships among those functions'

2. Determines current assignments of spare-parts acquisition responsibil-ities for USDRE and ASD(MI&L)1 ',

3) Recommend5and specifYAdetailed assignments of spare-parts acquisitionresponsibilities to the USDRE and ASD(MI&L) to eliminate currentoverlaps and omissions.

SPARE-PARTS ACQUISITION PROCESS

The process of acquiring spare parts starts during concept exploration,

continues through the life cycle of a weapon system, and ends only when the

weapon system is withdrawn from U.S. and friendly foreign government force

structures. During this time, many diverse actions and decisions directly or [1

indirectly have an impact upon spare-parts acquisition. For ease of discus-

sion, we have divided the spare-parts acquisition process into six major

categories: management plans; design development; data base development and

update; requirements determination; procurement; and materiel status. Major

actions or decision points in some of these categories occur throughout the

2. .

entire life cycle, while other categories are important only during specific

phases of the life cycle.

Management Plans

Management plans are formal plans providing guidance and documenting

the technical and supply management decisions made throughout the development,

production, and deployment phases of a weapon system. Included in this cate-

gory are the Integrated Logistics Support Plan (ILSP), the Maintenance Plan,

the Initial (Interim) Support Plan, the Transition Plan, the Post-Production

Support Plan, and the Termination Plan.

Design Development

The design development category consists of functions in which

logistics support considerations affect the end-item design during the devel-

opment phase of the weapon system acquisition process. Included in this

category are life-cycle cost (LCC) trade-off studies and logistic support

analysis (LSA). By means of the LCC trade-off studies, logistics considera-

tions such as maintainability, reliability, and quality are cont.Lnually traded

off against proposed design characteristics of the weapon system throughout

the development phase. The LSA process (1) ensures that individual logistics

support elements (such as technical data, training, spares support, and

facilities) are evaluated in a systematic manner as they affect maintain-

ability, reliability, and quality and (2) documents the final design decisions

applicable to each of the logistics support elements.

I The focus of this report is on acquisition of weapon- system- re latedspare parts. However, it should be noted that, beyond the initial (interim)support period of a weapon system, the spares acquisition categories (exceptmanagement plans and design development) apply equally to the acquisition ofall secondary items. Secondary items not associated with the weapon systemacquisition process include non-weapon-system-related hardware, general supplyitems, clothing and textiles, medical supplies, and fuel. Beyond the initial(interim) support period, support concerns for all categories of secondaryitems normally focus on individual line items rather than on weapon systems.

2

Data Base Development/Update

The decisions and actions in the first two categories culminate

in the development of a data base that supports subsequent management of

spare parts. The data base is continually updated to reflect current spare-

parts demand and procurement actions. This category includes development and

production drawings, technical documentation for provisioning, and the inven-

tory control point (ICP) technical and inventory management data bases.

Requirements Determination

Requirements determination uses the inventory management segment of

the data base in conjunction with models, algorithms, or other techniques to

compute reparable and consumable spare-parts requirements during all phases of

a weapon system's life cycle.

Procurement

The procurement category consists of functions necessary to obtain

spare parts from industry. This category includes development of both the

acquisition policy and the contracting instruments and techniques contained in

the Federal Acquisition Regulation and the Defense Acquisition Regulation

(FAR/DAR). Additional functions related to the management of the procurement

operation, such as spare-parts breakout, procurement quantity determination,

development of management systems, and multiyear procurement, are also

included in this category.

Materiel Status

This last category includes all data systems that provide visibility

of spare-parts inventories and materiel use throughout the life cycle of a

weapon system. These data systems update the inventory management segment of

the data base used in the requirements determination process to compute spare-

parts requirements.

3

&*22.m %. ~~*. %'

CURRENT RESPONSIBILITIES

The current split of responsibilities within OSD for the six categories

of spare-parts acquisition functions during the various portions of a weapon

system's life cycle is not explicit. DoD directives and instructions and

personal interviews indicate the following general allocation of responsi-

bilities:

- USDRE is responsible for the following:

-- design, development, and production of a weapon system and itsassociated spare parts.

-- technical data necessary for competitive procurement of spareparts.

-- spare-parts procurement policy.

- ASD(MI&L) is responsible for the following:

-- logistics support implications of weapon system design during thedevelopment phase.

-- management plans and systems that track the development andmaintenance of logistics support capability, including sparessupport.

-- spare-parts support.

It is interesting to note that, among the OSD staff, the spare-parts

acquisition process is generally viewed as a sequential process, with the

USDRE responsible for the early stages and the ASD(MI&L) responsible for the

later stages. There is little recognition that spares acquisition is an

integrated process requiring participation of both OUSDRE and OASD(MI&L)

throughout the entire life cycle. As a result, there is no concept of shared

responsibility and not much interaction between the two groups during the

[ development of policy.

4

% I I - I - -*

RECOMMENDED RESPONSIBILITIES

In developing the recommended split of responsibilities, we used the

following rationale:

- the OSD office developing the policy for a specific area should alsobe responsible for monitoring execution; there should be no split inresponsibility between policy development and program monitoring.

- responsibility for specific areas within any of the six categories ofthe spares acquisition process may change as a weapon system movesthrough its life cycle.

- although one office--OUSDRE or OASD(MI&L)--should be assigned primaryresponsibility for a specific function, the other office may have astrong interest in that function and should be a partner in policydevelopment and program monitoring.

Responsibilities for Spare-Parts Acquisition

We have developed an overview of the spares acquisition process

(Attachment 1) and have color-coded it to delineate the recommended responsi-

bilities of the USDRE and the ASD(MI&L). In developing these recommendations,

we have assumed no significant changes in the current OUSDRE and OASD(MI&L)

organizations. Attachment 1 segregates the spares acquisition process into

the six categories discussed above and depicts the major functions having an

impact upon spare-parts acquisition that occur in each category during the

various portions of a weapon system's life cycle. While most functions are

designated as the primary responsibility of either OUSDRE or OASD(MI&L), both

offices should be involved in most functions, one as primary agent, the other

supporting.

The recommendations are as follows:

- as the Defense Acquisition Executive, the USDRE should haveprimary responsibility for those functions that have a directimpact on weapon system design and production. These include LCCtradeoffs, development and production drawings, specifications,and drawings and other technical data describing individual spareparts. As the logistics support agent, the ASD(MI&L) shouldensure that logistics support implications are considered duringthe development process.

5

the USDRE should have primary responsibility for acquisitionpolicy throughout the life cycle of the weapon system, includingprocurement of spare parts. However, the ASD(MI&L) should have astrong interest, since the implementation of acquisition policysignificantly affects inventory investment levels and administra-tive costs at ICPs and/or stock points under his responsibility.Attachment I indicates that the responsibility for the procure-ment category is assigned to both the USDRE and the ASD(MI&L)when a weapon system reaches initial operating capability (IOC)or materiel support date (MSD). This category will be discussedin more detail in the spare-parts procurement section below.

the ASD(MI&L) should have primary responsibility for the manage-ment plans and design development categories that affect logis-tics support, including the ILSP and the other maintenance,support, transition, and termination plans and the LSA Dataprocess. Throughout the design process, the USDRE and theASD(MI&L), together, should continually assess logistics supportconsiderations that apply to the latest hardware configurationand document them in life-cycle cost studies and in the LSA database.

the ASD(MI&L) should have primary responsibility for the require-ments determination category for nearly the entire life cycle.Sparing to availability and other requirements determinationalgorithms are ASD(MI&L) responsibilities applicable to thedevelopment, production, and deployment phases. The USDRE isresponsible for spare-parts requirements only during the earlyphase of development, when requirements represent individual pro-totype engineering decisions rather than multiple end-itemsupport decisions.

In Attachment 2, we provide more detailed recommendations for the

assignment of responsibilities for the spare-parts acquisition process. That

attachment also provides a comprehensive description of spare-parts acqui-

sition functions and identifies the numerous interrelationships among those

functions. In Attachment 3, we provide a list and a brief summary of current

DoD directives and instructions containing policy guidance pertinent to the

spare-parts acquisition process.

Responsibilities for Spare-Parts Procurement

Both the USDRE and the ASD(MI&L) have primary responsibilities (see

Attachments I and 2) in the procurement category after IOC and/or MSD. During

this phase of the life cycle, USDRE responsibilities are essentially tech-

nical, while ASD(MI&L) responsibilities are essentially managerial.

6

The USDRE technical responsibilities pertain to the development of

contracting instruments and techniques, including contracts, agreements, and

simplified purchase procedures. These instruments and techniques are designed

to facilitate competition or to ensure that non-competitive procurements are

administered adequately. The effectiveness of these instruments and techni-

ques in enhancing competition hinges on the availability of adequate technical

data obtained by using spare-parts breakout techniques, either during the

design phase or at the time of reprocurement on a line-item basis.

The ASD(MI&L) managerial responsibilities pertain to the selection

of appropriate contracting instruments and techniques to procure individual

spare-parts requirements in an efficient and timely manner. The goals are to

enhance competition and to minimize inventory investment levels and adminis-

trative costs while providing satisfactory response to customer materiel

requirements. To achieve these goals, the ASD(MI&L) is concerned with

striking a balance between costs and customer response through procurement

management programs designed to reduce both administrative workload and unit

costs of procured materiel.

These technical and management responsibilities support the follow-

ing recommended split of responsibility for the procurement category subse-

quent to IOC/MSD:

- The USDRE should have primary responsibility for the following:

-- development of acquisition policy.

-- development of contracting instruments and techniques.

-- development of spare-parts breakout techniques, includingobtaining adequate technical documentation during the designphase of the weapon system life cycle.

-- pricing, including an assessment of variances, reasonable-ness, and validation.

7

'Iz M%' %.* - 4" %

- The ASD(MI&L) should have primary responsibility for thefollowing:

-- management of the technical data base, in support of theprocurement operation, including application of spare-partsbreakout techniques subsequent to ICP assumption of spare-parts support responsibility.

-- procurement quantity determination, including economic orderquantities and annual buys.

-- management of the procurement operation, including selectionof the applicable contracting instrument, development andadministration of the management systems appropriate toquick-response, large-volume purchasing and large- and small-dollar-value buy requirements, multiyear procurements,consolidated buys, and determination of central vs. localprocurement.

SUMMARY

We have recommended assigning policy development and program monitoring

responsibilities to the USDRE and the ASD(MI&L) as shown in Attachments I and

2, for a more effective management of the spare-parts acquisition process.

Primary responsibilities have been assigned to either the USDRE or the

ASD(MI&L) for the functions within each of the six spare-parts acquisition

categories, with the exception of the procurement category after IOC and MSD.

We have identified the need to assign primary responsibilities for the pro-

curement category during these phases to both the USDRE and the ASD(MI&L).

Specific responsibilities are delineated in Attachment 2. The recommendations

should be the basis for a memorandum of understanding between the USDRE and

the ASD(MI&L) to formalize the split of responsibilities for the spare-parts

acquisition process.

The assignment of responsibilities to the current organizations of the

USDRE and the ASD(MI&L) explicitly covers all aspects of the spare-parts

acquisition process. However, improvement of policy development and program

monitoring requires recognition of the fact that the spare-parts acquisition

8

.......................P... .

process is an integrated one with many complex interfaces and that it there-

fore requires better coordination between OUSDRE and OASD(MI&L) during all

phases of the life cycle.

ADDENDUM

An alternative to dividing responsibilities between the current organiza-

tions of the USDRE and the ASD(MI&L) would be to reorganize the OSD staff to

consolidate responsibilities for spare-parts acquisition functions under

either the USDRE or the ASD(MI&L). A reorganization evaluation would require

an analysis of all spare-parts acquisition categories shown in Attachment 1

and could not be limited solely to the spares procurement category. Such an

evaluation would have to deal with the new interfaces created in both the

weapon system and the spares acquisition processes and should recognize the

functional transfers that might result from the reorganization now taking

place in USDRE.

9a

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ATTACHMIENT 1

SPARES ACQUISITION

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ATTACHMENT 2

SPARE-PARTS ACQUISITION FUNCTIONS

SPARE-PARTS ACQUISITION FUNCTIONS

OSD Action OrganizationUSDRE ASD(MI&L)

Lead/ASD Lead/USDRE ASD(MI&L) Program (MI&L

Function Description Policy Interest for Spares Interest Only

MANAGEMENT PLANS

SIntegrated Logistic Support o Integrates the planning for all ASD x

Plan (ISP) elements of logistic support for (MI&L)the end-item throughout the devel-

Life-Cycle Costs (LCC)/ ment and initial production phases;Logistics Support Analysis plans for the transition of(LSA)/ILS Planning logistics support management from

- Maintenance Concept the acquisition project office/- Tech Data contractor to the designated- Training Military Department (MILDEP) and- Spares Support Defense Logistics Agency (DLA)- Repair Support inventory control points (ICPs).- Installation Support Includes (1) Eracki the LCC/LSA

(including Test Equipment) interplay proce (eLC- Software Support Trade-off" and "LSA" under

"Design Development" below),(2) scheduling and tracking ILSfunctions prior to Materiel SupportDate (MSD) (see "Initial (Interim)Support Plan" and "Transition Plan"below), and (3) scheduling andtracking development of the docu-mentation and automated productsdescribing the maintenance conceptand requirements for each iS element,including spares support (see "Pro-

visioning Technical Documentation(PTD)" below). Throughout theend-item development phase, the ILSPis reviewed and updated by theILS Management Team (ILSHT), con-sisting of representatives fromacquisition, contractor, logisticssupport, and field activity organi-zations.

o Maintenance Plan o Describes the maintenance concept ASDfor the end item; identifies the (MI&L)

- Reparables preventative and corrective main-- Consumables tenance requirements, te4.t equip-- Test Equipment ment requirements, and, for spres- Military Essentiality T-arables and consumb sbli), he- Repair & Supply Echelons mission essentiality, repair- Failure Rates levels (i.e., depot/intermediate/

organizational), and failure data.

These elements determine sparesrequirements.

o Initial (Interim) Support Plan o Describes the support concept ASD xand designates responsibility (MI&L)

- Spares for spares and repair support- Repair from Initial Operating Capability

(IOC)--completion of validation ofthe production configuration--toMSD, when responsibility for fullspares support is transferred tothe MILDEP and DLA ICPs (see"Initial (Interim) Support" under"Requirements Determination,""Acquisition Project Office/ICP"

2-1

OSD Action OrganizationUSDRE ASD(MI&L)

Lead/ASD Lead/USDRE ASD

(fLI&L) Program (fLI&L)Function Description Policy Interest for Spares Interest Only

under "Procurement" and "InterimSupport Visibility" under "MaterielStatus" below).

" Transition Plan o Describes actions required to ASD xtransfer the logistics support (fLI&L)

- Spares responsibility from the acquisi-- Repair tion project office/contractor to

the MILDEP and DLA ICPs, includingan accounting for spares and a planfor their distribution/disposition.

o Post-Production Support Plan o Describes the logistics support ASD xapproach for the end item (flI&L)

- Spares subsequent to delivery of the- Repair final production unit.

o Termination Plan o Describes actions required to ASD xensure that all logistics support (rI&L)capability for the end-itemis terminated in a coordinatedmanner.

DESIGN DEVELOPMENT

o Life-Cycle Cost (LCC) Trade-offs o Trades off RM&Q program pars- USDREmeters and LCC considerations;

- Reliability/Maintainability an -iterative process as the designand Quality (RM&Q) Program moves through the development

* LCC Reports phase towards the production con-figuration; supported by analyticalcapabilities such as spares optimi-zation techniques (see "Sparing toAvailability Models" below). Con-siderations of maintainability,reliability, and quality determinethe frequency of demand, costs; andthe level of repair; consequently,they determine spares inventoryinvestment cost.

o Logistic Support Analysis (LSA) o Records the design development ASD

decisions affecting logistics sup- (MI&L)- Logistics Support Analysis port; provides a disciplined,

Record (LSAR) automated mechanism for allovin- ILS Element Input Data spares support (and other IL- Spares Failure Data elements) considerations to

affect the design decisions;the LSAR is the data base de-scribing the production con-figuration for ILS purposes. Fromthis data base inputs are providedto the individual ILS elementsdata bases (including spares) forsubsequent MILDEP/DLA managementpurposes.

DATA BASE DEVELOPMENT/UPDATE

o Development Drawings o Supports the contract specs as the USDRE xrecord of the technical desgn

- Contract Specs (development) during the development process;- Spares Breakout during the development phase, use

2-2

V N

OSD Action OrganIzationUSDRE ASD(MI&L)

Lead/ASD Lead/USDRE ASO(MI&L) Program (MI&L

Function Description Policy Interest for Spares Interest Only

of the Parts Control Programseeks to maximize comon sparesas components in newly designedend items; spare-parts breakouttechniques are applied to obtainthe technical data for new itemsThe availability of adequate tech-ical data enables future com-petitive procurement.

o Production Drawings o Supports the contract specs as the USDRE Xrecord of the technical design in

- Contractor Specs (production) the production configuration; the- Contractor Spares Data Base contractor's spares data base is- Prime/Original Equipment supported by the production drawings;

Manufacturer (OEM) Part #s prime and/or OEM new-itm part num-- Defense Logistics Support bers are screened through the Defense

Center (DLSC) Screen Lolistics Support Center (DSC) toensure that National Stock Numbers(NSNs) already assigned are cited inspares support documentation. Dur-ing an Interim Support phase, thecontractor's spares data base and/orthe LSAR is source for sparesrequirements determination (see"Sparing to Availability Models"and "Initial (Interim) Support"under "Requirements Determination"below).

o Provisioning Technical Docu- o Required to establish the spares ASDmentation (PTD) data base of the mangingnven- (MIL)

tory control point (ICP); sup-Production Drawings ported by the spare productionLSA Output drawings, the contractor's spares

- Maintenance Plan Guidance data base, and/or the LSAR; contains- Reprocurement Data mission essentaility and repair

Indentured Parts Breakdown data from the Maintenance Plan;NSNs/anufcturer's Part #s NSNs obtained through the DSC

screen are included in the PTD.

o ICP Data Base o The technical data base includes ASD Xa description of the individual (MI&L)

- Technical Data Base spare for cataloging and pro-Inventory Msnqgement Data curement description purposes,Base relates the individual spare to

an end-item (application data),provides an indentured view of allspares supporting that end-item(spares may be identified at theequipment, system, and/or weaponsupport level), and identifiessources for procurement.

Inventory Management Data Basecontains many data elements, such asdemand data. price, unit of issue,procurement history, reparable orconsumable designation, and whole-sale (and sometimes partial retail)inventory status (quantitieson hand, on order, back-ordered,

2-3

%P

OSD Action OrganizationUSDE ASD(MI&L)

Lead/ASD Lead/USDRE AS)(MI&L) Program 11]6

Function Description Policy Interest for Spares Interest Onl,

etc.) for each line item. Thisdata base supports the calcula-tion of spares requirements (see'Requirseents Determination" below)

REQUI REMENTS DETERMINATION

o Development Requirements o During the early phase of develop- USDRE Xment, repairs and/or design changes

Prototype vs Multiple are made to a minimm number ofEnd-Item Support development model prototypes (end-

items) on an as-required basis aspart of the end-item deaign pro-cess; therefore spares require-ments algorithm are not appro-pri te.

" Sparinx to Availability Models o Spares optimization algoriths ASD"may be appropriate during the (MI&L)

LCC Trade-off Decisions development phase as theseTime Frames (Mission algorithm can usefully supportScenarios) the LCC trade-off process bySpares Requirements providing rationalized sparesAlgorithm for Multiple costs. During the testing, pro-End-Item Support duction. sad post-production

phase&, sparing availability modelscan provide a readiness-orientedoptimization of spares require-ments in support of end-itama,on a single or multiple cupplechelon basis.

" Initial (Interim) Support o Interim spares requirements (repar- ASDables and consumables) are computed (MI&IA

Reparables using data from the LSAR or con-Consumables tractor spares data base; either theWholesale/Retail ICP, or the acquisition project

office/contractor in conjunctionwith the ICP, computes requir-ementson the basis of a mutually agreeablespares computation algorithm.Initial wholesale and retail sparesrequirements are computed by theICP using data from the PTD.Interim support (if used) com-mences at IOC and ends at MSDInitial support commences atNSD The demand developmentperiod may begin at eitherthe IOC or the "SD

Prior SD.

Subsequent to PSD.

2-4

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OSD Action OrganizationUSDRE ASD(MI&L)

Lead/ASD Lead/USDRE ASD

(1MIL) Program (MI&;Function Description Policy Interest for Spares Interest Only

o Replenishment o Supports all end-itema subsequent ASD xto the demand development period; (MI&L)

- Wholesale/Retail requirements are calculated forRequirements wholesale and retail (intermediate

- Supply Echelon Support and consumer) levels and for special- Reparables support such as war reserves, foreign- Consumables military sales, etc.; relies upon- Special Support Requirements techniques such as demand forecasting,- Demand Forecasting repair-cycle management, Economic- Procurement Lead Times Order Quantity (EOQ) policy, pro-- Stock Fund Management curement lead-time management, and- Levels Setting/Stratification wholesale/retail stocks to achieve- Supply Effectiveness spares support objective at the

lowest overall dollar investment;uses levels setting and stratifica-

tion techniques to identify require-

ments for budget and procurementpurposes; uses supply effectiveness

to measure performance. (If Sparingto Availability Modela are used tocalculate replenishment requirements,

weapon system readiness indicatorswould be used to measure performance.)

Determines the frequen of procure-

mentrequests).

PROCUREMENT

Acquisition Project Office/ o During the development phase, USDRE xContractor spares procurements are accom-

plished by the contractor forGFm or CFM the Acqusition Project Office,End-Item Contract unless the item is identified

as "Government-furnished materiel"

(GFN), in which case it is obtainedfrom the MILDEP or DLA logistics

support system; contractormateriel procurement (known as"contractor-furnished materiel"

(CRM)) is monitored by theacquisition project officeas a line item under the end-

item development contract;the contract document itselfspecifies the circumstances underwhich competitive or non-competitiveprocurement is justified.

Acquisition Project Office/ o Under an interim support concept ASD xICP spares procurements are normally IMI&L),

the responsibility of the acquxsl- USDREInterim/Initial Support tion project office, although theSAIP ICP may also be involved; as duringGFM vs CFM the development phase, materiel

identified as GFM is obtained fromthe MILDEP or DLA logistics support

system. During the initial supportphase, the ICP procures the spareseither directly from the end-item

contractor/OEM with an ICP contractor indirectly from the contractorby using an end-item contract

2-5

*%I

OSD Action Organization

USDRE ASD(MI&L)Lead/ASD Lead/USDRE ASD(MI&L) Program (NI&L)

Function Description Policy Interest for Spares Interest Only

established by the acquisition pro-ject office; Spares AcquisitionIntegrated with Production (SAIP)my be used with both procurementmethods.

o ICP/Retail Activities o During the replenishment support ASD X Xphase, the procurement operations (MI&L)/

Line Item vs End-Item change significantly from earlier USDREWeapon-System-Related vs phases; procurement actions tend toNon-Weapon-System-Related be on a random line-item basis rather

- Number of Procurement Actions than conveniently planned and grouped- Breakout Techniques by end-item; procurements are gen-- Central vs Local Procurement crated for all support items, in-- Responsiveness cluding weapon-system-related- Procurement Leadtimes and and non-veapon-system-related

Cost spares, such as general supply items,clothing and textiles, and medicalsupplies; the number of procurementactions increases siZgificantly;spare-parts breakout techniques areused to obtair technical data notpreviously obtained in the designphase to support competitive pro-curements; items my be procured bymore than one organization (centralprocurement by the ICP and/or localprocurement by local procurementactivities); urgent customer require-ments necessitate quick response;and the ability of the industrialbase to respond to specific sparesrequirements is hampered as end-itemproduction lines shut down, tendingto increase procurement leadtimesand costs.

The procurement category, cosmencingwith IOC and/or ?ISD, is unique inthat USDRE and ASD(MI&L) areboth assigned primary responsi-bilities during these phases; USDREresponsibilities are technical innature and include development ofacquisition policy; development ofcontracting instruments; develop-ment of spare-part breakout tech-niques; value engineering toestablish "should-cost" price;

and validation of price reas -ableness. ASD(MI&L) responsi-bilities are management orientedand include selection of theappropriate method of procurementto minimize inventory investmentsand administrative cost whileproviding satisfactory response tocustomer requirements and managementof the procurement operation; ASD(MI&L,

also manages other procurement-related items such as determination

2- %

OSD Action OrganizationUSDRE ASD(MI&L)

Lead/ASD Lead/USDRE ASD

(MI&L) Program MI&L)Function Description Policy Interest for Spares Interest Only

of moat cost-effective procurementquantities; and use of technical dataand breakout techniques to maximizecompetitive procurement.

Specific recommended responsibilitiesare as follows:

- Development of acquisition policy-- Federal Acquisition Regulation USDRE X

(FAR)/Defense Acquisition Regula-tion (DAR)/DoD FAR Supplement

- Development of contracting instru- USDRE Xments"" contracts-- agreements

-- simplified purchase procedures- Development of spare-parts breakout USDRE X

techniques- Value engineering (should-cost) USDRE X- Pricing USDRE X

"" variance-- reasonableness-- validation

- Selection of proper contracting ASD Xinstrument for specific procure- (MI&L)ment action

- Use of spare-parts breakout tech- ASD Xniques to obtain technical data (MI&L)required to maximize competition

- Procurement quantity determination ASD X-- EOQs (rI&L)-- Annual buys

- Application of procurement techniques ASD X-- SAIP (NI&L)-- Multiyear contracting

- Management of the procurement process ASD X-- quick-response techniques (HI&L)

-- large- and small-dollar-valueprocedures

-- central vs local procurement

1ATERIEL STATUS

Acquisition Project Office/ o During the development phase, as USDRE IContractor with procurement, materiel status

is a contractor "in-house" accom-plishment to provide materiel in

support of development schedules.

Interim Support Visibtlity o During an interim support period, ASD Xmateriel status is maintained by (MI&L)

Interim Support Depot the contractor, frequently in con-End-User Demand Data junction with the [CP; user require-End-User Shipment Status ments may be forwarded directly

to the contractor as a unique materielsupport situation, or may be for-warded via the ICP as a normalmateriel support situation. The con-tractor provides status of supplyaction for user requirements in a

format directed by the ICP or the

acquisition project office. The

2-7

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OSD Action OrganizationUSDRE ASD(MI&L)

Lead/ASD Lead/USDRE ASD(MI&L) Program (MI&L)

Function Description Policy Interest for Spares Interest Only

contractor reports inventory statusto the ICP and/or to the acquisi-tion project office.

o Wholesale/Retail Visibility o Materiel status visibility sub- ASD xsequent to MSD involves the col- (MI&L)

Pre-posting vs. Post-posting lection of materiel demand or useSupply Echelons data from the supply echelons. On-Weapon Systems hand/on-order quantities, backorders,Categories of Materiel Use planned requirements, customer

priorities, required deliverydate, etc. are inputs to therequirements determinationalgorithms via the Inventory Manage-ment Data Base on a line-item basis.The correlation of materiel statuswith maintenance reporting determinesto a significant degree the abilityto accomplish requirements deter-mination on a weapon system, orreadiness, basis.

2-8

0 .S -. e v- ." .. JL'.I~, ju dus% ' ~-

ATTACHMENT 3

SPARES ACQUISITION PROCESS - SUMMARY DESCRIPTIONS OF APPLICABLEDoD DIRECTIVES AND INSTRUCTIONS

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