acquisition policy update

War-winning Capabilities…On Time, On Cost

Air Armament CenterAir Armament Center

Emily JayAAC/[email protected]

Acquisition Policy UpdateAcquisition Policy Update

DISTRIBUTION STATEMENT A: Approved for public release; distribution is unlimited.


Agenda

• Update on Anticipated Changes from Last Year

• Contract Incentives• Changes to Source Selection Process• Firm Fixed Price Development Contracts• Other Hot Topics


Update From Last Year

• Congress and DAPA “Conspiracy of Hope”Advocated Change in our Processes

– Source Selection Improvement Team• Requirements Traceability MatrixMore Education of Teams “Do’s and Don’ts”• DFARS Guidance Regarding DownselectsIncreased Use of Oral ProposalsIncreased Emphasis on Cost Realism/RiskIncreased Emphasis on Structuring Contracts to Limit

OverrunsMove to Risk Based Source Selection

– Award Fee Policy Revisions


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


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

War-winning Capabilities…On Time, On CostIncentive Fee Example #2

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

PerformanceCost 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%


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


Integrated Risk BasedSource Selection Criteria

Air Armament Center

Cost Risk Mission Capability Past Performance Cost/Price

Technical Rating Risk Rating

Example

Sub 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

•LHA•SEA •TRA•MRA•Demos •IBR•IMP/IMS•Test Plan•PoPS•MPC•Proposed Management Reserve

•Spec•ILSP

•LHA•SEA•TRA•MRA•Demos•IBR•IMP/IMS•Test Plan•PoPS

•CPARS•Questionnaires•PoPS•MRA

APC

MPC


Source Selection Evaluation Matrix

Past Performance

Mission Capability

Cost/Price ** This factor may require a risk assessment

as described in Paragraph 5.5.4.

Subfactor 1 Subfactor 3Subfactor 2

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Past Performance

Cost/Price

Subfactor 1

Tec

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ical

Rat

ing

* For use on cost reimbursement or fixed-price incentive contracts where Cost/Price Risk is an Evaluation Factor; Most Probable Cost is utilized

Tec

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ical

Rat

ing

Tec

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ical

Rat

ing

Mission Capability

Cost/Price Risk *

Ris

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Ris

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Subfactor 2 Subfactor 3

CURRENT

Proposal Risk

NEW

War-winning Capabilities…On Time, On CostCost / Price Risk Ratings

NEWCURRENTTABLE 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

Rating Description

Low Little difference exists between the offeror’s proposed cost/price and the government most probable cost which may cause minor or even negligible impact to program’s 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 offeror’s proposed cost/price and the government most probable cost that may impact the program’s 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 offeror’s proposed cost/price and the government most probable cost which may substantially impact the program’s probability of success. Cost growth is likely to occur as indicated by this difference and/or other anomalies related to cost/price.


Cost Risk Ratings

• Cost– The Offeror’s 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 Offeror’s Cost Proposal and the Government’s Most Probable Cost estimate (MPC) of the Offeror’s approach, including the Government’s estimate of risk associated with the Offeror’s approach.

• High Risk ( Estimate is > 20% above or below MPC)• Moderate Risk ( Estimate is 11%-20% above or below MPC)• Low Risk (Estimate is < 10% above or below MPC)

– Individual programs may tailor % and upper boundary for high risk


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 government’s 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


NEWCURRENT

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

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.


Mission Capability RiskRatings

NEWTABLE 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.

CURRENTTABLE 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


Proposal Risk – Pre SDD

TRL/Integration IMP/IMS Planning Risk Management Producibility

Low All technologies required for tech solution are > TRL 5,

Integration begun

Scope of integration and test efforts are benchmarked and relected in robust ingtegrated IMP & IMS

Contractor’s 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 > 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 > TRL 4

Integration and test efforts are planned but lack sufficient detail within the IMP/IMS. Benchmarking is poorly implemented

Contractor’s 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 < 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


Past Performance Ratings

TABLE 3- PERFORMANCE CONFIDENCE ASSESSMENTS

Rating Description

SUBSTANTIAL CONFIDENCE

Based on the offeror’s performance record, the government has a high expectation that the offeror will successfully perform the required effort.

SATISFACTORY CONFIDENCE

Based on the offeror’s performance record, the government has an expectation that the offeror will successfully perform the required effort.

LIMITED CONFIDENCE

Based on the offeror’s performance record, the government has a low expectation that the offeror will successfully perform the required effort.

NOCONFIDENCE

Based on the offeror’s 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 offeror’s performance record is so sparse that no confidence assessment rating can be reasonably assigned.

NEWTABLE 3- PERFORMANCE CONFIDENCE ASSESSMENTS

Rating Description

HIGH CONFIDENCE

Based on the offeror’s performance record, the government has high confidence the offeror will successfully perform the required effort

SIGNIFICANT CONFIDENCE

Based on the offeror’s performance record, the government has significant confidence the offeror will successfully perform the required effort

SATISFACTORY CONFIDENCE

Based on the offeror’s 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 offeror’s performance record, substantial doubt exists that the offeror will successfully perform the required effort.

NO CONFIDENCE Based on the offeror’s performance record, extreme doubt exists that the offeror will successfully perform the required effort.

CURRENT


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 challenging…not

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


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


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


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

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