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					WWW.DCMA.MIL                        WWW.DFAS.MIL




Line Items for Dummies –
 DoD Black Belt Results
  2010 DoD Contracting Operations Conference:
      Policies, Processes, and eBusiness…
                San Antonio, Texas
               February 23-24, 2010
             Dave Guinasso, DCMA
             Rebecca Beck, DFAS
                                                   1
                                AGENDA


•   IT Directions
•   Focus on the Contract
•   How we Receive Contracts
•   Frequent Problems on Contracts
•   Unique Lines of Accounting
•   Using Contract Line Items
     ! CLINs
     ! SLINs
     ! Info subCLINs
     ! ELINs
•   Special Payment Instructions
•   Standard Procurement System (SPS)
•   How To Correct Repeated Errors
•   Contacts / Resources


                                         Indispensable Partner2
                         IT Directions

        IT-- --eBiz--OSD Electronic Processing of Invoices




56% of paper transactions are on cost contracts
60% of paper transactions are from 5 CMOs
23 vendors have more than 10 paper invoices and account for
more than 50% of paper                                                3
                                             Indispensable Partner   3
                                                     IT Directions



                                   Invoices Rejected Due to Lack of DD250 Distribution
2500
                                       (FY04, FY05, FY06, FY07, FY08, FY09, FY10)

2000

1500

1000

 500

  0
       10/1/03



                 3/1/04



                          8/1/04



                                   1/1/05



                                            6/1/05



                                                     11/1/05



                                                               4/1/06



                                                                        9/1/06



                                                                                 2/1/07



                                                                                            7/1/07



                                                                                                     12/1/07



                                                                                                               5/1/08



                                                                                                                        10/1/08



                                                                                                                                  3/1/09



                                                                                                                                           8/1/09
                                                                                          Indispensable Partner                                     4
                          IT Directions

               Invoices Processed--% Returned & % Recycled
                       (FY04, FY05, FY06, FY07, FY08)



12%



        2.7%
10%
                  1.9%
                               1.0%



8%                                         0.7%
                                                        0.40%



                                                                 0.20%
6%
                                                                         Recycled

        8.6%
                  8.2%        8.3%
4%                                         7.2%         7.10%
                                                                         Returned
                                                                 6.10%



2%




0%
      FY04      FY05        FY06         FY07         FY08      FY09




                                                    Indispensable Partner           5
                          IT Directions

IT-- --eBiz--OSD Electronic Processing of Source Acceptances




    Significant improvement from GE
    5 CMOs account for over 40% of paper
    5 vendors represent over 25% of paper
                                              Indispensable Partner 6
                            Focus on the Contract



•   DCMA and DFAS Actions Driven by the Contract
     ! Contract Oversight
     ! Contractor Payment
     ! Saving Canceling Funds
     ! Contract Closeout


•   Our Success is Influenced by Contract:
     ! Data
     ! Structure
     ! Content



                                             Indispensable Partner   7
 How We Receive Contracts


      Image

EDA           EDM            EDW 4.0


                                     eTools

  GEX           MOCAS


      Data

                    Indispensable Partner     8
                         IT Directions

Customer Systems

                   ANSI X.12
                   850s & 860s
                                         ANSI X.12
                                         850s & 860s



                                                       MOCAS



                                 GEX

                            Who Doesn’t send EDI:

                                   DLA – Modifications
                                   SPS – Modifications
                                   DTRA

                                       Indispensable Partner   9
                 Frequent Problems on Contracts


•   Problem Contracts
    ! Lines of Accounting
    ! Contract line item numbers (CLINs)
    ! Sub-line item numbers (SLINs)
    ! Informational subCLINs
    ! Exhibit line item numbers (ELINs)
        •   Problems Causes Contracts to be Manually Processed

•   Costs of Manual Processing
    ! Higher DFAS per-invoice fees
    ! Hourly reconciliation charge
    ! Prompt Payment interest penalties
    ! Negative unliquidated obligations (ULOs) and unmatched disbursements
      (UMDs)
    ! Contract closeout delays                                   Indispensable Partner   10
                  Problems on Contracts are Costly


•   Prompt Payment Act Interest (MOCAS): $2,769,657
    ! Contract / Modification improperly prepared (2009)

                                 MOCAS PROMPT PAY INTEREST PAID FY 09

             $3,500,000.00                                                              25000

             $3,000,000.00
                                                                                        20000   Total
                                                                                                Interest
             $2,500,000.00

                                                                                        15000
             $2,000,000.00
                                                                                                # of
             $1,500,000.00                                                                      Contracts
                                                                                        10000
                                                                                                Impacted
             $1,000,000.00
                                                                                        5000
              $500,000.00

                    $0.00                                                               0
                               Contract/Mod.       Pre-Validation   Pay Office Issues
                             Improperly Prepared




•   Impact to Customer Billing Rates (MOCAS)
    ! Contract/Modification improperly prepared
        • Over $1.2 million (2009) (manual – electronic rate)
                                                                                 Indispensable Partner 11
                         Line of Accounting


•   Accurate Lines of Accounting (LOAs) are the Key to
    Successful Contract Execution
    ! Accurate LOAs key to Successful Contract Execution

    ! They Assure Proper Posting of Transactions

    ! LOAs Need Checked Carefully

    ! Each Service has a unique LOA




                                                   Indispensable Partner   12
                             Line of Accounting


•   For all contracts:

     ! Accounting Classification Reference Number

         • ACRN has a 1:1 relationship between the line of accounting
             – Defense Federal Acquisition Regulation Supplement (DFARS)

     ! Number of ACRNS available: 1056

     ! CLIN needs to reference the ACRN

     ! Contract Line Item can be funded by more than one ACRN “IF” certain
       conditions are met:
         • Non-severable items

         • Include payment instructions


                                                        Indispensable Partner   13
Contract Problem Example #1




           # CDRs Issued          4
           Interest Paid      $43,235.57
                                           14
                                 Examples of CDRs Issued
$$$$$$$, INVOICE(S) IN HOUSE EXPEDITE - REQUIRED TO AVOID POTENTIAL INTEREST
PAYMENT
B10E1, LONG LINE OF ACCOUNTING DIFFERENT
Mod P00015 cites an obligation increase of $8,736.00 against ACRN AT. The data line for this
ACRN differs from the data line previously used on mod P00007.
 P00015
 P00007




                                                                                          15
                       Using Contract Line Items
                           CLIN-SLIN-ELIN


•   Item value is reported via:
     ! CLINs or ELIN
         • All property delivered to the Government must be delivered on a Line item.

         • The acquisition cost of each item entering the Government property inventory is
           captured on the Line item.

              – The estimated acquisition cost of property will be identified upon delivery.

         • Established when the contract is structured prior to award and must be included
           for all items for which the Government will take delivery, either during the
           performance of or at completion of the contract.

     ! The Contracting Officer will modify a contract to establish separate
       CLINs/SLINs/ELINs prior to delivery of items that were not identified as
       contract deliverables at the time of contract award



                                                              Indispensable Partner 16
                                 Using Contract Line Items
                                     CLIN-SLIN-ELIN




                                 *
                                                                        *




                                                                        *

                          *




            * ELIN or Sub-ELIN

•   The table shows the preferred approach for identifying the acquisition cost of items
    delivered under a contract for the items to be separately priced.
                                                                                       17
                           Contract Structure



•   Line Item Characteristics         •     Two ways to subdivide Line Items:
     ! Single unit price                    ! Informational subline items
     ! Separately identifiable                  • Numeric suffix

     ! Separate delivery schedule               • Not scheduled or priced separately
                                                • Use to identify multiple funding
     ! Single accounting classification
                                                  sources for nonseverable items
       citation
                                            ! Separately identified subline items
     ! Can be subdivided by any of
                                                • Alpha suffix
       these characteristics
                                                • May be scheduled or priced separately
     ! Price must be at either the line         • May identify multiple funding sources
       item or sub-line item but not both         for severable items
       for the same item




                                                 Indispensable Partner                 18
                   CLIN Structure and Funding


                          CLINS                        Sub CLINs                       Info CLINs
                        (ex. 0001)                    (ex. 0001AA)                    (ex. 000101)

  Can be       • multiple ACRNs                • funding on CLIN               • funding on CLIN
funded by…
               • use Sub CLINs to establish    • be used to establish          • be used to establish
               ACRNs for severable             funding ACRNs for severable     funding ACRNs for non-
               quantities associated with a    CLINs                           severable CLINs
               single accounting
               classification,
   Can…           OR
               • use Info CLINs to establish
               ACRNs for each accounting
               classification citation on a
               non-severable item

               • use both Sub and Info CLINs   • be used in conjunction with   • be used in conjunction with
               to establish funding            Info CLINs to establish         Sub CLINs to establish
               • be used to fund another       funding ACRNs for CLINs         funding ACRNs for CLINs
               CLIN                            • be funded by more than        • be used to fund a Sub CLIN
 Cannot…
                                               one ACRN                        • be used for more than one
                                               • be funded by an Info CLIN     unique accounting
                                                                               classification


Same rules apply for ELINs                                         Indispensable Partner                       19
Contract Problem Example #2




   # CDRs Issued           5
   Interest Paid       $265,411.88
                                     20
                                 Examples of CDRs Issued
B1B, CLINS/SUBCLINS/ELINS MISSING
CLIN 0085 already established. Modification 14 brings in CLIN 0085aa. Request modification be
issued to validate cited deficiencies.




B7E, UNIT PRICE/EXTENDED PRICE MISSING
The UNIT PRICE field on CLIN 0070 ACRN AK is blank. The AMOUNT field on the CLIN does not
reflect a dollar value. Instead "NSP" is identified in the AMOUNT field of this CLIN.




                                                                                         21
                             CLIN / ACRN Tips



•   Clear and Simple
•   Only subdivide CLINs for a single reason
     ! Multiple subline breakouts make bizarre contracts
     ! Consider separate CLINs for other breakouts

•   Normally only assign one ACRN per CLIN
•   Plan for CLIN expansion during contract life
•   Check examples in DFARS 204.7104-2
•   Consult service/agency guides
•   Defense Acquisition University
     ! https://learn.dau.mil/html/clc/Clc.jsp
     ! Course: Structuring Contracts for the Emerging DoD Environment (CLC033)
                                                                            22
                                CLIN Tips



•   Priced CLINs have informational subCLINs*

•   Informational CLINs have priced subCLINs

•   You may not have:

    ! Priced CLINs with priced subCLIN

    ! Informational CLINs with informational subCLINs




                             * ELIN or Sub-ELIN   Indispensable Partner   23
                                  ELIN Impact




•   Problem: ELINs not sent as part of Contract Data

    !   ELIN text is provided through contractual attachments

    !   ELINs require manual input




                                                  Indispensable Partner   24
                                   ELIN Impact

•   Contract Impact
    •   Manual Contract Input                            Contracting          Entitling
    •   Higher DFAS Billing Rate


•   Prevalidation
    !   Rejects because entitlement level does not match obligation
    !   Requires manual intervention for prevalidation approval
                                                         Accounting        Entitlement

•   Accounts Payable Maintenance                     Obligation at CLIN   Invoice at ELIN

    !   Obligations mismatches require manual posting
    !   Negative impact on Problem Disbursements        Disbursement       Accounting
        performance metric                               ELIN Level         CLIN Level

•   Customer Impact
    !   Impacts Program Status of Funds/Execution
    !   Increased Cost
                                                                                  25
                        P2P Success with ELINs



•   P2P Success with ELINs
    ! DoD policy change requiring these contract line item numbers to be passed as
      data fields in lieu of images
        • Automates the process

        • Eliminates significant delays, reduces rework, and lowers costs previously rising from
          manual contract input, prevalidation, and disbursement posting

    ! Since September 2009, the Navy, as the first Military Department to use this
      solution, successfully began transmitting electronically contracts containing
      ELINS to the entitlement and accounting systems
        • Overall baseline figures indicate the ELIN solution will impact approximately 17,000
          contracts and 400,000 ELINs

    ! Rework rising from the manual contract load, obligation validation and
      disbursement posting is steadily declining
                                                         Indispensable Partner                   26
                          Payment Instructions

•   When are payment instructions used?
    ! When a single deliverable item is funded by more than one ACRN
•   Where are payment instructions found?
    ! Section G of the contract

•   Why are payment instructions important?
    ! Provides a standard list the contracting officer can select from for inclusion in
      section G

    ! Ensures monies are disbursed in accordance with contract terms

    ! Eliminates guesswork and reduces:

        ! Prevalidation delays/rejects

        ! Reconciliation effort

        ! Dollars provided due to cancelled funds and interest

                                                                                    27
                       Payment Instructions
                           DFARS PGI 204.7108




•   DFARS PGI 204.7108
    ! The contracting officer shall insert numbered instructions in Section G in a
      manner that reflects the performance of the work on the contract
    ! When incorporating clauses by reference in Section G, cite the clause number,
      title, and date
    ! If additional accounting classification citations are added, the payment
      instructions must be modified
    ! Contracting Officers shall not issue modifications that would create
      retroactive changes to payment instructions
    ! All payment instruction changes shall be effective as of the date of the
      modification


                      DATA INSTEAD OF TEXT!
                                                                                     28
                        Special Payment Instructions
                              DFARS PGI 204.7108



                                                        Special Pay
  A set of standard                                    Instructions –              MOCAS accept
payment instructions                                  Clause approved               special pay
published in DFARS                                      Oct 15, 2009               instructions –
    PGI 204.7108                                                                      Phase II
                                                                                     July, 2011


2006                   2007    2008              2009                   2010           2011
                                        Payment            Data Point:      Special Pay
                                      instructions      During FY 2009,    Instructions –
                                     rules reviewed     more than 20,000      Phase I
                                                         contracts were     August, 2010
•    Benefits                                           manually entered

      ! Accurate payment of the contract
      ! Facilitate end-to-end electronic processing
        (API rate)
      ! Facilitate contract closeout process
      ! Reduce interest payments
                                                         Indispensable Partner                29
                   P2P Black Belt Success with SPS


•   Previous MOCAS Process
    ! Manual contract input lead to increased costs, processing times, and control
      risks related to human error
    ! Contracts written using SPS did not automatically pass information into
      MOCAS for computation of payments
•   SPS to MOCAS Solution
    ! The P2P team built and implemented a standard DoD interface between SPS
      and MOCAS to automate information exchange and produce a robust control
      environment
    ! After only being in place in the Navy for three months, this solution increased
      Navy’s electronic contracting rate from 13% to 22%
    ! The solution was applied to the Air Force and has led to increases in the Air
      Force electronic contracting rate

             SPS         Contract       MOCAS         Disbursement      Closeout

                                                                                        30
                             IT Directions

Customer Systems                                            ANSI X.12
                                                            850s & 860s
                    ANSI X.12
                    850s & 860s                  EDA




                                                            MOCAS



                                     GEX




                   Including ELINs         Boeing
                                           Lockheed
                                           Northrop
                                           Navistar
                                                Indispensable Partner     31
                 How to Correct Repeated Errors



Advice

•   Simple is Better!

•   DCMA and DFAS are stakeholders in successful contract execution

•   Both Agencies can advise you on planned:
     ! Complex, high-visibility contracts

     ! Contracts with unusual structures or provisions

•   We can predict how such contracts are likely to fare after award




                                                Indispensable Partner   32
                            Contacts / Resources

                              Rebecca Beck, DFAS
                             Dave Guinasso, DCMA
•   Resources
    ! DFARS PGI
            http://www.acq.osd.mil/dpap/dars/dfarspgi/current/index.html
    ! DODFMR
            http://comptroller.defense.gov/fmr/
    ! DCMA Guidebook
            http://guidebook.dcma.mil/17/ContractCloseoutGuidebook.htm
    ! Defense Acquisition Guidebook
            https://dag.dau.mil/Pages/Default.aspx
    ! Defense Acquisition University

            https://learn.dau.mil/html/clc/Clc.jsp

            Course: Structuring Contracts for the Emerging DoD Environment (CLC033)
                                                                                  33
Back Up




      Indispensable Partner   34
                                          ELINs in MOCAS


             % of ELINs in MOCAS

                           22%                            CLINS in MOCAS    1,869,126     78%
              78%                                         ELINs in MOCAS      414,427     22%
                                                                      TOTAL 2,283,553    100%




            ELINS by Service
                                                               Service       # ELINs     %
                                                          NAVY                247,820     60%
                                 31%                      AIR FORCE           127,831     31%
               60%
                                          9%              ARMY                  36,686     9%
                                                          MARINE CORPS           1,267    >1%
                                                          OTHER                    764    >1%
                                                 >1%                TOTAL     414,427    100%
AIR FORCE   ARMY     DLA   MARINE CORPS   NAVY    OTHER




                                                              Indispensable Partner       35
Line of Accounting




             Indispensable Partner   36

				
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