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Capture Team Success Pratt & Whitney Rocketdyne Supplier/Buyer Training July 21, 2009 Presenters Capture Team Success Ed Kasaba Greg Manley Gary Pedersen Jim Scarpati Mike Suever Supplier Proposal Training This training is generalized in nature Capture Team Success Each Proposal has its specific requirements No two Proposals are the same, but, many similarities do exist Programs tend to develop boilerplate RFQ/RFP packages tailored to their specific customer requirements Buyer’s tend to modify boilerplates to satisfy their needs – ensuring all requirements are there So, we recognize RFQ/RFPs from various programs/buyers look different – PWR working to standardize the process AGENDA Disclaimer Mike Suever Capture Team Success Proposal Cost Overview Greg Manley Firewall Ed Kasaba Proposal Process Greg Manley Proposal Compliance Mike Suever Generating the proposal Greg Manley Make/Buy Mike Suever Types of Estimates Greg Manley RFP/RFQ Mike Suever Difference of RFP and RFQ and RFI Gary Pedersen Source Selection Gary Pedersen PWR Evaluation Criteria Jim Scarpati & Greg Manley Completing the PWR Proposal Greg Manley Change Proposals Mike Suever Capture Team Success Proposal and Contracts Overview Customers PWR has different types of customers and sales as identified below: Capture Team Success Government contracts - Prime. These consist of sales to Department of Defense (DoD) (Army, Navy, Air Force, and other DoD agencies); National Aeronautical and Space Administration (NASA) development centers, laboratories, test centers; and other Government departments and agencies (e.g., transportation, energy, and so forth.). Also included are foreign military sales contracted through a DoD or Government agency. Subcontract. Programs within PWR may be contracted as a subcontractor or team member to another aerospace company or team of contractors on a Government contract. Commercial and direct foreign sales. These types of sales are to other companies for products or services not subject to government procurement regulations, and to foreign governments as a direct sale. Capture Team Success Business Life Cycle Types of Solicitations RFP -- Request for Proposal Capture Team Success RFQ -- Request for Quote ITQ -- Invitation to Quote ECP -- Engineering Change Proposal BAA -- Broad Agency Announcement Used by DOD for basic and applied research not related to the development of a specific system or hardware procurement CAN -- Cooperative Agreement Notice Used to advance and commercialize technology where government has unique capabilities NTE -- Not to Exceed Proposal NRA -- NASA Research Announcement Used by NASA for research interests in support of NASA programs PRDA -- Program Research and Development Announcement Used by DOD for exploratory research that has general application and is not system specific Contract Types Contract types are grouped into two broad categories: Fixed price Capture Team Success Cost reimbursement The specific contract types range from firm fixed-price, in which the contractor has full responsibility for the performance costs and resulting profit (or loss), to cost-plus-fixed-fee, in which the contractor has minimal responsibility for the performance cost and the negotiated fee is fixed. In between are the various incentive type contracts in which the contractor's responsibility for the performance costs and the profit a fee incentives offered are tailored to the uncertainties involved in contract performance. Time and materials contracts offer characteristics of both fixed- price and Cost-reimbursement type contracts. Indefinite-delivery type contracts also offer unique contracting characteristics Types of Contracts Cost Reimbursable (Cost Type) Capture Team Success Cost Plus Percentage of Cost (Illegal) Cost Plus Fixed Fee Cost Plus Award Fee Cost Plus Incentive Fee Fixed Price Firm Fixed Price Fixed Price Level of Effort Types of Contracts Time and Material (T&M) Contracts Capture Team Success A T&M type contract provides for acquiring supplies or services on the basis of both a. Direct labor hours at specified fixed hourly rates that include wages, overhead, general and administrative (G&A) expenses, and profit. b. Materials at cost, including, if appropriate, material handling (overhead) costs as a part of material costs. Contracting Methods Capture Team Success Formal advertising (sealed bid) is preferred by the Government Contracting by negotiation is the alternative Governed by FAR 15-101 Basis for agreement on terms and price Cost Type (Cost Reimbursable) Costs are paid provided they are Capture Team Success Allowable – check FAR Allocable – charge the right contract and comply with the CAS Disclosure Statement Direct or Indirect or G&A Fee is based on ―Target Cost‖ Proposal and negotiations determine target cost and are used to establish fee Firm Fixed Price Used when costs can be estimated with good Capture Team Success assurance e.g., based on recent production cost experience You do a defined job and get a defined payment Can be used for large production contracts Risks and opportunities are high Fixed Price Level of Effort Capture Team Success Used for small contracts or task orders For example – 200 hours @ $200 / hour. Bill hours at a rate. Your billing rate includes your profit. Subtleties about engineering hours vs. business hours Ensure contract is clear. Risk vs. Reward Cost reimbursable contracts inherently have limited Capture Team Success risk for the contractor. They are most frequently used for new technology and research and development contracts – not production. Fixed price contracts involve risk. The contractor needs to deliver a good product no matter what the cost. Profit opportunities may be greater on FP contracts than on cost reimbursable. Contract Modifications The Government uses the ―Changes‖ clause to add or Capture Team Success delete work Must be in scope of original contract Requires and ―equitable adjustment‖ to contract cost, fee, period of performance, schedule, place of delivery, etc. Change proposals are submitted and negotiated on a fairly routine basis What Is A Winning Proposal? A business proposal is a written offer from a seller to a Capture Team Success prospective buyer. Business proposals are often a key step in the complex sales process--i.e., whenever a buyer considers more than price in a purchase. There are three distinct categories of business proposals: formally solicited, informally solicited, and unsolicited. Having defined a proposal, what is a winning proposal? What are the characteristics of the proposal, the organization, and the solution which make it attractive to evaluators? What Is A Winning Proposal? Winning proposals have four characteristics in common: Capture Team Success The supplier fully understands the needs and problems. The supplier knows how to satisfy the needs or solve the problems and offers a suitable plan. The supplier is well qualified by virtue of experience and resources, including personnel, to carry out the proposed plan; and The price asked is reasonable and is within the organization's budget. Governing Laws, Regulations & Policies Legislation Capture Team Success Truth in Negotiations Act (TINA) Anti-Trust Laws Foreign Corrupt Practices Act False Claims Act Regulations Federal Acquisition Regulations (FAR) Cost Accounting Standards (CAS) Policies Government directives Armed Services Pricing Manual (ASPM) Defense Contract Audit Agency (DCAA) manual Capture Team Success PWR Firewall Training PWR Firewall Training Definition of a Firewall: Capture Team Success 1. A process or procedure that limits the flow of information from, to, or within PWR. 2. It is used primarily where unrestricted access to the protected information might introduce bias or confer an actual or apparent unfair competitive advantage to PWR. 3. A firewall procedure specifies both how protected information will be treated and with whom authorized PWR employees (or consultants) may share the information. PWR Firewall Training Capture Team Success Types of Firewall Work Restrictions: • Duration of the Firewall • Physical Segregation of Work • Electronic Segregation of Information • Past Employment Restrictions • Future Work Restrictions • Information Marking Requirements PWR Firewall Training Firewall Procedure/Process: Capture Team Success 1. A firewall assures compliance with the terms of a Nondisclosure Agreement (NDA) with another company. – A NDA assures that PWR will use that company’s proprietary information only for the purposes identified in the NDA – A NDA assures that only a defined group (e.g., employees and possibly contract labor and/or consultants) who have a need to know the information will have access to that company’s proprietary information. PWR Firewall Training Firewall Procedure/Process (cont): Capture Team Success 2. A firewall is appropriate when a Boeing organization is involved in assisting an agency (or other customer) to define the requirements for a program, and another organization within PWR is likely to bid for the program. - FAR 9.505-1 or 9.505-2 may prohibit PWR participation in the subsequent procurement because of the concern that PWR might craft the requirements so as to give it an advantage against potential competitors. 3. A firewall may arise where PWR is a participant on more than one team competing for a contract. - It assures that the PWR IPT’s supporting the different teams bidding for the contract do not share information about their team’s proposal with persons supporting any other team. PWR Firewall Training PWR Management Responsibilities: - Manages the business. Capture Team Success - Primarily handles resource, commitment, programmatic issues. - Assures even and level competition. - Programmatic and technical oversight. - Executive communication with the customer – primarily commitments. - May have knowledge of multiple customer’s projects – must firewall internally. - Must restrict information given to the firewalled teams. - Generally will limit information received from the firewalled teams to a need to know basis. - Should not participate in the development of the customer’s strategy, concepts, program plans or any other competitive aspects of his/her proposal/project. PWR Firewall Training Firewalled Team Responsibilities: - Manages the Project/Program. Capture Team Success - Translates Prime requirements into specific PWR technical system requirements and requests. - Handles All Programmatic, Technical, and Business Communication with the customer. - Communicates technical and business data to the customer. - Communicates task requirements and outcomes with process support personnel outside the firewall. - Controls (i.e. filters & sanitizes) information flowing to both the customer and the non-firewalled process area support personnel to assure that competition sensitive data, including both hard data and abstract information is not transferred. PWR Firewall Training Non-Firewalled Process Area Support Team Responsibilities: Capture Team Success - Defines task assignments with PWR Firewalled interface - Performs & reports task outcomes to PWR Firewalled interface - Does not communicate with the customer - Should limit work on more than one customer to the extent possible PWR Firewall Training Restrictions: Non-firewalled personnel SHALL NOT perform or participate in Capture Team Success the following: - Development of the customer’s strategy, concepts, program plans or any other competitive aspects of his/her proposal/project. - Generating, reviewing, or negotiating the customer’s proposal, or of PWR’s proposal to the customer that would be embodied by the customer’s proposal other than to provide generic PWR data such as past performance, etc., or to review specific portions of PWR’s proposal that clearly are not competitive discriminators between the customer’s proposal (e.g. PWR pricing data). - Push suggestions that could ―cross pollinate‖ a customer’s ideas to other customer or PWR interfaces or otherwise influence a customer’s competitive position on knowledge of another customer’s proposal. PWR Firewall Training Capture Team Success Third Party Proprietary Information When PWR is working cooperatively with another company, the obligation in the firewall should be limited to protect proprietary information of the other party. - Even where the information is not marked, however, it must be treated as protected if its contents are clearly proprietary information, such as financial information or trade secrets. - This information should not be shared with another part of PWR or any other defined group. What is a Non Disclosure Agreement (NDA) Capture Team Success A Non Disclosure Agreement is an Agreement between the Parties that: Protects trade secrets and proprietary information Defines rights and obligations of parties with respect to information being shared Describes nature of information, permitted use, type of protection, how long will the information be shared, with whom, etc. An NDA is a legally binding contract when executed by all parties When is An NDA Needed Capture Team Success NDAs are used generally when disclosure of Proprietary Information will take place in the course of discussions prior to execution of a definitive business contract. Prepared in connection with specific programs or business or technical discussions Non Disclosure Agreement (NDA) Capture Team Success An NDA is not required when the exchange of data occurs under the scope of a purchase order (PO) that incorporate proprietary information protection in the Pratt & Whitney Rocketdyne, Inc. (PWR) General Provisions unless there is a PWR/program requirement to obtain a separate agreement even though PO includes the proprietary information. Capture Team Success PWR Proposal Process Pre-RFP Planning Identify customer needs/funding constraints Understand market needs Capture Team Success Identify competition and determine their approach Evaluate your strengths & weaknesses vs. competition & customer expectations Identify your proposal team and sub-tier suppliers Generate capture strategy - win factors, themes Identify key personnel -capture team (Engineering processes, OPS, C&P, QA, others as needed) Identify requirements Develop PA budget for management and team (inchstone level) Identify IR&D/capital requirements Proposal Process Programs Program Manager Program Manager Program Manager Marketing Contract Manager Project Engineer Project Engineer Business Plans Cost Volume/Business Cost Volume/Business Cost Volume/BM Should Cost Manager Manager Mgr. Market Develop Program RFP Function Capture Team Success Proposal RFQ Price Definition Overview Strategy Establish: Prepare: Present/Discuss: • Due Date • Program Plan • Program Approach • RFP Requirements • Program Schedule • Pricing Strategy • Deliverables/MIR’s, T&C’s • Test Plan • Estimating Assistance • Estimating Methodology • Bill of Materials (M/B) • Identify “Similar To” • “Similar To: Programs • Work Breakdown Structure • Make/Buy • Resp. Assignment Matrix • Affordability/DTC Goals Program Manager Technical & Profit Analysis Project Engineer Cost Volume Risks and Estimating & Pricing Function Directors/VP Cost Volume Mgr. Manager Opportunity, Functional Mgr. Publish Detail Estimating Functional Review Capital Investment Risk Assessment/ Cost/Technical • Task Descriptions • Evaluate Estimating Complete Cmt Review Cycle Commitment and Mgmt • Estimate • Access Cost Risk Technical •Est. & Pricing Volumes • Basis of Estimates (if any) Evaluate Risk Volume •Contact Mgmt. •Assume Risk Pricing •Revise Estimate Actions & •Executive Mgmt. •Rescope Prepare Program Manager • Labor Standards Substantiation (-3’s) Cost Contract Manager • CERs • Labor Volume Cost Volume Mgr. • Detail Estimates • Parametrics • Material Support • “Similar To’s” • ODC •Audit • Round Table/ •Fact Finding Expert Opinion •Negotiations • Supplier Quotes • P.O. History • Catalog Prices Proposal Process Overview Capture Team Success Analyze the Proposal Requirements Read the request for proposal (RFP) Understand the statement of work (SOW) and proposal type Capture Team Success Generate ground rules and assumptions Proposal preparation guidelines Due date Required volumes Page and print specifications Evaluation criteria Technical description (SOW) Expected program length Expected program cost Procurement contract type Deliverable items (hardware, data, etc.) Create and generate a compliance matrix early Think of the RFP as a Quiz Capture Team Success Answer the questions clearly and explicitly What? -- SOW/WBS/program plan How? -- Baseline/tech approach When? -- Master program schedule Who? -- Organization/RAM Where? -- Facilities Why? -- Discriminators, themes, trades Beginning of the Proposal Process Proposal manager identified Review available data Capture Team Success Capture strategy Program overview MIRs or selection criteria - Win factors, themes Develop WBS & dictionary SOW & specifications Design-to-cost targets Program schedule Risk management plan Business plan (Program Performance Plan) Establish technical concepts Program organization Make/buy plan Hardware list Test plan Determine profit objective Proposal Compliance Capture Team Success Developing Requirements Matrices Proposal Receipt RFP receipt by PWR Contracts Capture Team Success Accounting Established Proposal Plan of Action Developed Proposal Manager Calls Kick-off meeting Proposal Team begins the Requirements Review and Shred Systems Integrity develops Supplier Flowdowns Purpose Ties proposal response to requirements and Capture Team Success evaluation criteria Flows RFP requirements to proposal outline Tool for establishing proper page count Ensures compliance with proposal requirements How Matrix Developed Capture Team Success We use a macro developed in house that parses a Word document into an Excel spreadsheet* We then use the spreadsheet to develop an annotated proposal outline with descriptive headings, section assignments, page allocations, graphic notes, themes, writing assignments/instructions, and linkages to customer’s evaluation criteria *This is an inexpensive option, but there are products available on the market that will parse RFPs. See APMP.org Requirements Matrix Each requirement should be a separate line Most Important Requirements (i.e., Evaluation Criteria) drive page allocation Capture Team Success DRD Matrix Develop a separate matrix for Data Requirements Deliverables Capture Team Success How Suppliers Can Help We recommend that Suppliers use a similar principle in reviewing PWR Requests for Proposals or Quotations Capture Team Success Often, we have tried many ways of identifying key/critical elements needed within the proposal and with rare exception they’re missed In the past, we have bolded the key/critical elements, developed checklists, etc. to no avail. We welcome any ideas on how to get our RFP’s read by the Suppliers!! Capture Team Success Generating the Proposal Proposal Preparation Capture Team Success Proposal Outline Themes Mockup Technical & Cost are to be Prepared Together Approach must be Life Cycle Oriented PWR Affordability Process Proposal Schedule Proposal Steps Customer RFP Requirements RFP- Ground-Rules and Assumptions Capture Team Success Statement of Work Terms and Conditions WBS Design to Cost (DTC) Targets Work Organization & WBS Task Description Integrated Program Master Program Plan Schedule/Major Milestones and Activity Schedules Work Decomposition Make/Buy Contract Data Requirements/Data Task Planning Requirements etc Scope Risk and Opportunities Assess/Identify Identify R&O’s when Estimating Scope for Reduction No Estimate Development Estimate Development Identify Historical References or other Basis Hrs, mat’l, ODC for Estimate – Data Driven Estimates Price Tasks within Within WBS Target Assessment – 1st Pass, DTC Yes Price Tasks Compare to Target Target? Price Task Proposal Planning Steps Develop: Capture Team Success Proposal schedule Executive/process management review plan Volume outlines Proposal responsibility assignment matrix Identify attendees to kick-off meeting Identify relevant program history from which to base estimates Proposal ground rules & pricing instructions RFP compliance matrix Plan proposal kickoff meeting Study the RFP, Then Create the Outline Write the outline to match the RFP What the customer asked for, the way they asked for it Capture Team Success Redline the RFP–then write your outline Analyze the similarities and differences in: Instructions, Evaluation Criteria and Technical Description/requirements Choose a technique to address all areas: Embed one section's requirements within another Cross reference to account for all requirements Coordinate outline with compliance matrix Proposal Kick Off Meeting (PPOA) Brief proposal team operating groundrules Capture Team Success Brief Program requirements, MIR’s, Potential Competitors etc Distribute SOW, specifications, WBS etc. Brief proposal outline, mockups, and executive summary Distribute schedules, RAMS, budgets (hours/task for each person) Communicate Make/Buy plans (ie for the Bill of Material) Distribute DTC goals for each IPT Communicate Tech Volume and Cost Volume requirements Identify outstanding information and action plan Technical and Cost are Prepared in Parallel Technical Proposal Phases Capture Team Success Capture Planning Outline Mockups Draft Final Proposal Cost Design Basis of Preliminary Final Targets to Cost Estimates Cost Run Cost Run Cost Proposal Phases Each Technical Proposal phase has a counterpart Cost Proposal phase The Proposal Schedule (30 days) Must be complete prior to kickoff meeting Should include: Exact calendar dates based on RFP data Capture Team Success Kickoff Preparation Include capture team products Proposal input preparation periods Final Outline Mockups Drafts Final revisions complete Pricing schedule Final cost targets Manpower inputs/BOEs Subcontractor/purchased material bids Final pricing runs Reviews Printing/Shipping Make it as detailed as practical Update and status every day–highlighting concern areas Fact-Finding PWR Pricing acts as lead to support ALL audit activities Provides DCAA, etc. With proposal copies Capture Team Success Coordinates all meetings between DCAA & PWR staff Documents all issues and responses Attends exit conference CA acts as lead to support all fact finding activities Coordinate all meeting between customer & rd Documents all issues and responses PM & functions support both as need Negotiations PWR Legal/CA acts as lead to support ALL Negotiation activities Capture Team Success coordinate all meeting between customer & RD documents all issues and responses exchanges offers & counter offers Summarize cost impacts for Management PM & functions support both as need Pricer updates C&P data & coordinates disclosures w/CA Pricer performs sweeps & certs if applicable CA completes memo of negotiations Capture Team Success Make/Buy Make or Buy Planning Process Executive Mgmt responsible will co-Chair or appoints Capture Team Success Program Manager to co-Chair the Make/Buy Committee Operations Executive Mgmt will co-Chair or delegate to a subordinate manager the Make/Buy Committee Make/Buy Committee consists of: Finance Supply Management (Committee Secretary) Engineering Quality Assurance Business Development Contracts Human Resources Small Business Administrator Make or Buy Planning Process The Make/Buy decision making process divides parts and Capture Team Success processes into the following three categories: Must Make: Hardware consisting of details, subassemblies and assemblies that historically demand extreme attention & close coordination between functions. Must Buy: Hardware such as raw material, castings/forgings, catalog or industrial hardware that PWR cannot produce. Can Make or Buy: Hardware not contained in the above categories and could be made in house or procured. Typically, the majority of Program requirements fall into this category. Make or Buy Planning Process Capture Team Success A Bill of Material (BOM) or conceptual BOM is developed by the Integrated Product Team and/or Engineering. The Integrated Product Teams, based upon recommendations from PWR Operations, and in conjunction with their Industrial Systems Integration Teams performs an assessment of capacity, capability, overall costs required to support the program and develop a sourcing strategy. Make or Buy Planning Process IPT presents the program sourcing strategy of make or buy recommendations to the Make/Buy Committee Capture Team Success The Committee is responsible for sourcing material in a manner the best utilizes PWR Operations’ and Supplier resources. Prime consideration is given to quality, cost and schedule requirements The Committee reviews the Program Sourcing Strategy considering core competencies, cost, schedule, risks, requirements, Small Business objectives, etc. A Specific Program Make/Buy Plan developed & Approved Plan integrated into the Program Execution Plan Make/Buy Analysis Unique Components Strategic In-house Make (LTA’s, Strategic Alliances, Etc) (Must Make) Capture Team Success Uniqueness Buy – Common Not a Comp Adv. Competitive Advantage (Can Make/Can Buy) Competitive Advantage Supplier Risk Assessment Risks Capture Team Success 5 High 6 Likelihood of Occurrence 4 Medium 4 3 4 3 7 1 2 6 5 2 Mitigation Status 1 5 Low 3 7 1 2 3 4 5 Original Consequence of Occurrence Change Manufacture or Purchase Planning Process Internal Process to decide: Sufficient capacity and support to core competencies Capture Team Success exist to make product If not, recommend outsourcing Decision to be in concurrence with the PWR-Operations Strategic Plan Similar to Make or Buy – Committee formed to review same as Make or Buy Normally convenes after Prime Contract Award to PWR Analysis performed to consider Program schedules, cost, shop load and process capabilities and risks Upon analysis completion, subcommittees present recommendations to Committee Committee approves and documents manufacture or purchase plan Capture Team Success Types of Estimates Types of Estimates Within the proposal process, various kinds of estimates and quotations are prepared as defined in the following text. These definitions are Capture Team Success consistent with those published by the Society of Cost Estimating and Analysis (SCEA) and DoD. Cost estimates are primarily prepared to respond to solicitations, however; they are also prepared to support technical studies, life cycle cost (LCC), cost as an independent variable (CAIV), "what if exercises, and design trade studies. Budgetary and Rough Order of Magnitude(ROM) - These estimates are for comparative studies on new programs and long-range procurement planning for established programs. Both the customer and PWR use them for analysis, preliminary program planning and scheduling purposes, and establishment of fund allocations. These estimates are usually prepared from minimum design and work statement information. Planning, budgetary, and rough order of magnitude (ROM) estimates do not bind PWR to perform a contract within a given price. However, because of the frequent reliance on these cost/prices for fiscal year funding and procurement planning and scheduling, considerable effort is made to achieve accuracy in their preparation. Contingencies may be added to these estimates to cover uncertainties. Types of Estimates Firm Quotations - These are prepared to definitize the price of a program or work package. When definitized, the price is a binding obligation on Capture Team Success PWR. Estimates for firm quotations are normally based on well-defined statements of work and plans, but can also be based on minimum design and work statement information. Not-to-exceed (NTE) - A not-to-exceed (NTE) estimate is a firm and binding obligation by PWR to perform at a cost to the customer not greater than the NTE quotation, assuming no change in the contractual baseline. NTE estimates are generally quoted to a customer when the statement of work and other conditions are definitive enough to establish a firm baseline. A contingency is often added to allow for definition and cost estimating uncertainties. Not-less-than (NLT) -A not-less-than (NLT) estimate is a firm credit estimate by PWR and includes all requirements of an NTE proposal except for the ensuing commitment, which will not be less than the NLT quotation. Capture Team Success RFP/RFQ Process RFQ-RFP Training Capture Team Success Difference of RFP and RFQ and RFI Difference of RFP and RFQ and RFI Capture Team Success Definitions Types of solicitations Evaluation criteria SPI Process Difference of RFP and RFQ and RFI Capture Team Success Request for Proposal (RFP) Request for Quote (RFQ) Request for information (RFI) Difference of RFP and RFQ and RFI Capture Team Success DEFINITION of RFP: Request for Proposal (RFP) - A solicitation to prospective suppliers where the supplies and/or services described are highly complex, undeveloped products and/or services, requiring a response detailing technical and management expertise and a proposed design/development approach. Difference of RFP and RFQ and RFI DEFINITION of RFQ: Capture Team Success Request for Quotation (RFQ) - A solicitation to prospective suppliers wherein the requirements described are existing, ―off-the-shelf‖ equipment, build-to-print parts with known specifications, common services, or otherwise sufficiently defined so that the award can be made on the basis of price and past performance from the responsive bidders. Difference of RFP and RFQ and RFI DEFINITION of RFI: Capture Team Success Request for information (RFI) - is a standard business process whose purpose is to collect written information about the capabilities of various suppliers. Normally it follows a format that can be used for comparative purposes. An RFI is primarily used to gather information to help make a decision on what steps to take next. RFIs are therefore seldom the final stage and are instead often used in combination with the following: request for proposal (RFP), and request for quotation (RFQ). See Sample RFI – NASA Display of Shuttle and SSME Types of solicitations Capture Team Success A solicitation is a document, sent to prospective contractors by a Government agency, requesting the submission of offers or information. This is a generic term that includes the following types of solicitations: Invitations for Bids (IFBs) Requests for Proposals (RFPs) Requests for Quotations (RFQs) Invitation for Bids (IFB) The Invitation for Bid (IFB) is the solicitation document used in Sealed Bidding procurements. Capture Team Success IFBs must describe the Government’s requirements clearly, accurately, and completely. It includes all documents needed by prospective bidders for the purpose of bidding plus all terms and conditions of the prospective contract (except price) so that all bidders will submit bids on the same basis and award can be made solely on the basis of price and price-related factors. FAR 14.101. You will use this type of solicitation when your requirement is definitive, pricing is stable, competition is expected, and there is not a need to hold discussions with any potential bidders. Buyer’s Role in the RFQ/RFP Process Upon receipt of a requirement the Buyer reviews and Capture Team Success determines if the originating organization(s) has furnished complete specifications, blueprints, statements of work (SOW), description of item(s) to be purchased, etc., so that requirements can be adequately defined in the RFQ/RFP and any resulting Purchase Order (PO). The Buyer will contact originating organization(s) or Integrated Product Teams (IPTs) if additional data is required. RFQ Structure The Buyer is responsible for the entire content of the Capture Team Success RFQ. The RFQ should be structured in such a manner to assure that all requirements are clearly delineated on the RFQ and that the supplier clearly understands the requirements. In some cases, the Buyer may need to provide additional clarification of the requirements to assure complete understanding by the supplier. In such cases, the Buyer is responsible for providing consistent information to all solicited suppliers. TINA, CAS, SB Plan Capture Team Success REMINDER: During solicitation phase for Government procurements $500K and above, consider the applicability of: TINA - $650K (FAR 15.403-4) CAS - $650K (FAR 52.230-2) SB Subcontracting Plan - $550K (FAR 52.219-9) Supplier Steps To Providing A Responsive Proposal Do’s Capture Team Success Read the RFP Instructions Contact the Buyer regarding RFP questions Meet the RFP deadline and provide a Proposal which meets the RFP instructions Protect PWR proprietary data Protect Export controlled data Don’ts Contact technical personnel for questions during the proposal process unless Buyer instructed Wait to the last minute to ask for an extension Continually ask for extensions Request for proposal Key objectives Capture Team Success Obtain correct information to enable sound business decisions. Ensure that all suppliers have an equal understanding of the requirements. Enable a broader and creative range of solutions to be considered. Responsive Bids allow PWR purchasing to evaluate proposals to obtain a favorable deal. Evaluation Criteria Capture Team Success Responsive Bid Price Delivery Technical Solution Past Performance (SPI) Financial Stability Agreed Upon Terms & Conditions Steps In The RFP Evaluation Process Step One: Review All Proposals Capture Team Success Step Two: Determine Status. Determine if proposal is ―responsive‖ or ―non-responsive‖ Step Three: Score Proposals based on criteria established in the RFP Step Four: Discuss Proposals. The evaluation committee reaches a ―unified understanding‖ of the criteria and corresponding responses. Individual scores may be adjusted at this point based on discussion. Tally results. Step Five: Interview. This step is optional. This is an opportunity for both sides to explain their viewpoints Steps In The RFP Evaluation Process Step Six: Discussion/Negotiation. This step can be Capture Team Success optional, but may be required. Step Seven: Best and Final Offer. This is optional. Once a BAFO is received the committee will evaluate it in the same manner as the original proposal. Step Eight: Recommendation. Written recommendation includes scores, justification and rationale for the decision. Step Nine: Management Review of committee scoring and justification. If accepted, the winning proposal will be used to roll up in PWR proposal or award PO to supplier if using company funds or after PWR is awarded a contract. Capture Team Success Source Selection Proposal/Source Selection 1. Receipt of Proposal Capture Team Success 2. Best Value Proposal Evaluation Quality Performance Schedule Performance Price Non-recurring costs impact to overall price evaluation Proposal Evaluation Tool (SPI Tool) Terms & Conditions 3. Technical Evaluation (as required) 4. Source Selection Board (as required) Source Selection Capture Team Success PURPOSE AND SCOPE: To define the process for fairly and ethically evaluating and selecting best value sources of supplies and services. Competitive Procurements Non-Competitive Procurements Source Selection process PWR Buyer Criteria – See PWR 5.3.2 Capture Team Success Selection Process Competitive (Best Value – SPI evaluation) Non-Competitive (Determination of reasonableness) Fact-finding Negotiation Award Evaluation of Quotations or Offers Many source selections are relatively straight forward and Capture Team Success may be completed primarily on the basis of price competition. Other more complex source selections require an assessment of other factors. Best Value Analysis - An evaluation technique based upon an integrated assessment of a supplier’s technical, management, cost or price, and schedule elements, as well as the supplier’s past performance record with PWR, intended to select the source offering the greatest overall benefit in response to the requirement. Lowest Evaluated Proposal Capture Team Success • Price Analysis based on comparing two or more proposals using the Supplier Performance Index (SPI) model. SPI Process Capture Team Success • A formula used to evaluate suppliers’ delivery and quality performance. • The model is weighted: 40% SDR (Supplier Delivery Rating) and 60% SQR (Supplier Quality Rating). SPI Calculation The Supplier Performance Index (SPI) is calculated Capture Team Success as follows: Here are some sample calculations: 2 – ( SQR * .60 + SDR * .40) = SPI 100 SUPPLIER A 2 – ( 0.588 + 0.400 ) = 1.012 SUPPLIER B 2 – ( 0.582 + 0.388 ) = 1.030 SUPPLIER C 2 – ( 0.528 + 0.352 ) = 1.120 How is the SPI used? PWR buyers use the SPI as the primary factor in their evaluation of supplier proposals for inspected items. The example below Capture Team Success illustrates how it works. SUPPLIER A SUPPLIER B SUPPLIER C QUOTED PRICE $1,035.00 $1,050.00 $1,023.00 multiplied by SPI 1.012 1.03 1.12 --------------- ------------- ------------- EVALUATED PRICE $1,047.42 $1,081.50 $1,145.76 Supplier A could be selected for the award, even though their quoted price was not the lowest. The closer a supplier’s SPI is to 1.000, our experience indicates, the more likely they will meet PWR’s quality and delivery requirements. Fact-Finding Capture Team Success PWR Fact-Finding Questions will be covered in our next section Certified cost and pricing data will be discussed in the next section Capture Team Success PWR Evaluation Criteria and Process Agenda Capture Team Success PWR Price / Cost Analysis Fact-Finding PWR Technical Evaluation of Supplier Proposals Funding Profiles, Ogives and PTL Capture Team Success PWR Price and Cost Analysis Greg Manley July 2009 Why Do We Need a Cost Analysis? Capture Team Success For government contracts, the Truth in Negotiations Act (TINA), requires the submission of cost and pricing data: When the proposed price is expected to exceed $650,000. When the pricing of a change or modification to a contract exceeds $650,000 For commercial contracts a cost analysis is required: To comply with company procedures. Because it makes good business sense. What is a Price Analysis? Capture Team Success A price analysis is the process of examining and evaluating a prospective price by comparing the price with other available pricing Typical price analysis techniques include: Competition Catalog/market pricing Comparison to other costs (historical, similar-to, in-house estimate, parametric/cost estimating relationships) Value/visual analysis What is a Cost Analysis? Capture Team Success A cost analysis is the review and evaluation of the separate cost elements and proposed profit of a supplier’s cost or pricing data. It is the judgmental factors applied in projecting from historical data to the estimated costs to form an opinion on the degree to which the proposed costs represent a fair & reasonable the cost. Both of the above items assumes reasonable economy and efficiency Overall Cost Analysis Process Capture Team Success Receive Request Preliminary for Cost/Price Start Field Support Negotiations as Supplier SOW Fact Find Analysis Fact-finding Member of the Team Development Questions Receive Issue Cost Draft & Request DCAA Technical Analysis Submit RFP Assist Audit* Evaluation Position to Supplier Receive Request Receive Complete Documentation Supplier Technical Clarification Fact-finding Sign-off Proposal Evaluation Responses from Supplier Approve Cost Support Pre- Analysis Plan Receive DCAA negotiation (CAP)** Assist Audit Review Report* * Only on Government Contracts ** Optional Note: Some of these tasks will overlap or will be done in parallel with other tasks. DCAA Assist Audit Capture Team Success In the event a subcontractor denies access to their cost & pricing or rate data the Cost Analyst should request DCAA audit or rate verification The DCAA audit request is initiated by submitting a request in writing to the cognizant ACO, along with a copy of the subcontractor’s proposal. The request will identify the supplier, contract number and any specific audit needs, i.e. Material, labor hours, rates, etc. or just direct and indirect labor rates A report will be released by the DCAA to the cognizant ACO The ACO will release the report to the requesting Cost Analyst The DCAA’s findings will be utilized in the final cost analysis report. Cost Analysis Process The Supplier Management Agent/Buyer is responsible for: Capture Team Success Request cost analysis from the Finance Cost Analysis if thresholds are exceeded Requesting additional information from the supplier (as required) to complete a cost analysis Supporting fact find (as required) Responsible for understanding the logic/details of the cost analysis as completed by the cost analyst Preparing procurement board/memo for review with management. Learning Curve Rate of Improvement Capture Team Success 100% curve slope = no learning Robots, 100% automated (very rare) Rate is less when most of the work is done by machines (flatter slope) As a task is repeated, the more efficient the task becomes, due to operator efficiency, tool design, method and process improvements, etc All areas of the enterprise contribute to the overall performance Learning Curve Capture Team Success The greater the amount of manual labor, the greater the opportunity for improvement (steeper slope) The steeper the curve slope (lower curve %) the greater the rate of improvement. Learning Curve Determining the Curve Slope First, perform regression analysis of the actual data. Capture Team Success If the projection produces an unrealistic answer, the correlation is poor, or you have only one data point, then: Use a force curve using a single data point based on a historical curve slope for a similar item. If no historical slopes are available, then: Then use the following rule of thumb curve slope percentages: Sheet Metal 95% Machining 90% NC Machining 95% Assembly 85% There are published lists of curve slope percentages. Learning Curve Capture Team Success Advantages Universal tool Projects continuous improvement Uses past performance to project the future Able to find line of best fit Disadvantages Need to be aware of make/buy and process changes. Must have data to develop. Manufacturing problems are included in the historical data base (rework, scrap, etc.) Quantity Adjustment Capture Team Success An attempt to normalize (adjust) the historical data base (as it relates to procurement quantities) to a constant base, in order to account for large changes in quantities When the item being procured has a large amount of fixed cost or is a common commercial item, then that quantity break is appropriate Curve would be 100% with no fixed cost As fixed cost increases, the curve slope % decreases. Material Material–purchased items/services which become part Capture Team Success of the final, deliverable product Four common categories of material are as follows: Raw material—requires further processing. Subcontracted Items—assembled parts that have been offloaded to another supplier for manufacture. Outside processing. Purchased parts—parts processed from raw material that are bought complete. Material Capture Team Success Bill of Material (BOM) The engineering drawings are the source of the BOM. An itemized listing of all the material items/services that are required to build a product. Determine the best value supplier and associated cost for the material item or serves. Typically the BOM is evaluated by validating a sample of the total parts or BOM. Rate Verification Forward Pricing Rate Agreement Capture Team Success A written agreement negotiated between a contractor and the government to utilize certain rates or prices during a specified period in pricing contracts or modifications Represents reasonable projections of specific costs that may not easily be estimated for, identified with, or generated by a specific contract May include rates for labor, indirect costs, scrap, obsolescence, etc. Rate Verification Capture Team Success Government audits Accounting and/or technical audit performed by a government agency Government accounting audit is requested when PWR does not have audit rights Government technical audit is required when supplier will not provide cost/pricing data to PWR (i.e., Labor hour history). Capture Team Success Fact-Finding PWR Fact-Find Questions The following data is the standard supporting documentation the Cost Analysis Department requests when certified cost and pricing data is required: Capture Team Success A summary description of the operation of the supplier's cost estimating system (New Projects & Existing/Repeat Projects). Cost breakdown based upon supplier's estimating system (Non- Recurring/Recurring-D.L.; Overhead; Material; Other Direct Cost; G&A; Profit, etc.). Provide basis of estimate (actual, history, estimate, etc.) for labor hours Priced Bill of Material a. Explanation of method and data used by the supplier in preparing the BOM b. Explanation of contingencies, if any. Explanation of method and data used by the supplier in preparation of direct labor hour forecast for this purchase order. Direct labor hour forecast by month and by unit or lot if respective production is involved. Basis for forecasting direct hourly rates (Engineering, Manufacturing, etc.). PWR Fact-Find Questions Basis for forecasting burden rates (Engineering, Manufacturing, etc.) Actual Burden rates experienced by year for the previous two calendar years. Capture Team Success Negotiated burden rates experienced by year for the previous two calendar years and the Government agency with whom such rates were negotiated (i.e. DCAA) - if applicable. Analysis of burden pools by account and by year for the previous two calendar years classified by fixed and variable costs. Total of direct labor hours or dollars expended by year for the previous two calendar years. Forecast of direct labor hours or dollars for the period to be covered by and including the purchase order together with an outline of the basis of the forecast. Actual sales backlog at the beginning of the previous and the current calendar year. Profit substantiation. Was a learning curve applied? What type of curve is used (CUM. AVG. UNIT, etc.) PWR Fact-Find Questions How many hours were proposed for the first unit? Are there any contingencies in supplier's proposal for labor hours? Was there any learning curve applied to material costs? Capture Team Success Provide support documentation for "driver" items representing 80% of material cost (i.e. Quote; P.O.; Inventory, etc.) Does proposed material provide for mortality? If so, applicable to all items? Does material cost include a handling charge or other burden application? Are there other contingencies in supplier's proposed material cost? If yes, please describe. Basis for forecasting G&A rate a. Actual G & A rate experienced by year for the previous two calendar years b. Negotiated burden rates experienced by year for the previous two calendar years and the Government agency with whom such rates were negotiated (i.e. DCAA) - if applicable c. Explanation of the difference between a & b - if applicable d. Analysis of G & A pools by account and by year for the previous two calendar years classified by fixed and variable costs. PWR Fact-Find Questions Capture Team Success Other Cost - Provide documentation to support other cost items if applicable. Does the proposal contain any unallowable cost (FAR: 31.205)? If so, please identify. Provide documentation (actual cost or estimated cost at completion) on current or previous PWR procurements of the same or similar item. Capture Team Success PWR Technical Evaluation of Supplier Proposals PWR Technical Evaluation Criteria Technical Evaluations of supplier proposals form the foundation for subsequent price negotiations The Technical Evaluation consists of an evaluation of the supplier’s Capture Team Success technical and cost proposals The Technical Evaluation of the supplier’s technical proposal is a comprehensive and responsive evaluation of the criteria set forth in the solicitation The Technical Evaluation of a supplier’s cost proposal is a review and assessment by qualified technical personnel of the following points: labor mix appropriateness including number of hours and labor category proposed; type and quantities of material proposed; special tooling and facilities proposed; and, reasonableness and appropriateness of proposed other direct costs (ODC’s). Capture Team Success Ogives and PTL/Funding Profiles PWR Ogive Definition Capture Team Success An Ogive is a frequency distribution of numerical data Ogives are normally represented on bell curves Example: If you are plotting 100 hours on a 20/80 Ogive 20 hours (100 x 20% = 20) would fall on the left side of the bell and 80 hours (100 x 80% = 80) on the right side Valid PWR / ProPricer Ogives: 10/90, 20/80, 30/70, 40/60, 50/50, 60/40, 70/30, 80/20, 90/10 PWR / ProPricer will spread the data between the start / stop months based on the selected Ogives Capture Team Success Program Termination Liability (PTL) Background Capture Team Success PWR Estimating Systems Manual Termination Liability Topics What is Termination Liability Termination Liability Funding Termination Costs Termination Cost Risk Coverage Special Termination Cost Clause Estimating Termination Costs Responsibility Capture Team Success Estimating and Pricing must work with Contracts/Legal Services and Program Management to ensure that costs resulting from a potential termination are either a. Included in requested contract funding and submitted in the cost proposal. b. Covered by appropriate contractual language (such as a Special Termination Cost Clause). c. Accepted by management as potentially unrecoverable costs. What is Termination Liability? Termination liability is the maximum amount the Capture Team Success Government will reimburse a contractor if a contract is terminated. It includes cost for contract work that has been incurred up to the termination date plus termination cost. In the case of a multi-year contract terminated before completion of the current fiscal year, termination liability includes costs for current year contract work prior to the termination and termination costs for both the current and out years. Termination Liability Funding Capture Team Success For incrementally funded contracts, the contractor usually provides the Government an estimate of the funds required to cover the anticipated contract work plus enough funds to cover termination costs (not covered by special contract clauses) for each period of the contract. The Government will allocate funds to the contract for the current contract performance period based on the funding required. Failure of the contractor to adequately forecast termination costs and include them in the funding requirement may result in inadequate funds being made available to cover costs in the event the contract is terminated. If this situation occurs, the contractor may not be able to recover any incurred costs in excess of the funded amount. Termination Costs There are eight categories of termination costs. Organizations should use these cost categories to help identify potential termination costs in their program and make provisions to Capture Team Success minimize the financial risk associated with them. The eight different categories are Before termination costs. Costs continuing after termination (FAR 31.205-42(b)). Initial costs (FAR 31.205-42(c)). Loss of useful value (FAR 31.205-42(d)). Rental under unexpired leases (FAR 31.205-42(e)). Alterations of leased property (FAR 31.205-42(f)). Settlement expenses (FAR 31.205-42(g)). Subcontractor claims (FAR 31.205-42(h)). Termination Cost Risk Coverage Capture Team Success A upcoming chart displays the termination costs that have been historically covered in the PWR termination estimate (calculated by leading labor and material) or by the special termination cost clause. Costs in the potentially uncovered category are not addressed by either of these methods. If a contract has no special termination cost clause, or has significant costs in the potentially uncovered category, then these costs need to be separately estimated and added to the PWR termination liability line values, (see Figure 8.7-1) covered by additional contract clauses, or accepted as potential risks by management. Special Termination Cost Clause Government contracts and RFPs sometimes include a Capture Team Success special termination cost clause. This clause recognizes that if the contract is terminated there will be selected termination costs for which the Government will be obligated to provide additional funding. This clause usually contains a not to exceed funding limitation. Special termination costs are defined by Department of Defense (DoD) FAR Supplement 252.249-7000. Contracting agencies have different variations to the language covering the specific costs included in a special termination cost clause. Be sure to read the contract provisions to determine the costs that are covered by the clause. Estimating Termination Costs Estimating method-leading cost PWR typically calculates a termination liability line by leading costs for PWR labor, interdivisional labor, and supplier costs by set Capture Team Success periods. Lead times are dependent on the particular circumstances of the individual program. This technique includes in the current funding request, costs for future periods for which PWR may be contractually liable. An example of the approach follows. PWR labor, associated overhead, and other costs are set forward a specific period of time, usually one to three months. The interorganizational costs are set forward a month, similar to PWR costs. Subcontract, supplier, and direct material costs are set forward a specific period of time, usually three months. This offset covers the subcontractor's and suppliers expenditures that have been performed but not yet billed to the prime contractor. For major subcontractors termination liability lines should be requested and compared to the internal calculations. Adjustments to the internal subcontract values should be made if required. Estimating Termination Costs Capture Team Success PTL Recommendation Document current processes (All) Capture Team Success Investigate existing processes (DoD) Develop PTL tools (Review Questionnaire) Review Termination Liability costs with Programs Determine Program Termination Liability costs Price costs in the ProPricer System Review Termination Liability costs with Management Present Termination Liability values to customer PTL Process Description Typical Six Step PTL Process 1. Identify the following elements of PTL for the Program life from the Business Operations Budgeting System A.Total Expenditures (i.e. MPM/SAP extract) Capture Team Success B.Non Labor Costs, Budgeted value including common budget elements (i.e. G&A, COM and Fee) C.Labor Costs, calculated (mathematical difference of A less B). 2. Determine PTL values • Identify Labor and Non Labor lead values required to provide PTL coverage in months (Burn Rate) Before Termination Costs Costs Continuing After Termination (partial de-staffing only) Subcontractor Claims • Identify any PTL Special Termination Cost Clause values Costs Continuing After Termination Settlement Expense • Identify any potentially uncover costs Initial Costs Loss of Useful Value Rental Under Unexpired Leases Alterations of Leased Property 3. Calculate a PTL by GFY quarter 4. Review PTL values with Program Management 5. Report PTL values to Upper Mgmt 6. Review and update PTL values as required Capture Team Success Completing the PWR Proposal Wrapping Up the Proposal Create Draft /Prelim Run of Pricing Capture Team Success Write technical proposal based on approved mockup Submit remaining graphics for login and formatting Check pricing input for completeness and consistency to proposal plan Draft BOEs Submit preliminary cost data for Pricing/Finance Management Approval Review program plan / risk analysis / T&Cs/cost/business plan with approving executives Create Finished Proposal Capture Team Success Obtain IPT/process organizations approvals for cost estimates and BOEs Assemble final proposal Prepare briefing/documentation for executive approval Schedule Repro and Data Management effort Complete technical, management and cost proposal packages with all required backup Identify/confirm delivery arrangements Proposal Submittal Capture Team Success Submit for repro with instructions (include backup copies) Verify proposal completeness and prepare for delivery Deliver to customer Prepare for Orals and Fact-Finding Capture Team Success Team prepares for orals (if required) Team responds to CRs & DRs (if any) BAFO follows same steps as above PM coordinates PA (or other) budget to support post submittal activities Develop BAFO strategy based on above Negotiations PWR Legal/CA acts as lead to support ALL Negotiation activities Capture Team Success Coordinate all meeting between customer & RD Documents all issues and responses Exchanges offers & counter offers Summarize cost impacts for Mgmt PM & functions support both as need Pricer updates C&P data & coordinates disclosures w/ CA Pricer performs sweeps & certs if applicable CA completes memo of negotiation Capture Team Success Change proposal Change Proposals Changes occur for a variety of reasons/scenarios Capture Team Success PWR Customer driven change PWR generated change Supplier generated change Not all changes require an equitable adjustment Equitable adjustment can be schedule and/or price Adjustments can be increasing or decreasing Equitable adjustment changes generally are scope or schedule driven Terms & Conditions are not re-negotiable Change Proposals Not competitive Capture Team Success Scope/schedule changes can be incorporated via an undefinitized change notice (proposal & negotiations to follow) A formal RFQ/RFP may be sent by PWR TINA requirements apply (aggregate value, i.e., $350K increase + $300K decrease = $650K TINA change value) It is not an opportunity to ―Get Well.‖ The equitable adjustment must only consider the impact of the actual change. Change Proposals Pursuant to PO ―Changes‖ clause, supplier obligated to Capture Team Success place change notice into work. Proposal & Negotiation Process should be timely (FAR requirement to be complete in less than 180 days – PWR Goal is 120 days) Supplier is obligated to present PWR with a fully documented change proposal within fifteen calendar days of PO change receipt.
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