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Pratt & Whitney RocketdyneSupplier/Buyer Training

July 21, 2009

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Presenters

Ed Kasaba Greg Manley Gary Pedersen Jim Scarpati Mike Suever

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Supplier Proposal Training

This training is generalized in nature

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

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AGENDA

Disclaimer Mike Suever 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

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Proposal and Contracts Overview

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Customers

PWR has different types of customers and sales as identified below:

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.

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Business Life Cycle

Shape theMarket

(Gate A)Negotiations

TransactionReview(Gate D)

ProposalDevelopment

Change Management

BudgetBaseline

WorkAuthorization

ContractCloseout

FinancialReporting

EAC

PerformanceManagement

EVM

Acquisition Phase

Contract Execution Phase

Authorityto

Proceed

WinStrategy(Gate B)

Decisionto Bid

(Gate C)

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Types of Solicitations

RFP -- Request for Proposal 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

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Contract Types

Contract types are grouped into two broad categories: Fixed price 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

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Types of Contracts

Cost Reimbursable (Cost Type) 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

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Types of Contracts

Time and Material (T&M) Contracts

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.

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Contracting Methods

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

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Cost Type (Cost Reimbursable)

Costs are paid provided they are

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

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Firm Fixed Price

Used when costs can be estimated with good 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

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Fixed Price Level of Effort

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.

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Risk vs. Reward

Cost reimbursable contracts inherently have limited 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.

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Contract Modifications

The Government uses the “Changes” clause to add or 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

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What Is A Winning Proposal?

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?

A business proposal is a written offer from a seller to a 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.

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What Is A Winning Proposal?

Winning proposals have four characteristics in common:

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.

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Governing Laws, Regulations & Policies

Legislation 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

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PWRFirewall Training

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PWR Firewall Training

Definition of a Firewall:

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.

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PWR Firewall Training

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

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Firewall Procedure/Process:

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

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PWR Firewall Training

Firewall Procedure/Process (cont):

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.

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PWR Management Responsibilities:

PWR Firewall Training

- Manages the business.

- 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.

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Firewalled Team Responsibilities:

PWR Firewall Training

- Manages the Project/Program.

- 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.

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Non-Firewalled Process Area Support Team Responsibilities:

PWR Firewall Training

- 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

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Restrictions:

PWR Firewall Training

Non-firewalled personnel SHALL NOT perform or participate in 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.

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PWR Firewall Training

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.

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What is a Non Disclosure Agreement (NDA)

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

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When is An NDA Needed

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

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Non Disclosure Agreement (NDA)

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.

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PWR Proposal Process

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Pre-RFP Planning

Identify customer needs/funding constraints Understand market needs 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

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Price

RFPRFQ

Proposal ProcessProposal Process

DevelopProposalStrategy

Program

Definition

FunctionOverview

Cmt Review Cycle•Est. & Pricing•Contact Mgmt.•Executive Mgmt.

PublishCost/Technical

and Mgmt Volumes

CompleteTechnical

VolumePricing

Actions &Prepare

CostVolume

ProgramsMarketing

Business PlansShould Cost

Program ManagerContract Manager

Cost Volume/Business Manager

Technical & Cost Volume

Manager

Program ManagerProject Engineer

Cost Volume/Business Manager

Program ManagerProject EngineerCost Volume/BM

Mgr.

Present/Discuss:• Program Approach• Pricing Strategy• Estimating Assistance• Identify “Similar To”

Prepare:• Program Plan• Program Schedule• Test Plan• Bill of Materials (M/B)• Work Breakdown Structure• Resp. Assignment Matrix

Establish:• Due Date• RFP Requirements• Deliverables/MIR’s, T&C’s

• Estimating Methodology• “Similar To: Programs• Make/Buy• Affordability/DTC Goals

Program ManagerProject Engineer

Cost Volume Mgr.Functional Mgr.

Evaluate Risk•Assume Risk•Revise Estimate•Rescope

Risk Assessment/Commitment

Support•Audit•Fact Finding•Negotiations

Program ManagerContract ManagerCost Volume Mgr.

Detail Estimating• Task Descriptions• Estimate• Basis of Estimates

Functional Review• Evaluate Estimating• Access Cost Risk

(if any)

Estimating & Pricing Function Directors/VP

Substantiation (-3’s)• Labor• Material• ODC

• Labor Standards• CERs• Detail Estimates• Parametrics• “Similar To’s”• Round Table/

Expert Opinion• Supplier Quotes• P.O. History• Catalog Prices

Profit AnalysisRisks and Opportunity,Capital Investment

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Proposal Process Overview

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Create and generate a compliance matrix early

Analyze the Proposal Requirements

Read the request for proposal (RFP) Understand the statement of work (SOW) and proposal type 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.)

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Think of the RFP as a Quiz

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

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Beginning of the Proposal Process

Proposal manager identified Review available data 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

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Developing Requirements Matrices

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Proposal Receipt

RFP receipt by PWR Contracts

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

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Purpose

Ties proposal response to requirements and evaluation criteria

Flows RFP requirements to proposal outline

Tool for establishing proper page count

Ensures compliance with proposal requirements

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How Matrix Developed

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

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Requirements Matrix

RFP Section

RFPPara RFP Requirement

PROP VOL NO

PROP SECT NO SECTION TITLE

RESP AUTHOR

PAGE COUNT

Verify /Initial

Part Two 2.1 Period of Performance 1 2.3, 3.9 Cost, Schedule & Milestones BrombergPart Two 3.1.1 Procurement Integrity, Standards of Conduct, Ethical Considerations,

and Organizational Conflicts of Interest 1 Admin. Transmittal Letter Pomatto

Part Two 4.2 Contractor teams should include activities and costs for both Phase 1 and Phase 2 within their proposals.

1 2.33.13.9

Cost, Schedule & MilestonesSOWCost Schedules and Milestones

Bromberg

Part Two 4.2.1 Proposal Information n/aPart Two 4.2.1 The typical proposal should express a consolidated effort in support of one

or more related technical concepts or ideas. n/a Lu

Part Two 4.2.1 Proposers must submit an original and five (5) copies of the full proposal and one (1) electronic copy of the full proposal [in PDF (preferred)] on a CD-ROM. Each hard copy must be clearly labeled with BAA, proposer organization, proposal title (short title recommended), and Copy _ of 5.

n/a Soliz

Part Two 4.2.2 Proposal Format n/a White/Soliz

Part Two 4.2.2 Proposals shall consist of two volumes. All All ALL White/Soliz

Part Two 4.2.2 All pages shall be printed on 8-1/2 by 11 inch paper with type not smaller than 12 point, however, 10 point font may be used inside graphs, tables, and figures.

White/Soliz

Part Two 4.2.2 The page limitation for full proposals includes all figures, tables, and charts. Except for the attached bibliography and Section I, Volume I shall not exceed fifty (50) number pages.

White/Soliz 50

Part Two 4.2.2 Copies of not more than three (3) relevant papers can be included with the submission.

White/Soliz

Section I 4.2.3 Volume I, Technical and Management Proposal Volume 1 Technical & Management Proposal Lu 50

Section I 4.2.3 Section I. Administrative Volume 1 1 Cover Sheet PomattoSection I 4.2.3 A. Cover sheet to include: Volume 1 1 Cover Sheet Pomatto

Section I 4.2.3 (1) BAA number Volume 1 1 Cover Sheet Pomatto

Section I 4.2.3 (2) Technical area Volume 1 1 Cover Sheet Pomatto

Section I 4.2.3 (3) Lead Organization Submitting proposal Volume 1 1 Cover Sheet PomattoSection I 4.2.3 (4) Type of business Volume 1 1 Cover Sheet Pomatto

Section I 4.2.3 (5) Contractor’s reference number (if any) Volume 1 1 Cover Sheet Pomatto

Section I 4.2.3 (6) Other team members & type of business for each Volume 1 1 Cover Sheet PomattoSection I 4.2.3 (7) Proposal title Volume 1 1 Cover Sheet Pomatto

Section I 4.2.3 (8) Technical point of contact Volume 1 1 Cover Sheet Pomatto

Section I 4.2.3 (9) Administrative point of contact Volume 1 1 Cover Sheet Pomatto

Section I 4.2.3 (10) Date proposal was submitted Volume 1 1 Cover Sheet PomattoSection I 4.2.3 B. Official transmittal letter. Cover Ltr n/a Transmittal Letter Pomatto n/a

Section II 4.2.3 Section II. Summary of Proposal Volume 1 2 Summary of Proposal Frye

Section II 4.2.3 A. Innovative claims for the proposed research. Volume 1 2.1 Innovative Claims Frye 2

Each requirement should be a separate line Most Important Requirements (i.e., Evaluation Criteria) drive page allocation

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DRD Matrix

Line DRD Title Typ

e

Submission Events WBSDescription and SOW Paragraph Number

Groundrulesand Assumptions

Number of Submittals

Hours/ Submittal

Total Hours Concur

Pro

po

sal

IBR

AT

P

SR

R

Co

mp

on

ent

SD

Rs

Sys

tem

SD

R

Co

mp

on

ent

leve

l PD

Rs

PD

R -

60 d

ays

Sys

tem

PD

R

Mo

nth

ly

Qu

arte

rly

Oth

er

1 SB-001 Financial Management Report

3 +30 days

X 1.2.1 The M/Q report shall provide a report for projecting costs and equivalent personnel (EPs) for evaluating contractor's actual cost and fee, for the planning, monitoring, and controlling of project and program resources, and for accruing cost. This data will also be provided electronically via reporting requirements and data elements provided in this DRD 1.2.1

Assume Monthly Earned Value Report

40 8 320 Smith

Develop a separate matrix for Data Requirements Deliverables

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How Suppliers Can Help

We recommend that Suppliers use a similar principle in reviewing PWR Requests for Proposals or Quotations

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!!

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Generating the Proposal

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Proposal Preparation

Proposal Outline

Themes

Mockup

Technical & Cost are to be Prepared Together

Approach must be Life Cycle Oriented

PWR Affordability Process

Proposal Schedule

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Proposal Steps

RFP-Statement of

Work

Price Tasks within WBS

– 1st Pass, Compare to Target

Assess/Identify Scope for Reduction

Price Tasks

Estimate Development

Hrs, mat’l, ODC

Program Plan

WBS

Customer RFP Requirements

Ground-Rules and Assumptions

Terms and Conditions

Design to Cost (DTC) Targets

Work Organization & WBS Task Description

Integrated Program Master Schedule/Major Milestones and Activity Schedules

Make/Buy

Task Planning

Work DecompositionContract Data Requirements/Data Requirements etc

Estimate DevelopmentIdentify Historical References or other Basis for Estimate – Data Driven Estimates

Target AssessmentWithin DTC

Target?Yes

No

Scope Risk and OpportunitiesIdentify R&O’s when Estimating

Price Task

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Proposal Planning Steps

Develop:

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

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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 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

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Proposal Kick Off Meeting (PPOA)

Brief proposal team operating groundrules

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

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Each Technical Proposal phase has a counterpartCost Proposal phase

CapturePlanning Outline Mockups Draft Final

Cost Targets

Design to Cost

Basis ofEstimates

PreliminaryCost Run

FinalCost Run

Technical Proposal Phases

Cost Proposal Phases

Technical and Cost are Prepared in Parallel

Proposal

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Make it as detailed as practicalUpdate and status every day–highlighting concern areas

The Proposal Schedule (30 days) Must be complete prior to kickoff meeting Should include:

Exact calendar dates based on RFP data 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

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Fact-Finding

PWR Pricing acts as lead to support ALL audit activities

Provides DCAA, etc. With proposal copies

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

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Negotiations

PWR Legal/CA acts as lead to support ALL Negotiation activities

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

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Make/Buy

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Make or Buy Planning Process

Executive Mgmt responsible will co-Chair or appoints 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

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Make or Buy Planning Process

The Make/Buy decision making process divides parts and 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.

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Make or Buy Planning Process

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.

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Make or Buy Planning Process

IPT presents the program sourcing strategy of make or buy recommendations to the Make/Buy Committee

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

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Make/Buy Analysis

Competitive Advantage

Un

iqu

enes

sUnique ComponentsUnique Components

(LTA’s, Strategic Alliances, Etc)(LTA’s, Strategic Alliances, Etc)Strategic In-house MakeStrategic In-house Make

(Must Make)(Must Make)

Buy – Common Not a Comp Adv.Buy – Common Not a Comp Adv. Competitive AdvantageCompetitive Advantage(Can Make/Can Buy)(Can Make/Can Buy)

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Mitigation Status

Consequence of Occurrence

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1

1 2 3 4 5

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1

HighHigh

LowLow

MediumMedium4

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Original

Change

4

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Supplier Risk Assessment

5

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Manufacture or Purchase Planning Process

Internal Process to decide: Sufficient capacity and support to core competencies

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

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Types of Estimates

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Types of Estimates

Within the proposal process, various kinds of estimates and quotations are prepared as defined in the following text. These definitions are 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.

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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 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.

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RFP/RFQ Process

RFQ-RFP Training

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Difference of RFP and RFQ and RFI

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Difference of RFP and RFQ and RFI

Definitions

Types of solicitations

Evaluation criteria

SPI Process

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Difference of RFP and RFQ and RFI

Request for Proposal (RFP)

Request for Quote (RFQ)

Request for information (RFI)

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Difference of RFP and RFQ and RFI

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.

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Difference of RFP and RFQ and RFI

DEFINITION of RFQ:

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.

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Difference of RFP and RFQ and RFI

DEFINITION of RFI:

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

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Types of solicitations

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)

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Invitation for Bids (IFB)

The Invitation for Bid (IFB) is the solicitation document used in Sealed Bidding procurements.

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.

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Buyer’s Role in the RFQ/RFP Process

Upon receipt of a requirement the Buyer reviews and 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.

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RFQ Structure

The Buyer is responsible for the entire content of the 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.

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TINA, CAS, SB Plan

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)

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Supplier Steps To Providing A Responsive Proposal

Do’s

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

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Request for proposal

Key objectives

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.

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Evaluation Criteria

Responsive Bid Price Delivery Technical Solution Past Performance (SPI) Financial Stability Agreed Upon Terms & Conditions

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Steps In The RFP Evaluation Process

Step One: Review All Proposals

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

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Steps In The RFP Evaluation Process

Step Six: Discussion/Negotiation. This step can be 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.

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Source Selection

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Proposal/Source Selection

1. Receipt of Proposal

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)

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Source Selection

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

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Source Selection process

PWR Buyer Criteria – See PWR 5.3.2

Selection Process

Competitive (Best Value – SPI evaluation)

Non-Competitive (Determination of reasonableness)

Fact-finding

Negotiation

Award

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Evaluation of Quotations or Offers

Many source selections are relatively straight forward and 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.

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Lowest Evaluated Proposal

• Price Analysis based on comparing two or more proposals using the Supplier Performance Index (SPI) model.

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SPI Process

• 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).

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SPI Calculation

The Supplier Performance Index (SPI) is calculated 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

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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 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.

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Fact-Finding

PWR Fact-Finding Questions will be covered in our next section

Certified cost and pricing data will be discussed in the next section

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PWR Evaluation Criteria and Process

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Agenda

PWR Price / Cost Analysis

Fact-Finding

PWR Technical Evaluation of Supplier Proposals

Funding Profiles, Ogives and PTL

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PWR Price and Cost Analysis

Greg ManleyJuly 2009

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Why Do We Need a Cost Analysis?

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.

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What is a Price Analysis?

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

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What is a Cost Analysis?

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

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Supplier SOW Development

Draft & Submit RFP to Supplier

Receive Supplier Proposal

Receive Request for Cost/Price

Analysis

Approve Cost Analysis Plan

(CAP)**

Request DCAA Assist Audit*

Request Technical Evaluation

Preliminary Fact Find Questions

Start Field Fact-finding

Receive Clarification Responses

from Supplier

Receive Technical Evaluation

Receive DCAA Assist Audit

Report*

Complete Fact-finding

Support Pre-negotiation

Review

Documentation Sign-off

Issue Cost Analysis Position

Support Negotiations as Member of the Team

Note: Some of these tasks will overlap or will be done in parallel with other tasks.

* Only on Government Contracts** Optional

Overall Cost Analysis Process

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DCAA Assist Audit

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.

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Cost Analysis Process

The Supplier Management Agent/Buyer is responsible for:

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.

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Learning Curve

Rate of Improvement 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

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Learning Curve

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.

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Learning Curve

Determining the Curve Slope First, perform regression analysis of the actual data.

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.

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Learning Curve

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.)

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Quantity Adjustment

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.

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Material

Material–purchased items/services which become part 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.

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Material

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.

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Rate Verification

Forward Pricing Rate Agreement

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.

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Rate Verification

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).

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Fact-Finding

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PWR Fact-Find QuestionsThe following data is the standard supporting documentation the Cost Analysis Department requests when certified cost and pricing data is required:

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 Materiala. Explanation of method and data used by the supplier in

preparing the BOMb. 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.).

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PWR Fact-Find Questions Basis for forecasting burden rates (Engineering, Manufacturing, etc.) Actual Burden rates experienced by year for the previous two

calendar years. 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.)

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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? 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 yearsb. 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 applicabled. Analysis of G & A pools by account and by year for the previous two

calendar years classified by fixed and variable costs.

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PWR Fact-Find Questions

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.

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PWR Technical Evaluation of Supplier Proposals

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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

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).

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Ogives and PTL/Funding Profiles

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PWR Ogive Definition

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

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Program Termination Liability (PTL)

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Background

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

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Responsibility

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.

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What is Termination Liability?

Termination liability is the maximum amount the 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.

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Termination Liability Funding

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.

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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 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)).

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Termination Cost Risk Coverage

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.

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Special Termination Cost Clause

Government contracts and RFPs sometimes include a 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.

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Estimating Termination Costs

Estimating method-leading costPWR typically calculates a termination liability line by leading costs for PWR labor, interdivisional labor, and supplier costs by set 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.

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Estimating Termination Costs

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Document current processes (All)

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 Recommendation

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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)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 CostsCosts Continuing After Termination (partial de-staffing only)Subcontractor Claims

• Identify any PTL Special Termination Cost Clause valuesCosts Continuing After TerminationSettlement Expense

• Identify any potentially uncover costs Initial CostsLoss of Useful ValueRental Under Unexpired LeasesAlterations of Leased Property

3. Calculate a PTL by GFY quarter4. Review PTL values with Program Management5. Report PTL values to Upper Mgmt6. Review and update PTL values as required

PTL Process Description

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Completing the PWR Proposal

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Wrapping Up the Proposal

Create Draft /Prelim Run of Pricing

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

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Create Finished Proposal

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

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Proposal Submittal

Submit for repro with instructions (include backup copies)

Verify proposal completeness and prepare for delivery

Deliver to customer

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Prepare for Orals and Fact-Finding

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

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Negotiations

PWR Legal/CA acts as lead to support ALL Negotiation activities

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

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Change proposal

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Change Proposals

Changes occur for a variety of reasons/scenarios 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

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Change Proposals

Not competitive

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.

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Change Proposals

Pursuant to PO “Changes” clause, supplier obligated to 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.