Presentation on theme: "Cost/Price Analysis Meeting"— Presentation transcript:
1 Cost/Price Analysis Meeting PRICE FIGHTERSBrief ForFuture of DoD ContractCost/Price Analysis MeetingThis brief presents the followingWHO WE AREWHAT WE DOWHY WE ADD VALUEHOW TO DO BUSINEES WITH USHOW TO CONTACT US9-10 January 2007
2 Where We Fit SECNAV CNO ASN(RDA) NAVAIR NAVSEA NAVSUP NAVFAC SPAWAR Secretary of the NavyCNOChief of Naval OperationsASN(RDA)Assistant Secretary of the Navyfor Research, Development and AcquisitionNAVAIRNaval AirSystems CommandNAVSEANaval SeaSystems CommandNAVSUPNaval SupplySystems CommandNAVFACNaval FacilitiesEngineering CommandSPAWARSpace and Naval WarfareSystems CommandThe Naval Supply Systems Command (NAVSUP) is one of the five major Naval Hardware Systems Commands. The Naval Inventory Control Point (NAVICP) is the largest field activity. Price Fighters is a department of NAVICP.If there is time and attention, may want to say,NAVSUP is located in Mechanicsburg, PA. NAVICP has two sites, Philadelphia and Mechanicsburg, PA. Price Fighters is located in Norfolk, VA and reports to the Philadelphia site through the Engineering and Product Support Directorate.NAVICPNaval Inventory Control PointPrice Fighters
3 Save Program Dollars Price Fighters Mission To provide responsive, expert value analysis, technical assistance, and pricing validation support to buyers, managers, and users of equipment, material, services, supplies, spare parts, and weapon systems in an accurate, cost effective, and unbiased manner.Save Program DollarsPrice Fighters is an energetic, aggressive, and forward-looking group that is unlike any other Government organization.The overall need to which Price Fighters contributes is to have the best possible Defense structure for the least cost. In many instances, procurement officials do not have the requisite technical background or the resources available to make “best value” decisions.Price Fighters brings that expertise to the table.
4 Technology Development Production & Deployment Design Readiness Review The MDAP ProcessABCIOCFOCMDAP ProcessConceptRefinementTechnology DevelopmentSystem Development& DemonstrationProduction & DeploymentOperations & SupportDesign Readiness ReviewFRP Decision ReviewConcept DecisionPrice Fighters ServicesNegotiation SupportProposal ReviewCost EstimatingSite VisitsPre & Post Business ClearanceShould CostBusiness CaseAnalysisConsulting ServicesPost Production SupportAcronyms:MDAP Major Defense Acquisition ProgramsNCCA Navy Center for Cost AnalysisDCMA Defense Contract Management AgencyPrice Fighters provides direct engineering-based cost analyses, technical analyses, and contract negotiation support throughout the complete spectrum of acquisition – from the end-user of the items that question their prices, to the procurement officials that actually buy the spare parts and weapon systems on behalf of the Department of Defense.DCMA vs. PF$Report complexity. Where as a DCMA report may be 10 pages, our is 150 pages. We have more time and resources to dig deeper than DCMA. Our reports are easier to negotiate because of the information provided.Often DCMA analysts have many roles to play. Cost analysis is only only one. They have quality, sell-off and other program issues competing for their time.We are technical persons grown in to dedicated cost analysts. DCMA are usually degreed engineers, that typically are dedicated to a single company.We go through negotiations. DCMA typically can't support negotiations.Usually we offer a more severe reduction to costs. DCMA (SOMETIMES) accepts what we challenge and secure in negotiations.Engineering Management Services. The sum of the product groups provide key engineering management services to acquisition professionals within the defense acquisition framework. 70% of life cycle system costs occur in the Operations and Sustainment phase.Our counterparts, NCCA and DCMA, are often mistakenly considered us as competition, when in fact we are a complementary team. Their efforts, however, rarely enter the Production & Deployment phase.Post Production support, line shutdown.Cost Estimating TechniquesAnalogyParametricEngineeringActuals
5 Supporting Current & Future Readiness Products & ServicesProviding expert, cost effective value analysis, technical assistance, and pricing validation support.Business Case Analysis (BCA)Cost Estimating Relationship (CER) AnalysisCost Analysis / EstimatingCost ModelingCost Realism StudiesECP EvaluationIn-Process Review (IPR)Litigation SupportNegotiation SupportObsolescence StudyPhysical Configuration Audit (PCA)Pre-Award SurveyPost-Production SupportPrice Challenge HotlineProcess Improvement StudiesProposal EvaluationRepair AnalysisRisk Analysis/ManagementShould Cost AnalysisSource SelectionLean / Six Sigma SupportTech Data Package Adequacy ReviewOur technical composition affords us the flexibility to provide a wide range of services. Our core services include cost proposal evaluation, cost analysis, estimating, and negotiation support for weapons systems procurement and support. Price Fighters’ cost and pricing analysis and support encompasses a wide range of items, from piece parts items through complete weapons systems, in addition to handling end-user (Fleet) inquiries questioning the prices paid for military-procured material and equipment through the Price Challenge Hotline service.Supporting Current & Future Readiness
6 Support spare parts buyers Should CostSupport spare parts buyersBottoms up, engineering based, cost analysisAlternate sources of supplyNegotiation supportPerforms detailed should cost analysis for DLA and NAVICP buying centers.Primarily piece parts.Purpose – To ensure the government gets “fair and reasonable“ prices. Emphasis on “fair”; not out to gouge the contractor, which could result in poor part quality or inability to perform. Want what is fair for both parties.Cost Analysis - Should cost = labor + materials + overhead + profit of spares and repairables.Alternate SOS – can someone else make the same item cheaper, or faster, or both?Should cost analysis positions are used as a baseline for negotiation support. Are often the Government’s starting position. Again, we are available to directly support negotiations.
7 Should Cost Example Tray, Conveyor Roller NSN 2590-01-359-9278 Application: Cargo Handling SystemQuantity 3 unitsShould Cost Price: Technical review developedProposed Price: $4,850.25Negotiated Price: $702.61Savings: $12, (86% reduction)Resolution: Since this was an ESOC procurement, Price Fighters was requested to find an alternate source for this part as quickly as possible. Within two weeks, Price Fighters had found and received a quote from another source that was 86% lower than the original quote.Case referred by: DSCC
8 Should Cost Example Piston, Linear Actuator NSN 1650-00-532-1805 Application: C-130 AircraftQuantity unitsShould Cost Price: $2,313.47Proposed Price: $10,743.00Negotiated Price: $3,841.00Savings: $427, (64% reduction)Resolution: Price Fighters developed a unique pricing analysis using the contractor rates and the labor and material from the Should Cost Analysis. The buyer utilized the analysis to negotiate a lower cost.Case referred by: DSCR
9 Price Challenge Hotline Prime venue for customer price challengesCan lead to should costsOver 129,000 inquiries$846M in savings$453K in awardsEstablished in 1979 as the Navy’s primary resource for investigating overpricing complaints.Most visible program to the fleet.Any military or federal employee can challenge a price.Direct funded by SUP.We are the challenger’s interface with the Item Manager. Analyze the IM’s response.Determine if a Should Cost is required.Analyzed over 125,000 cases for a total savings of $820 millionAwarded over $425,000 to employees who have submitted price challenges that resulted in savingsOverall, helps reduce the cost of spare parts, promote readiness and maximize available resourcesChallenge from SK2 Colquitt, USS Rainer (AOE-7).Awarded $Cost Avoidance of $2.9M.DSCC bought 1 ft cable from a 500 ft reel at $1, per ft. based on min. buy requirements and no demand to support buying entire reel. DSCC buying remainder of est $5.00 per ft. since demand has increased . Cost avoidance estimated at annual demand times old price minus new price (1,712*($1, $5.00))=$2.9MWeb Page: click on the “Challenge High Priced Parts” bulls-eye iconPhone: NAV-CHAL ( ), Fax: (757)
10 Price Challenge Hotline Good Price Challenge CandidatesAppears overpricedConsolidation of identical itemsNew commercial source
11 Price Challenge Hotline Example Price Challenge from Patrol Squadron 64, Naval Air Station, Willow Road, PANomenclature: Rigid Tubing AssemblyChallenged Price: $4,688.12Concerns: Price too highResults: Found item overpriced, pursued refundCost Avoidance: $24,278.97Challenger’s Award: $1,425.00
12 Assist in SOW development BCA development PBL SupportIPT memberAssist in SOW developmentBCA developmentAnalyze and verify data setPopulate BCAProposal reviewNegotiations supportTotal involvement from start to finishNAVICP is the customer.Effort primarily on depot level repairables (DLR’s).The main purpose of performing a BCA is to determine whether organic or contractor logistics support is more cost effective.We do that by determining costs for depot repair, piece parts, transportation, warehousing, NAVICP operations, etc. We then compare those costs against what the contractor says it would cost him to perform the same functions with guaranteed availability (within defined parameters) and possibly improved reliability (+MTBF).If the Navy decides to go contractor support, it’s referred to as Performance Based Logistics (PBL).Emphasize guaranteed level of availability and reliability!Partnering – functions/responsibilities may be divided between contractor and government. Contractor will fill the warehouse, perform the work, but could use military facilities, labor, etc to perform the depot level repair.Success Story – SMS controls the weapons launches on AV-8 and F-14D. When contractor took over support in April 00, there were 400 backorders. Backorders now near zero.
13 H-60 Tip-To-Tail Phase II BCA PBL BCA ExampleH-60 Tip-To-Tail Phase II BCAAgreement with Maritime Helicopter Systems Company (MHSCo) and Naval Inventory Control Point Philadelphia.Covered 458 individual parts applicable to the SH-60B, SH-60F, HH-60H, MH-60S, and MH-60R aircraft and focused on integrating 34 suppliers under one prime integrator.The With-out PBL (traditional support ): $258MWith PBL program cost were proposed as $241MPotential Savings/Cost Avoidance of $17M over a 33 month period of performance.
14 Weapon Systems Support Procurement Support / Cost AnalysisSupports Program Managers and ContractingProposal EvaluationsECPsAlpha ContractingSource SelectionReimbursable services primarily for the HSC’s. NAVAIR is our major customer. Army, Air Force and NAVSEA to a lesser degree.Provide procurement support to the program offices and contracting officers for major weapon systems. We provide information to program managers so they can make more informed program decisions.Analysis of proposals or developing a government position from contractor dataEvaluate touch labor, management, engineering (recurring and nonrecurring), logistics, material, tooling, quality, data development, etc.Also provide direct negotiation support, interface with manufacturersEngineering Change ProposalsPrograms supported include E-2C, F/A-18, Tomahawk, H-60, EA-6B, V-22, AV-8, T-45, and MH-47Often teaming with DCMC, DCAA, NAVAIR program office, contractor (alpha).Alpha Contracting – team with the contractor to develop their proposal; saves time in negotiationsSource Selection - Often sit on the price evaluation team.Example – Japan wanted to upgrade E-2C to from group 0 to group 2. Grumman is the contractor. We looked at labor costs. Examined their labor analysis, what they’re using to determine what they’re charging the navy (grass roots, engineering estimates, learning curves). Savings on 2 kits $5.9M.
15 ResultsExamples:ProposedSettledCost AvoidanceCostROIE-2C FY04-07Multi-Year$808M$706M$102M$172K593CV-22 Block Change$241.5M$208M$33.5M$100K330.5MH-47G SLEP Program Lot 2$282M$246M$36M$163K223F-18 E/FProduction$403.2M$360M$43.2M$40K1080TOTALS$1,734.7M$1,520M$214.7M$475K452N-GBoeingIf there is time and attention, may want to quote some examples or say why our staff is able to support the customerPrice Fighters possesses an empowered, technical-based, highly-skilled, customer-orientated, and responsive workforce with hundreds of years of production, manufacturing and engineering experience that can analyze spare part and weapon system procurements in great detail from the bottom up. These “craftsmen” know what it takes to manufacture a part of system from the very beginning of the process, to the final testing, evaluation, and production phases. They give procurement officials a unique technical perspective and independent government estimate typically unavailable from the organic procurement organizations.Recent experience with many Primes, on USN, USMC, USAF, USA, Joint projects
16 Patriot (PAC-3) Missile Customer: U. S. Army, Redstone ArsenalProject: Procurement of Patriot Advanced Capability (PAC-3) MissilesEffort: Supplemented Redstone Contracting team in review of contractor and major subcontractors including labor hours, material, and negotiation supportResult: $56M savings and 4 additional missiles
17 Special Projects Berry Amendment Bureau of Engraving and Printing Supporting DCMA on reviewing Corrective Action Plans and drafting Domestic Non-Availability DeterminationsBureau of Engraving and PrintingSupporting BEP on a $280M procurement of currency paperAcquisition Quality Assessment Program and Intrinsic Value AnalysisSupporting NAVICP ContractingPrice analysis for active procurementsSampling awarded procurementsPrice Fighters has achieved documented savings to the Department of Defense in excess of $3 billion since 1983 and has been recognized at the highest levels within DOD. Return on investment is in excess of 20 to 1, making it and extremely cost-effective program and a prudent expenditure of taxpayer dollars.Doing business with us is simple. A funding document is the all of the paperwork required. No lengthy contracting effort. If the effort increases or decreases the funding document is the only thing that needs to be amended. All funding balances will be returned for your reprogramming.
18 Summary High-Quality Engineering-Based Cost Analysis Services Customer-OrientedOutstanding ROI (current average 20:1)Effective ISO-Certified QMSBest ValueServices Easy To ObtainPrice Fighters has achieved documented savings to the Department of Defense in excess of $3 billion since 1983 and has been recognized at the highest levels within DOD. Return on investment is in excess of 20 to 1, making it and extremely cost-effective program and a prudent expenditure of taxpayer dollars.Doing business with us is simple. A funding document is the all of the paperwork required. No lengthy contracting effort. If the effort increases or decreases the funding document is the only thing that needs to be amended. All funding balances will be returned for your reprogramming.
19 Director, Price Fighters (757) 443-2468 DSN 646 Point of ContactBuster JonesDirector, Price Fighters(757) DSN 646