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Cost/Price Analysis Meeting

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1 Cost/Price Analysis Meeting
PRICE FIGHTERS Brief For Future of DoD Contract Cost/Price Analysis Meeting This brief presents the following WHO WE ARE WHAT WE DO WHY WE ADD VALUE HOW TO DO BUSINEES WITH US HOW TO CONTACT US 9-10 January 2007

2 Where We Fit SECNAV CNO ASN(RDA) NAVAIR NAVSEA NAVSUP NAVFAC SPAWAR
Secretary of the Navy CNO Chief of Naval Operations ASN(RDA) Assistant Secretary of the Navy for Research, Development and Acquisition NAVAIR Naval Air Systems Command NAVSEA Naval Sea Systems Command NAVSUP Naval Supply Systems Command NAVFAC Naval Facilities Engineering Command SPAWAR Space and Naval Warfare Systems Command The 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. NAVICP Naval Inventory Control Point Price 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 Dollars Price 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 Process A B C IOC FOC MDAP Process Concept Refinement Technology Development System Development & Demonstration Production & Deployment Operations & Support Design Readiness Review FRP Decision Review Concept Decision Price Fighters Services Negotiation Support Proposal Review Cost Estimating Site Visits Pre & Post Business Clearance Should Cost Business Case Analysis Consulting Services Post Production Support Acronyms: MDAP Major Defense Acquisition Programs NCCA Navy Center for Cost Analysis DCMA Defense Contract Management Agency Price 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 Techniques Analogy Parametric Engineering Actuals

5 Supporting Current & Future Readiness
Products & Services Providing expert, cost effective value analysis, technical assistance, and pricing validation support. Business Case Analysis (BCA) Cost Estimating Relationship (CER) Analysis Cost Analysis / Estimating Cost Modeling Cost Realism Studies ECP Evaluation In-Process Review (IPR) Litigation Support Negotiation Support Obsolescence Study Physical Configuration Audit (PCA) Pre-Award Survey Post-Production Support Price Challenge Hotline Process Improvement Studies Proposal Evaluation Repair Analysis Risk Analysis/Management Should Cost Analysis Source Selection Lean / Six Sigma Support Tech Data Package Adequacy Review Our 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 Cost Support spare parts buyers Bottoms up, engineering based, cost analysis Alternate sources of supply Negotiation support Performs 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 System Quantity 3 units Should Cost Price: Technical review developed Proposed Price: $4,850.25 Negotiated Price: $702.61 Savings: $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 Aircraft Quantity units Should Cost Price: $2,313.47 Proposed Price: $10,743.00 Negotiated Price: $3,841.00 Savings: $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 challenges Can lead to should costs Over 129,000 inquiries $846M in savings $453K in awards Established 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 million Awarded over $425,000 to employees who have submitted price challenges that resulted in savings Overall, helps reduce the cost of spare parts, promote readiness and maximize available resources Challenge 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))=$2.9M Web Page: click on the “Challenge High Priced Parts” bulls-eye icon Phone:  NAV-CHAL ( ), Fax:  (757)

10 Price Challenge Hotline
Good Price Challenge Candidates Appears overpriced Consolidation of identical items New commercial source

11 Price Challenge Hotline Example
Price Challenge from Patrol Squadron 64, Naval Air Station, Willow Road, PA Nomenclature: Rigid Tubing Assembly Challenged Price: $4,688.12 Concerns: Price too high Results: Found item overpriced, pursued refund Cost Avoidance: $24,278.97 Challenger’s Award: $1,425.00

12 Assist in SOW development BCA development
PBL Support IPT member Assist in SOW development BCA development Analyze and verify data set Populate BCA Proposal review Negotiations support Total involvement from start to finish NAVICP 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 Example H-60 Tip-To-Tail Phase II BCA Agreement 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 ): $258M With PBL program cost were proposed as $241M Potential Savings/Cost Avoidance of $17M over a 33 month period of performance.

14 Weapon Systems Support
Procurement Support / Cost Analysis Supports Program Managers and Contracting Proposal Evaluations ECPs Alpha Contracting Source Selection Reimbursable 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 data Evaluate touch labor, management, engineering (recurring and nonrecurring), logistics, material, tooling, quality, data development, etc. Also provide direct negotiation support, interface with manufacturers Engineering Change Proposals Programs supported include E-2C, F/A-18, Tomahawk, H-60, EA-6B, V-22, AV-8, T-45, and MH-47 Often teaming with DCMC, DCAA, NAVAIR program office, contractor (alpha). Alpha Contracting – team with the contractor to develop their proposal; saves time in negotiations Source 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 Results Examples: Proposed Settled Cost Avoidance Cost ROI E-2C FY04-07 Multi-Year $808M $706M $102M $172K 593 CV-22 Block Change $241.5M $208M $33.5M $100K 330.5 MH-47G SLEP Program Lot 2 $282M $246M $36M $163K 223 F-18 E/F Production $403.2M $360M $43.2M $40K 1080 TOTALS $1,734.7M $1,520M $214.7M $475K 452 N-G Boeing If there is time and attention, may want to quote some examples or say why our staff is able to support the customer Price 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 Arsenal Project: Procurement of Patriot Advanced Capability (PAC-3) Missiles Effort: Supplemented Redstone Contracting team in review of contractor and major subcontractors including labor hours, material, and negotiation support Result: $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 Determinations Bureau of Engraving and Printing Supporting BEP on a $280M procurement of currency paper Acquisition Quality Assessment Program and Intrinsic Value Analysis Supporting NAVICP Contracting Price analysis for active procurements Sampling awarded procurements Price 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-Oriented Outstanding ROI (current average 20:1) Effective ISO-Certified QMS Best Value Services Easy To Obtain Price 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 Contact Buster Jones Director, Price Fighters (757) DSN 646


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