1. COMMERCIAL ITEM DETERMINATION & PRICING
OVERVIEW
Presented By: Director, Commercial Pricing Team
Tom Walker
OCT 6, 2015

2. GOAL
Develop enhanced capability within DCMA to meet buying office and internal DCMA requests for commercial item determination and pricing support; A (CID&P) “Cadre”
Stand-up of Organization as of 11 January Manpower being established to fulfill this goal and meet customer expectations.
Imperative: NDAA, Section 831(b) 2

3. Observations to Date Commercial Item Determinations (CID) Pricing
More commercial “of a type” items are pushing boundaries of the definition
Prime contractors are prone to simply accept subcontractor commerciality assertions at face value
Assertions lack detail requiring numerous RFIs
Continuous contractor push-back to recommendations in government pricing reports on CID and Price Reasonableness is significantly delaying acquisitions
Pricing
Subcontractors – particularly true commercial vendors – are not providing the information necessary to determine fair and reasonable prices
Low quantities of commercial sales raise concerns on price validation
Prices for high quantities of government purchases not reflective of expected volume discounts
Current historical data is often an issue
Heavy DoDIG interest 3

4. AQKAP & What We Provide
Core Cadre is standing up now in St. Petersburg, FL
Provide training, analysis and other assistance to the buying commands and agencies, as well as internal DCMA ACO’s
Direct PCO support for Commercial Item Determinations – Recommendations only!
Market Analysis and Pricing Support
Internal Cost & Pricing Center Technical Resources, with ability to leverage Navy Price Fighters as required
Other Cost & Pricing Hubsites lend surge capacity as needed 4

5. Commercial Team Where We Are
Initial plans call for 50 personnel
Spread geographically to 5 locations besides St. Pete
Will be a mix of Contracts and Pricing and Analysts
Hiring will focus on both internal and external (Commercial) candidates
Will still heavily rely on Operations ACOs and Pricing as the front line for both CID and Price reasonableness
DCMA Inst. – 120 – April 1, 2014
Major Proposal – over $250 million – referred to Director of Proposal Pricing --- to Commercial Cost & Pricing Team
DCMA AQKAP – Group 5

6. Organized Geographically Expertise in Local Market Sectors
Locations
Tampa Bay
Denver/
Colorado Springs
Phoenix
Cincinnati/
Dayton
Boston
Philadelphia
Organized Geographically
Expertise in Local Market Sectors
(e.g., C4I in Colorado)
Proximity to:
Offeror Production/ Warehouse Facilities
Customers
Travel Hubs
DCMA/DoD Facilities 6

7. Standard Organization Chart7

8. Locations: Tampa Bay
Major Customers: SOCOM, Redstone, Tinker, MacDill, Eglin, Robins, Huntsville
Commercial Market Sectors:
Import/Export (6 of 10 $Top Ports), Manufacturing, Banking & Financial, Research Triangle
Traditional Defense Contractors: Harris, Fluor, Boeing, Northrop, Honeywell, Pall Aerospace, General Dynamics, Rockwell Collins, Bell Helicopter, L-3, Lockheed Martin
Other key considerations:
Virtual AQ support from Dallas
Media reports citing Saint Petersburg + foundational staff
Existing facilities and resources
Geographical impact on recruiting “experts” 8

9. Locations: Denver/Colorado Springs
Major Customers: Peterson, Buckley, Federal Civilian Agencies
Commercial Market Sectors:
Space (Colo), C4I (Colo), Aerospace (Colo / Wash)
Traditional Defense Contractors: Boeing, General Dynamics, Harris Corporation, SAIC, ITT, L-3 Communications, Lockheed Martin, Northrop Grumman, The Space Foundation
Other key considerations:
U.S. Air Force Academy
Geographical impact on recruiting “experts”
Commercial airport hub 9

10. Locations: Phoenix Major Customers: Edwards, Hill, Kirtland, SPAWAR
Commercial Market Sectors:
C4I; Misc. Manufacturing / Supply-chain; Marine (Cali); Agriculture; Import/Export (Cali)
Traditional Defense Contractors: General Atomics, Lockheed Martin, Raytheon, Boeing, Northrop Grumman
Other key considerations:
# of manufacturing facilities / market sectors requires 2 in West
Technology from CA is produced / warehoused in Four Corners
Existing facilities and resources
Commercial airport hub 10

11. Locations: Cincinnati / Dayton
Major Customers: Rock Island, Warren, DLA Land & Marine, Columbus, Wright-Patterson
Commercial Market Sectors:
Automotive; Aeronautics; Research & Development Institutions; Consumer Goods; Banking & Finance (Chic); Misc. Manufacturing
Traditional Defense Contractors: Boeing, Navistar Defense, Rockwell Collins, Oshkosh, GD Land Systems, Rolls Royce, GE Aviation
Other key considerations:
Ease of recruitment, sources other than W-P AFB
Commercial airport hub 11

12. Locations: Boston
Major Customers: Hanscom, Army Contracting Command, DLA Distribution
Commercial Market Sectors:
Technology Services; Chemicals & Materials (UpNY, Maine); Naval Transport; Biotechnology (Mass); Heavy Machinery (Mass)
Traditional Defense Contractors: L-3, United Technologies Corp., GE, Textron, Raytheon, Sikorsky, Lockheed Martin, Northrop Grumman, Pratt and Whitney, Hamilton Sundstrand, BAE Systems
Other key considerations:
Massachusetts Institute of Technology
Most accessible (geographic) to the greatest number of industrial bases
Existing facilities and resources (incl. C/DACO Group)
Commercial airport hub 12

13. Locations: Philadelphia
Major Customers: Aberdeen Proving Ground, DLA Aviation, NAVAIR, NAVSEA, NAVSUP, DLA Troop Support, DLA Energy
Commercial Market Sectors:
Technology Services; Naval Transport; Research & Development Institutions; Robotics; Pharmaceuticals
Traditional Defense Contractors: Boeing Rotorcraft, BAE, Honeywell, Lockheed Martin , General Dynamics, Northrop Grumman, Exelis, BAE Systems, Orbital ATK, DRS Technologies
Other key considerations:
Anticipated overflow from Northeast Corridor (Boston) and Midwest (Ohio)
Declining Maryland/Virginia Technology Corridors
All other proposed locations comparably accessible to Newport News
Most contractors in DC-MD-VA are HQ (v. production) 13

14. DCMA Technical Analysis Support for Commercial Acquisitions
DCMA Provides Technical Analysis and Contractor Oversight for Commercial Items Acquisitions
Includes Should-Cost analysis, Technical Support to Negotiations and data from previous analyses via CBAR
Analyze configuration changes against the commercial product
Substantiate contractor’s Commercial Item assertion with technical recommendations, cost rationale, and supporting data
Reduce risk to Commercial Item acquisition
Successful history of performing engineering analyses of contractor cost proposals per the FAR
Overview
DCMA Provides Technical Analysis and Contractor Oversight for Commercial Items Acquisitions
What We Provide
Should-Cost analysis, Technical Support to Negotiations, CBAR historical data
How we do it
Analyze configuration changes against the commercial product
Substantiate contractor’s Commercial Item assertion with technical recommendations, cost rationale, and supporting data
Why
Reduce Risk to Commercial Item Acquisition
Successful history of performing engineering analyses of contractor cost proposals per FAR 42
Excerpt
(3) Commercial items. (i) Any acquisition of an item that the contracting officer determines meets the commercial item definition in 2.101, or any modification, as defined in paragraph (3)(i) of that definition, that does not change the item from a commercial item to a noncommercial item, is exempt from the requirement for certified cost or pricing data. If the contracting officer determines that an item claimed to be commercial is, in fact, not commercial and that no other exception or waiver applies, (e.g. the acquisition is not based on adequate price competition; the acquisition is not based on prices set by law or regulation; and the acquisition exceeds the threshold for the submission of certified cost or pricing data at (a)(1)) the contracting officer shall require submission of certified cost or pricing data.
Seeking synergy through collaboration with other Agencies and Services to capture best practices and develop consistent processes.

15. DCMA Technical Analysis
Technical Review Incorporates:
Mission Capability:
Reference performance specifications that were used to document the "item(s)" mission capability/engineering requirement
Comparison:
Identify the Performance Characteristics of the item being purchased by US Government (Function)
Identify the Physical Characteristics of the item being purchased (Form, Fit - Function)
Manufacturing process and any testing
Identify Manufacturing process
Identify Testing procedures
Identify any unique features that may relate to item being purchased by US Government
NOTE: Item could be a part or a subsystem
Overview
DCMA Provides Technical Analysis and Contractor Oversight for Commercial Items Acquisitions
What We Provide
Should-Cost analysis, Technical Support to Negotiations, CBAR historical data
How we do it
Analyze configuration changes against the commercial product
Substantiate contractor’s Commercial Item assertion with technical recommendations, cost rationale, and supporting data
Why
Reduce Risk to Commercial Item Acquisition
Successful history of performing engineering analyses of contractor cost proposals per FAR 42
Excerpt
(3) Commercial items. (i) Any acquisition of an item that the contracting officer determines meets the commercial item definition in 2.101, or any modification, as defined in paragraph (3)(i) of that definition, that does not change the item from a commercial item to a noncommercial item, is exempt from the requirement for certified cost or pricing data. If the contracting officer determines that an item claimed to be commercial is, in fact, not commercial and that no other exception or waiver applies, (e.g. the acquisition is not based on adequate price competition; the acquisition is not based on prices set by law or regulation; and the acquisition exceeds the threshold for the submission of certified cost or pricing data at (a)(1)) the contracting officer shall require submission of certified cost or pricing data.

16. DCMA Technical Analysis
Notice that Detailed Notes is something that should be done throughout the review. The reason is because DCMA Engineering support does not stop at the submission of the technical report
Two outcomes of the CID Review
The first to recommend to PCO commercial or non-commercial based on this flow Chart
The second is to support Price Reasonableness / assist DCMA Cost Analyst

17. DCMA Technical Approach
Review CID Package
Determine/recommend the applicable FAR definition
Research Company
Types of Products Produced
Similar Products used in other systems/equipment
Research Product
Mission Capability
Purpose/Function
Perform Market Research
Manufacturing Process
Compare Product to Baseline Product (focus on Minor and Major Modifications)
Document Results
Technical Report D E T A I L N O S
Notice that Detailed Notes is something that should be done throughout the review. The reason is because DCMA Engineering support does not stop at the submission of the technical report
Two outcomes of the CID Review
The first to recommend to PCO commercial or non-commercial based on this flow Chart
The second is to support Price Reasonableness / assist DCMA Cost Analyst
Technical Analysis of a CID package needs to focus on capability and function of product

18. Regulatory Update New Proposed Rule 2013-D034 published 8-3-15
Key Points:
Adds definition of “market based Pricing and “uncertified cost data”
Market based Pricing means nongovernment buyers are “preponderance” (> 50%) of sales
Nongovernment sales = nongovernment sale and for nongovernment purpose
Market based pricing is preferred method of establishing fair and reasonable
If relevant sales data reflecting market based is provided, the PCO shall not obtain cost data
Must consider market based pricing, age of data, volume, nature of acquisition, catalog (reflective in sales data) and T&Cs
PGI added to Identify “Cadre of Experts”
“Of a type” comparison can be quite the challenge because the contractor does not adequately demonstrate the differences between the baseline product and proposed product.
Example…the contractor modified the commercial item and stated the price was 3 times more because it was 3X more complex than commercial item. In this case they did provide the baseline. Do you believe this is reasonable? 18

19. AF Success Stories
 JDAM - commerciality/pricing for Aero Antenna, Honeywell, Rockwell Collins and Woodward
Global Hawk - commerciality/pricing support for Rolls Royce engine sustainment
Global Hawk - Republic of Korea (ROK) commerciality / pricing for Rolls Royce engine
Small Diameter Bomb (SDB - Eglin AFB) - Aero Antenna, Honeywell and Woodward commerciality/pricing
F117 engine sustainment - commerciality and pricing support for high visibility subcontract with Pratt & Whitney
“Of a type” comparison can be quite the challenge because the contractor does not adequately demonstrate the differences between the baseline product and proposed product.
Example…the contractor modified the commercial item and stated the price was 3 times more because it was 3X more complex than commercial item. In this case they did provide the baseline. Do you believe this is reasonable? 19

20. AF Success Stories
F15 TACAN - detailed technical / commerciality review
 AF Cryptographic Center Pegasus KI-55 and Gryphon ASICS
UPCOMING:
F117 engine sustainment, commerciality/pricing prime contract, sole source to Pratt & Whitney, currently awaiting submission of proposal -
Tinker AFB C130J - assistance through Eastern Hub for commerciality/pricing support for commercial subcontractors
Presidential Aircraft Recapitalization Program - specific tasking and support not defined yet
“Of a type” comparison can be quite the challenge because the contractor does not adequately demonstrate the differences between the baseline product and proposed product.
Example…the contractor modified the commercial item and stated the price was 3 times more because it was 3X more complex than commercial item. In this case they did provide the baseline. Do you believe this is reasonable? 20

21. Summary
QUESTIONS? 21