SUBCONTRACT MANAGEMENT HOW TO HANDLE THOSE DARN SUBCONTRACTORS ! ! ! Pamela McFarland

2 AGENDA Statement of Work (SOW) Terms and Conditions Risk Assessment Site Visits Liability Records Disposition

3 STATEMENT OF WORK Incorporate requirements into SOW as deliverable line items Physical Inventory Requirements Financial Reporting Requirements Gov’t Property System Approval Letters Property Plans/Procedure Requirements Disposal Requirements

4 STATEMENT OF WORK Requires Close working relationship with: Procurement Contracts Engineering Cost Accounting Managers Quality (to incorporate possible property audits with quality audits ……cost effective!)

5 TERMS and CONDITIONS Flow all property requirements (FAR 45, , and NASA or DoD Supplements) into the Terms and Conditions of Every Contract Different T’s & C’s dependent upon type of contract (i.e., Fixed Price or Cost Plus) May seem redundant, but acquisition or furnishing GP/CP may not be known at time of SOW. Can NOT flow Limited Risk of Loss Clause.

6 RISK ASSESSMENT Once the subcontract is in place and property is accountable. Assessments should consider the following: Total Dollar Value of property Does the sub have an “approved” system? Have they had LDD’s? Do they have lower tier subs? Do they have a method for “fully loaded cost”? (NASA) Have they implemented UID? (DoD) Do they have procedures?

7 RISK ASSESSMENT Assessments should be completed annually: To ascertain surveillance requirements (i.e., “on-site” versus desk surveillance) Review for support property administration delegation

8 RISK ASSESSMENT PURPOSE To provide an objective and disciplined risk assessment analysis of subcontractors METHODOLOGY Identify areas of vulnerability Focus on optimal levels of risk Efficient commitment of resources KEY ATTRIBUTES The risk categories and the corresponding measurements have been identified in the following charts

9 RISK ASSESSMENT DoD

10 RISK ASSESSMENT NASA

11 SITE VISITS Should the risk assessment determine a site visit is required, prior preparation is essential. Limit the scope to 5 functional elements or less Request property listings a week prior for random sample selection and preparation Complete audit spreadsheets and entrance briefings prior to start of visit (See Handout)

12 LIABILITY Limited Risk of Loss Clause If the limited risk clause is in the Prime contract, then the potential exists to flowdown that clause. Inform subcontractors that this clause exists and encourage them to request. –Request requirements include: –A copy of the original request from the subcontractor –A listing of ALL losses, regardless of prime contract, that the sub has incurred during the last 3 years. –A copy of the subcontractor’s most recent government property system approval letter.

13 LIABILITY Remember…………….. If the subcontractor does NOT have the limited risk clause, then YOU, as the prime, are responsible for obtaining payment.

14 RECORDS Subcontractor Records Two methods exist pertaining to records –The subcontractor maintains the record, or …… –YOU, the prime, maintain the record Pros and Cons for both methods You must rely on the subcontractor for everything, when the sub keeps the records. If you keep the records, are they “up to date”? How do you get notified when the property moves, gets issued, or ships?

15 DISPOSITION Program Screening MUST be completed first. Several Methods PCARSS (Plant Clearance Reutilization Screening System) Ship back to Prime for retention/reutilization Ship back to Prime for disposal (Yikes!)

16 MANAGING SUBCONTRACTORS REMEMBER …………We must reflect the value that property management adds to the company “bottom line”. We must be resourceful and flexible, and we can NOT do it alone. Creating and maintaining a good working rapport with your subcontractor is ……. ESSENTIAL !!

17 QUESTIONS QUESTIONS ? CONCERNS ? COMMENTS ? Thank You Pamela McFarland, Raytheon Work: Cell: