February 17, 2014

Is Your Company Overthinking Supply Chain Compliance?

There are plenty of aspects of effective supply chain management within a CPSR environment that are difficult - specialty metals compliance, noncompetitive price analyses for prototypes, etc. But there are many compliance requirements that are downright simple. So simple, in fact, that many contractors talk themselves right out of easy answers and into more difficult situations than are necessary. Here are three VERY common examples:

1. Competition on ID/IQ Teams: MANY contractors approach evaluating ID/IQ teams thusly - I added all of the team members because they bring work to the vehicle/do something special/customer loves them etc. I have no intention of “competing” them at the task order level - everyone will know what TO they're getting … it’ll just be a lot of silent responses. So I'll fill out source justifications, do a target rate analysis, take my chances complying with TINA requirements and hope no one asks if I performed a cost analysis.

Here's the easy and compliant solution - if all team members are proposing rates against the same labor categories then those rates can be competitively analyzed using standard competitive analysis procedures (Olympic scoring, etc.) and all subcontracts can be awarded on a competitive basis once high outliers are negotiated within the competitive range or are disqualified. And, per 15.403-1(c)(1)(iii), any task orders awarded using those rates would be considered competitive awards going forward.

2. Lead Time: Lead time is calculated by taking the time from Procurement's receipt of an approved requisition to award. Many contractors have extreme difficulty clocking adequate lead time (15-30 days enterprise-wide per DCMA). Because many contractors use accounting system requisitions (Deltek, etc.) and maintain efficiency metrics for PO processing, the contractor is never able to recognize more than 24-72 hours of lead time during a CPSR.

Easy compliant answer? Stop using Accounting System Requisitions for Purchasing System initiation! Each system needs certain types of documents. Accounting System Reqs (ASDs) come at the end of a procurement and obligate ceiling and/or funding. A purchasing system reg (PSD) should come BEFORE the RFQs go out to clock lead time correctly. So replace all of those back-and-forth emails with one piece of paper, get credit for lead time and avoid a needless – and practically incorrect - CPSR finding.

3. SSJs for SMEs: Tell me if you’ve heard this one before, COTR and a PM walk into a bar … The worst SSJs, by far, come from PMs trying to make a COTR happy. No PM, it’s not customer direction. Yes PM, the market for SMEs in a particular specialized discipline probably can’t be correctly assessed in 24-48 hours via Google. So okay, PM … submit your awful SSJ and we’ll take our lumps during our next CPSR.

Two answers here. First – try to compete. Staffing companies LOVE responding to SME RFQs (big rates plus winning is a good way to establish rapport and loyalty with a new or continuing customer – you). Throw that RFQ out there on a Best Value basis! If competition is accomplished you’ll either get the person the PM wanted or someone better at a lower rate (the only two real options in this case, no?). If no competition is achieved you now have documented market research and efforts to compete. Back-up for SSJ achieved! 

Second option – ask: WHY does the COTR want the sub? Many PMs stop at “COTR said,” even though there is a legit justification behind the request. Generally it’s that the sub built a system being currently maintained/improved or is moving to the contractor’s contract from an expired order (both Follow-on Procurements). Getting the reason behind the request will often improve the documentation immensely (Follow-On will apply to these requests probably 5 or 6 out of 10 times; 2 or 3 more out of 10 will likely be addressed by the SME approach if you’re a typical service contractor).