Acquisition Policy Update

1. Air Armament Center Acquisition Policy Update Emily Jay AAC/PK emily.jay@eglin.af.mil 882-4398 DISTRIBUTION STATEMENT A: Approved for public release; distribution is unlimited.

2. Agenda Update on Anticipated Changes from Last Year Contract Incentives Changes to Source Selection Process Firm Fixed Price Development Contracts Other Hot Topics

3. Update From Last Year • Congress and DAPA “Conspiracy of Hope” Advocated Change in our Processes • Source Selection Improvement Team • Requirements Traceability Matrix • More Education of Teams “Do’s and Don’ts” • DFARS Guidance Regarding Downselects • Increased Use of Oral Proposals • Increased Emphasis on Cost Realism/Risk • Increased Emphasis on Structuring Contracts to Limit Overruns • Move to Risk Based Source Selection • Award Fee Policy Revisions

4. Contract Incentives April/May 2006 – OSD/AF letters June 2007 – OSD/AF letters More OSD and AFFARS change pending AAC Local Procedures CPFF (PI) Contract Type allows Min Base Fee with Performance Incentives Cost, Schedule, and Performance are tied Incentives Need to Consider Length of Effort, Scope of Work and determine if: Graduated Plans Should Be Used Interim Evaluations Should Be used

5. Incentive Fee Example #1Non-Graduated, Complete in 1 Year • Small % Fixed Fee • The Cost, Schedule, and Technical criteria are "final performance criteria" for a Performance Incentive Fee of X% • Only be earned if the combined criteria are all accomplished. • The criteria are interdependent, all criteria must be met to earn the performance incentive fee. • Sample Criteria • Cost: CPI of 1.0 or higher at contract completion • Schedule: All SDD major events complete IAW kt • Performance: Successful completion of DT

6. Incentive Fee Example #2 Cost Plus 3% Fixed Fee with 12% Incentive Fee for meeting Cost AND Schedule AND Performance

7. Changes to Source Selection AF Standardized Source Selection Process All source selection plans approved on or after 31 Mar 08 must comply with the revised procedures Individual Deviations approved at AFMC Program Tailoring Comes In Developing Evaluation Criteria Changes will be implemented in AFFARS

8. Integrated Risk BasedSource Selection Criteria Air Armament Center

9. Source Selection Evaluation Matrix CURRENT NEW Cost/Price Risk * Mission Capability Mission Capability Subfactor 1 Subfactor 2 Subfactor 3 Subfactor 1 Subfactor 2 Subfactor 3 Proposal Risk Risk Rating Risk Rating Risk Rating Technical Rating Technical Rating Technical Rating Past Performance Past Performance Cost/Price * * This factor may require a risk assessment as described in Paragraph 5.5.4. Cost/Price * For use on cost reimbursement or fixed-price incentive contracts where Cost/Price Risk is an Evaluation Factor; Most Probable Cost is utilized

10. Cost / Price Risk Ratings CURRENT NEW

11. Cost Risk Ratings • Cost • The Offeror’s proposal will be assigned a cost proposal risk rating to characterize the extent to which the proposed costs indicate a clear understanding of solicitation requirements and reflect a sound approach to satisfying those requirements, including the planning for sufficient Management Reserve to accommodate risk. This will be accomplished by assessing the difference between the Offeror’s Cost Proposal and the Government’s Most Probable Cost estimate (MPC) of the Offeror’s approach, including the Government’s estimate of risk associated with the Offeror’s approach. • High Risk ( Estimate is > 20% above or below MPC) • Moderate Risk ( Estimate is 11%-20% above or below MPC) • Low Risk (Estimate is <10% above or below MPC) • Individual programs may tailor % and upper boundary for high risk

12. Factors – Cost/Price Risk • Elevated Cost/Price Risk as a separate evaluation factor • Moves Cost/Price risk from within the Cost/Price evaluation factor. • Only applies to ACAT programs in a System Development and Demonstration (SDD) phase utilizing Most Probable Cost (Cost Reimbursement or Fixed-Price Incentive contract) • Mandatory discussions of cost model prior to RFP release • Requires robust discussions with each offeror on how the government’s best estimate of Probable Costs is calculated • Each offeror will have its own MPC based on their unique approach • When used, Cost/Price Risk shall be a significant factor

13. Mission Capability Technical Ratings CURRENT NEW

14. Mission Capability RiskRatings CURRENT NEW + Used when risk is in the upper boundaries of a Mission Capabilities Risk Rating but not enough to merit the next inferior rating

15. Proposal Risk – Pre SDD

16. Past Performance Ratings CURRENT NEW

17. Fixed Price Development Contracts FY07 Authorization Act – PL 109-364, sec 818 DFARS Case 2006-D053 MS B – MDA, with advice of the Contracting Officer, selects contract type for development program Basis for Contract Type Documented in Acq Strategy Include explanation of level of risk If high risk, steps taken to taken to reduce program risk and reasons for proceeding despite the high level of program risk Cost Type Contract Requires a Written Determination Program is so complex and technically challenging…not practicable to reduce program risk to a level permitting FP contract” Complexity and technical challenge is not a result of failure to meet 10USC2366a DFARS Case – Out for Public Comment - Closes 24 March 08

18. MDA Certification National Defense Authorization Act for 2006 Implemented in USD/ATL letter dated 2 May 06 Prior to MSB approval, MDA must certify Technology has been demonstrated in a relevant environment Program demonstrates high likelihood of accomplishing its mission Program is affordable when considering the per unit cost and total acquisition cost AoA has been conducted Program is affordable when considering alternative systems JROC has completed review, including analysis of reqts Program complies with all policies, regs, directives

19. Other Hot Topics • Sole Source Negotiations • Receive same level of Risk Assessment/Review Prior to Handshake • Congressional requirement for Service Contract Reviews • OSD looking at broader applications • UCA Definitizations • Increased Emphasis on 180 Day Definitization

20. Summary Congress, OSD, and AF continue to advocate realism and accountability in estimates and contracts Risk is now assessed in POM Submissions, MDA Certifications, Source Selections and Sole Source Awards OSD and AF increasing use of Standardized Procedures to ensure min level of quality/realism