Defense Supply Center Richmond

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Defense Supply Center Richmond

• Pre- Proposal Conference
• BRAC PRIVATIZATION
• EFFORT FOR
• COMPRESSED GASES
• AND CYLINDERS
• 18 JULY 2006

2
Agenda

• Privatization Overview
• Timeline
• Acquisition Strategy
• Terms
• Scope
• Requirements
• Instruction to Offerors
• Evaluation Procedures
• Privatization Challenges
• Questions

3
Privatization Overview

• Purpose
• DLA plans to transform the way it orders,
  receives, accounts for, distributes, and disposes
  of chemicals to include packaged petroleum, oil,
  lubricants (POLs), compressed gases, cylinders,
  and chemicals for its customers.
• This strategic sourcing initiative is a critical
  priority mandated by BRAC recommendation 175,
  which was signed into law on November 9, 2005.

4
Base Realignment and Closure (BRAC)Recommendation
175

• Background
• DLA will rely on private industry for the
  performance of supply, storage, and distribution
  of these commodities.
• DLA will retain only the supply contracting
  function for each commodity.
• DLAs intention is to leverage the commercial
  industry and potentially implement regional
  chemical management services programs across the
  U.S. This initiative is designed to assure
  readiness, safety, and efficiency.
• DLAs goal is to improve lead-times, reduce
  costs, and increase customer satisfaction while
  allowing the customers to focus on their core
  competencies.

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Timeline

• Industry Day 14 Dec 05
• RFI Feedback 30 Jan - 3 Feb 06
• Small Business Industry Day 1 Mar 06
• Draft Business Case Analysis 24 Mar 06
• Synopsize 31 May 06
• Issue RFP 12 Jul 06
• Pre-Proposal Conference 18 Jul 06
• RFP closes 11 Sep 06
• Tech/Price Evaluation 6 Oct 06 (tentative)

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Acquisition Strategy
Acquisition Strategy
Advantages

• 1 Worldwide Contract
• Compressed Gases Cylinders
• Excludes Ozone Depleting Substances

• Economies efficiencies
• (cost avoidance)
• - IT Integration / interface
• - Centralized approach
• - Clear lines of communication
• - Industry best logistical network
• - Simplifying transition process
• - Minimizing duplicate overhead cost

Privatizing 2 FSCs 802 NSNs 416
Active 386 Inactive Demand value (CY2005)
23 million
6830 Compressed Gases 8120 Cylinders
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Terms

• Type of contract
• Fixed price with quarterly EPA adjustments
• Price re-determination at option exercise for
  material prices and cylinder refurbishment
• 100 Small Business Set Aside
• Contract Term
• 10 years
• 5 year base
• One 5 year option period
• Maximum 10 Year Contract Value 525 Million
• Guaranteed Minimum 25 of first years
  transition and management fees. No guaranteed
  minimum for option period.

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Scope of Acquisition
Planning / forecasting Order
processing and fulfillment
Procurement / purchasing Inventory
management Quality control
Storage Transportation / distribution

• Packaging
• Obsolescence management
• Data management / delivery
• Customer support services
• Material returns
• Disposal

• Management of a pool of Government furnished
  cylinders to include storage,
• maintenance / refurbishment, filling, and
  distribution.
• Development of a cylinder exchange program to
  include the delivery of full
• cylinders to, and the pick-up of empty cylinders
  from, customers sites both
• CONUS and OCONUS.

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Government Responsibilities

• Identify DLA Customer Account Specialists to
  coordinate communications with customers
• Provide cylinders as GFP for use in cylinder pool
• Provide T-carts as GFP for OCONUS use
• Transfer VMI
• Sell or dispose of non-VMI
• Maintain responsibility for alternate source
  approval, FAT, QPL, Military/Federal
  specifications, CID and PID updates

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Addition/Deletion of Items

• Additions
• Service managed items
• Newly developed items
• Replacements for obsolete/canceled NSNs
• Priced per pricing methodology and subject to
  full production lead-time before application of
  metrics
• Deletions
• Obsolete or canceled NSNs

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Requirements

• Program Management
• Transition
• Forecasting
• Inventory Management
• Purchasing
• Distribution
• Reviews and Reports
• End of Contract Support

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Program Management

• Single interface
• Resolution of business/technical problems
• Implementation of corrective action
• Customer Service
• Toll-free number/web-site link
• Quality and Environmental Requirements
• Contractor responsible for obtaining/maintaining
  all required federal, state, municipal and
  international certifications, licenses and
  approvals
• Quality system ISO 9000

13
Transition

• Synchronized among contractor, DDC, and DSCR
• Completion of transition - 730 days after award
• Post-award conference 30 days after award
• Establish methodology for pricing inactive or new
  items
• EDI requirements
• Assumption of item management
• Vendor managed inventory
• Establishment of cylinder pool
• Existing DLA contracts and purchase orders

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Purchasing

• Contractor purchases must conform to all
  technical and quality requirements
• Item Descriptions
• Material Safety Data Sheets
• Hazardous Warning Labels
• Environmental Protection Agency designated
  products
• Item testing and certifications
• Facility certifications

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Forecasting and Inventory Management

• Worldwide support for all DLA customers including
  CONUS, OCONUS and FMS.
• Responsible for all items both active and
  inactive NSNs.
• OCONUS forward stock locations
• Maintenance of cylinder pool
• Shelf-life management
• Surge Demands

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Distribution

• Compliance with DOT and DOD specifications and
  standards
• Packaging, marking per item description
• Inspection/acceptance
• Transportation
• Cylinder exchanges/returns
• Delivery requirements
• High Priority 2 day delivery
• Routine Priority 5 day delivery
• Emergency Orders 24/7

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Distribution (contd.)

• OCONUS Requirements
• Material Returns
• Disposals
• Product quality deficiencies - supply
  discrepancies
• Tailored support

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Fill Rate Metric

• Fill Rate measured monthly reviewed annually at
  PRB to determine incentive/disincentive
• Must maintain minimum percentage for each
  performance period
• Fill rate metric measurement based on ship date
  rather than delivery receipt date.
• Priority 01-08 1 Day
• Priority 09-15 3 Days
• Backorders are included in subsequent monthly FR
  metric calculations until order is shipped.

Contractor performance will be governed by Fill
Rate metric with a minimum .
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Performance Reviews Reports

• Quarterly reports beginning 180 days after award
• GFP cylinder inventory
• GFP cylinder refurbishment/disposal
• Customer cylinder deliveries/exchanges
• VMI disposal
• PQDRs-SDRs
• Material returns
• In-Process Reviews
• Performance Review Board

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End of Contract Support

• Contract Expiration
• Remaining VMI and GFP cylinder pool to successor
• No Government purchase of contractor inventory
• Contractor comply with SOW for all orders
• Contract Termination
• Return VMI and GFP to Government
• Government may purchase contractor inventory
• Coordination for New Solicitation/Contract
• Contractor furnished information
• Transition to successor

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Payment

• Material - Fixed prices for gas, cylinders and
  associated parts adjusted quarterly by EPA. Paid
  per delivery order.
• Services Paid Monthly
• Cylinder Refurbishment Fixed price based on 4
  levels of refurbishment.
• Transition Fee Fixed amount for first year.
• Management Fee Fixed annual amount.
• Throughput Fee Fixed percentage applied to
  volume of business.
• Fill rate incentive paid annually after
  performance review board.

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Section L Instructions to Offerors

• Proposal Format
• Five volumes
• Volume 1 - Executed proposal
• Volume 2 Technical proposal
• Volume 3 Management proposal
• Volume 4 Past performance proposal
• Volume 5 Price proposal
• Three copies of each volume and one CD-ROM
• Page limitations and layout

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Technical Proposal

• Forecasting
• Indicate and describe tools and measurements
  utilized in forecasting demands
• Data used
• Forecasting Tool
• Examples

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Technical Proposal (contd.)

• Inventory Management
• Outline ability to manage inventory to support
  requirements of SOW
• Facilities/warehousing
• Management of GFP cylinder pool
• Shelf-life management

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Technical Proposal (contd.)

• Purchasing
• Identify place of manufacture and QPL approvals
• Production facilities for each gas
• Describe plan for compliance will item
  descriptions
• Flow-down of requirements to subcontractors
• Planned and existing arrangements with
  subcontractors
• DLA Mentoring Business Agreements Proposal

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Technical Proposal (contd.)

• Distribution
• List/describe current and proposed distribution
  and distribution network
• Process for marking, packaging, packing and
  palletization
• Flow chart/description of process from receipt of
  order to delivery to customer
• Plan for managing disposals, customer returns and
  misdirected shipments
• Description of order tracking system
• Cylinder pick-up
• PQDRs, SDRs, warranty issues

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Management Proposal

• Organization
• Management Team
• Organization Chart
• Transition Plan
• Establishment of GFP cylinder pool
• Implementation of VMI transfer
• Assumption of item management
• Risk Management Plan
• Address specific scenarios
• Surge and sustainment plan

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Past Performance Proposal

• Substantially similar past performance
• Offeror or major subcontractor
• Past 5 years
• Similar in scope
• Corporate experience
• Offeror, subcontractor, or employee in providing
  individual elements of proposal
• Experience may not be as comprehensive as scope
• How experience relates to proposed concept

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Price Proposal

• Excel spreadsheet see Schedule B1
• Material Prices
• Fixed unit price for each gas, cylinder and
  associated parts
• Unit price is for first quarter after award
  subject to quarterly EPA adjustments
• Cylinder Refurbishment
• Fixed unit price for each level of refurbishment
• Escalation rate for annual adjustment
• Transition Fee first year dollar amount to
  cover transition and implementation costs
• Management Fee a dollar amount for each year to
  cover fixed costs including OH, GA and profit
• Throughput Fee a single percentage to cover
  costs that vary with business volume.

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Section M Evaluation Procedures
Evaluation Criteria

• Technical
• Planning / Forecasting
• Purchasing Subcontracting
• Inventory Mgmt
• Distribution
• Management
• Organization
• Transition Plan
• Risk Mgmt
• Past Performance
• Substantially similar past performance
• Corporate Experience
• Price

Technical, Management, Past Performance and
Price will be weighted equally
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Evaluation Procedures (contd.)

• Technical Proposal
• Purchasing and Distribution are equally
  important.
• Forecasting and Inventory Management are equally
  important.
• Purchasing and Distribution are more important
  than Forecasting and Inventory Management
• Management Proposal
• Organization and Transition are equally important
• Risk Management is more important than
  Organization and Transition

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Evaluation Procedures (contd.)

• Past Performance
• Lack of performance record receives neutral
  rating
• Rated for three sub factors in descending order
  of importance
• Substantially Similar Past Performance
• Corporate Experience
• DLA MBA Proposals
• A rating of deficient may be assigned if past
  performance does not demonstrate a commitment to
  customers satisfaction or a reputation for
  reasonably cooperative behavior.

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Evaluation Procedures (contd.)

• Price
• Evaluated based on cost realism, fairness and
  reasonableness.
• Material Prices multiplying proposed price
  times EAD times 10 unadjusted by EPA
• SSA will be provided EPA scenarios
• FAT prices will be added to total evaluated price
  and each of the EPA scenarios
• Service Fees
• Cylinder refurbishment multiplying proposed
  price for each level times EAD. Proposed
  escalation will be applied for each year to
  arrive at a 10-year refurbishment price.

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Evaluation Procedures (contd.)

• Service Fees
• Management fee adding proposed fee for each
  year to arrive a 10-year value.
• Throughput fee multiplying proposed unit price
  X EAD X proposed percentage. Material prices
  will be escalated 3 each year. Each yearly
  value will be added to arrive at a 10-year value.
• Transition fee will be added to the evaluated
  management fee, throughput fee and cylinder
  refurbishment fee to arrive at a 10-year total
  service fee.

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Privatization Challenges

• Challenges
• DDC schedule / tailored support / DRMS Disposal
  Support
• Close Coordination with DDC/DDRV/DRMS
• Ensuring healthy pipeline
• Implementation Plan and Coordination with
  Services
• Movement to localized OCONUS support
• Plans Technical Evaluations

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Privatization Execution
Privatization Contracts Chems/POLs
NSN Expansion
Movement to OCONUS CD Support
Continual Movement Toward Full Commercial
Approach
FY08
FY06
FY10
Award (12/06)
Chemical Management Services (CMS) Multiple
Award
Inventory transfer complete (12/08)
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DSCR Privatization Website

• Website
• http//www.dscr.dla.mil/UserWeb/FAGA/privatize.ht
  m
• All Questions Must Be Submitted In Writing
• Visit often for updates!
• Offers must be submitted by 9/11/06 at 2 p.m. EST