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Breakout Session #509 Elton Beldock , Manager Procurement Compliance, Honeywell Engines, Systems and Services

The Benefits of Implementing Commercial Items In the Supply Chain. Breakout Session #509 Elton Beldock , Manager Procurement Compliance, Honeywell Engines, Systems and Services Rhonda Jacobs , Manager, Ernst & Young LLP, Government Contract Services Date April 28, 2004

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Breakout Session #509 Elton Beldock , Manager Procurement Compliance, Honeywell Engines, Systems and Services

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  1. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

  2. The Benefits of Implementing Commercial Items In the Supply Chain • Breakout Session #509 • Elton Beldock, Manager Procurement Compliance, Honeywell Engines, Systems and Services • Rhonda Jacobs, Manager, Ernst & Young LLP, Government Contract Services • Date April 28, 2004 • Time 10:30 – 11:30 a.m. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

  3. QUESTION • Can you reduce contracting and subcontracting administrative costs related to Government contracts? • Can your primarily commercial business preserve its structure, strategies, and systems and still do business with the Government ? YES, YOU CAN! NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

  4. Introduction • About Honeywell Engines, Systems & Services • Phoenix-based leading global provider of integrated propulsion engines, systems, auxiliary power units and service solutions for aircraft manufacturers, airlines, business aviation, and military application “Of a type” products for both Commercial and Government Customers NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

  5. The New Process Improvement • Decision to Implement Commodity Team • Enter into Long Term Agreements (LTA) • leverage commodity purchases across the businesses • Centralize procurement activities • Develop supplier long term partnerships • An unimpeachable commercial process Sound commercial practices . . . . NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

  6. The Issues • Our Government Customers were not happy: • Thresholds exceeded for Contractor Purchasing Systems Review (CPSR) • Contract pegging? • LTAs meant higher levels of documentation • Initial Corrective Action Attempts • Joint CPSR Reviews of LTAs • Repeated failures • Band-aid fixes • Increased process complexity and inefficiencies . . . . burdened by Government Regulatory Requirements. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

  7. Simultaneous Government Acquisition Revisions • FASA – The first step • Clinger-Cohen - Clarifications • Commercial Item Handbook – Guidance • CI decisions vs. price reasonableness • Who makes the decision? • Market research • Commercial Item Checklist • Alternative approaches to determinations • SARA, others Government Dealing with Same Issues NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

  8. Commercial Unique 49% Dual Use 40% Government Unique 11% The Idea • Can the Government’s Acquisition Revisions Help Us? • Reviewed active purchased parts: • Split the Processes: Commercial/Govt. It’s a GO! NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

  9. Say It,... • Bring the customer into the process.. NOW • Gain process consensus • Bi-monthly meetings • Conversion from LTA to LTC • Stratification and classification A Dynamic Empowered Team and a Winning Strategy NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

  10. Do It,…. • Establish diverse, innovative team • Knowledge of products acquired • Training in Commercial Item criteria • Review Process: • Obtain customer agreement that commercial only and dual use applications are Commercial Items • Review balance by Alternative Approaches • Modifications of a type – retain function • Same industry processes • Commercial Facilities Mirrored the Government’s Market Research NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

  11. Prove It,... • Basis for Purchasing System Reviews • Separate commercial decision from price reasonableness • Provide DCMA with Commercial Item Checklist that validates the decision • Retain the Price Reasonableness analysis in the LTC file • Code CID in MRP for future buys • No re-review unless component is significantly modified (CIH) K.I.S.S. It ! NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

  12. The Results • MOU defined specifics of the processes and responsibilities • Mitigates misunderstandings • Provides guidance to CPSR • CPSR after full deployment results in NO recommendations Teaming with Customer = SUCCESS NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

  13. Sharing the Benefits • Government • Framework for successful/streamlined system review • Audit process in less time with fewer auditors • Use of electronic files and on-line systems • New technologies, broader supplier base • Honeywell (and all Contractors) and Suppliers • Price analyses supported by other than cost andpricing information on non-competed procurements • Documentation requirements more manageable • Flowdown limited basically to those at 52.244-6 It’s a WIN - WIN Solution! NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

  14. QUESTIONS Commercial Item Handbookhttp://www.acq.osd.mil/dpap/Docs/cihandbooks.pdf FAR Web Sitehttp://www.arnet.gov/far/current/html/FARMTOC.html Contact Rhonda at rhonda.jacobs@ey.com or (949) 437-0317 Contact Elton at elton.beldock@honeywell.com or (480) 592-3854 NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

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