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LESSON 4 Nonconforming Material

LESSON 4 Nonconforming Material. Lesson Introduction. Given the Defense Contract Management Agency (DCMA) Nonconforming Material (NCM) policy, students will be able to effectively perform surveillance and manage nonconforming material. Lesson Objectives.

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LESSON 4 Nonconforming Material

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  1. LESSON 4Nonconforming Material

  2. Lesson Introduction Given the Defense Contract Management Agency (DCMA) Nonconforming Material (NCM) policy, students will be able to effectively perform surveillance and manage nonconforming material.

  3. Lesson Objectives Upon completion of this lesson, you should be able to: • Interpret Federal Acquisition Regulation (FAR) guidelines pertaining to NCM as they apply to the DCMA. • Distinguish the difference between nonconforming material and nonconforming products/services. • Distinguish the difference between a Variance, pre-production (Deviation) and a Variance, post-production (Waiver). • Distinguish the difference between a critical, major, and minor nonconformance.

  4. Lesson Objectives (cont.) Upon completion of this lesson, you should be able to: • Outline the DCMA NCM process. • Identify the responsibilities of DCMA pertaining to NCM. • Identify the responsibilities of the Material Review Board (MRB) in the disposition of nonconformances. • Distinguish the difference between scrap, rework, repair, and use-as-is. • Identify reasons why performing data trend analysis is part of an NCM surveillance plan.

  5. Lesson Topics This lesson covers the following topics: • Definitions and Authority • Nonconforming Supplies and Services Policy • Documents Frame Our Approach to NCM • DCMA NCM Process • Material Review Board Basics • Surveillance of NCM

  6. WIIFM? This lesson is important because: • NCM should be the exception, not the norm. • A Quality Assurance Specialist (QAS) must know how to handle NCM • NCM can occur with any contractedproduct or service! • More common in complicated and highlydetailed endeavors • The QAS’s involvement in NCM situationsvaries depending on the facility and the nature of the NCM. • As Government agents, QASs have an obligationto drive down nonconformities!

  7. Definitions and Authority Lesson Topics: Definitions and Authority Nonconforming Supplies and Services Policy Documents Frame Our Approach to NCM DCMA NCM Process Material Review Board Basics Surveillance of NCM

  8. Topic 1: Definitions and Authority • Key terms • Nonconformance • Nonconforming materials • Nonconforming supplies/services • Deviations/Waivers • Engineering change proposal (ECP) • Material review board (MRB) • Authority • FAR 52.246-2 through -9 • FAR Part 46: Quality Assurance • FAR Part 52: Solicitation Provisions and Contract Clauses • FAR Part 12: Acquisition of Commercial Items • FAR Part 32: Contract Financing

  9. Definitions: Nonconformance • NonconformanceThe nonfulfillment of a requirement. • Nonconforming MaterialAny item, part, supplies, or product containing one or more nonconformances. • Nonconforming Supplies and ServicesAny supplies or services which do not conform in all aspects to the contract requirements.

  10. Definition: Deviation/Waiver • Deviation/Deviation PermitAuthorization to depart from a particular requirement. • Requested prior to manufacture/pre-production (product realization) • Waiver/ConcessionAuthorization to use or release a nonconforming product • Requested after manufacture/post-production • Variance Refers to all (MRB) nonconformance requests for Waiver or Deviation ……Request for Variance (RFV)

  11. Definitions: Engineering Change Proposal Engineering Change Proposal (ECP)Documentation by which a proposed engineering modification is described, justified, and submitted for approval to: • Current document change authority • Procuring activity

  12. Definitions: Material Review Board Material Review Board (MRB)Supplier’s board consisting of representatives of supplier’s departments necessary to review, evaluate, and determine or recommend disposition of NCM referred to it.

  13. Definitions: Types of Nonconformance Types of nonconformanceNonconformances are categorized as one of three types: • CriticalInvolves safety and can result in catastrophic failure or loss of life • MajorAffects performance, reliability, health, use, weight/size, or appearance • MinorDoes not adversely affect or involve any factors listed for critical or major nonconformance

  14. Definition: Types and Differences in NCM Disposition Types and differences in NCM dispositionThe Government can approve specific actions for NCMs: • ReworkAction taken to eliminate a nonconformance • RepairOne-time action to make a NCM acceptable for intended use • Standard RepairDocumented repair technique that is morecost effective than a rework • ScrapNCM cannot be reworked or repaired • Use-As-IsMaterial with minor nonconformance(s) usable for intended purpose

  15. Question and Answer Which of these definitions describes a nonconforming product or service? • The nonfulfillment of a requirement • A product/service realization departure from a contract requirement • Any supply/service that does not conform in all aspects to contract requirements • Any item, part, supplies, or product that fulfills the contractual quality standard

  16. Authority (1 of 5) FAR 52.246 THROUGH THE END OF PART 52 … f) The Government has the right either to reject or to require correction of nonconforming supplies. Supplies are nonconforming when they are defective in material or workmanship or … This section defines what constitutes nonconformance.

  17. Authority (2 of 5) FAR PART 46: QUALITY ASSURANCE … 46.405 – Subcontracts 46.406 – Foreign Governments 46.407 – Nonconforming Supplies or Services 46.408 – Single-Agency Assignments of Government Contract Quality Assurance … These sections address nonconformance with regard to QA and special circumstances.

  18. Authority (3 of 5) FAR PART 52: SOLICITATION PROVISIONS AND CONTRACT CLAUSES ... that have been tendered for acceptance. The Government may require repair or replacement of nonconforming supplies or performance of nonconforming services at no increase in contract price. When repair or replacement is necessary, the supplier must absorb associated costs.

  19. Authority (4 of 5) FAR PART 12: ACQUISITION OF COMMERCIAL ITEMS ... the issue of rejection, the Government always has the right to refuse acceptance of nonconforming items. This paragraph is generally appropriate when the Government is acquiring noncomplex commercial ... This section extends the Government’s rights of refusal to commercially available items.

  20. Authority (5 of 5) FAR PART 32: CONTRACT FINANCING … (6) … noncompliances or changes in cost accounting practice. (7) Reinspection costs for nonconforming supplies or services. (8) Duplicate or erroneous payments.… Keep accurate records when reinspection is needed; work with ACO to recoup costs.

  21. Nonconforming Supplies and Services Policy Lesson Topics: Definitions and Authority Nonconforming Supplies and Services Policy Documents Frame Our Approach to NCM DCMA NCM Process Material Review Board Basics Surveillance of NCM

  22. Topic 2: Nonconforming Supplies and Services Policy FAR 46.407: Nonconforming supplies or services • This regulation serves as the basis for DCMA’s disposition and procedures regarding nonconforming goods and services. • The complete regulation is available online: http://farsite.hill.af.mil/reghtml/regs/far2afmcfars/fardfars/far/46.htm#P198_30620 The bottom line is… • The Government is a customer, and as such: • Expects to receive what it paid for • Is entitled to consideration when it does not receive what it paid for

  23. FAR 46.407(a) NCMs are unacceptable!!! The contracting officer should reject supplies or services not conforming in all respects to contract requirements … However, “In those instances where deviation from this policy is found to be in the Government’s best interest, such supplies or services may be accepted …”

  24. FAR 46.407(b) The supplier is on the hook!!! The contracting officer must give the contractor the opportunity to correct or replace nonconforming supplies or services … within the required delivery schedule. The Government reserves the right to: • Charge the supplier for additional costs • Reject NCM • Terminate the contract

  25. FAR 46.407(c)(1) When nonconformance is major or critical… … the contracting officer ordinarily must reject supplies or services… there may be circumstances … when … acceptance … is in the best interest of the Government. CO makes this determination based on: • Technical advice • Information about the nonconformance • Supplier’s request for acceptance • Recommendation for acceptance, conditional acceptance, or rejection • Contract adjustments

  26. FAR 46.407(c)(2) Document everything!!! The cognizant contract administration office … must furnish this data to the contracting officer in writing … Communication is key • Contract administration office • All involved Government activities • Technical experts • Health officials • Support personnel

  27. FAR 46.407(d) QAS can decide to accept/reject minor NCM If the nonconformance is minor, the cognizant contract administration office may make the determination to accept or reject, except where this authority is withheld… Better safe than sorry!!! • Don’t make arbitrary (“gut”) decisions • Establish a joint review group for minor NCMs • Base all decisions on rationale and risk • How will the NCM affect form, fit, and function?

  28. FAR 46.407(e) Fix the problem!!! The contracting officer must discourage the repeated tender of nonconforming supplies or services … by appropriate action… If the problem persists, track it down! • Repeated nonconformances (even minor ones) indicate a problem with the process • Reject and/or document each instance • Maintain performance records • Verify root cause analysis

  29. FAR 46.407(f) Paying the price for accepted NCMs When supplies or services are accepted with critical or major nonconformances … the contracting officer must modify the contract to provide for an equitable price reduction or other consideration… Can be monetary consideration or additional product/items • Withholdings should cover estimated cost and profit to correct nonconforming materials or services. • For minor NCMs, modify the contract only if supplier’s savings exceed Government’s cost of modifying the contract.

  30. FAR 46.407(g) How to handle rejection Notices of rejection must include the reasons for rejection and be furnished promptlyto the contractor … because … acceptance may in certain cases be implied as a matter of law … The notice must be in writing if: • Rejection occurs at a place other than the supplier’s plant • Supplier persists in providing NCM • Delivery was late without excusable cause

  31. Question and Answer FAR 46.407(d) allows the DCMA QAS to do what? • Charge the supplier for additional costs related to NCM. • Adjust the contract to allow minor NCM acceptance. • Cancel the contract if NCM is discovered. • Decide to accept/reject minor NCM.

  32. Documents Frame Our Approach to NCM Lesson Topics: Definitions and Authority Nonconforming Supplies and Services Policy Documents Frame Our Approach to NCM DCMA NCM Process Material Review Board Basics Surveillance of NCM

  33. Topic 3: Documents Frame Our Approach to NCM These documents frame DCMA’s approach to NCM.

  34. ISO 9001: Quality Management Systems Requirements • Requires: • Quality System • Control of NCM, including identification • Elimination of defect or authorizing its use • NCM records

  35. MIL-HDBK-61A, ANSI/EIA 649: Configuration Management • Configuration Management Standards • Managing Requests for “Variance” or Requests for Deviation

  36. FAR 52.246-2: Inspection of Supplies – Fixed Price • Requires system acceptable to the Government • Primary basis of DCMA’s authority to conduct surveillance • Establishes the right to reject NCM or require correction

  37. DCMA Nonconforming Material Instruction • Describes integrated DCMA approach for managing the NCM process • Provides multifunctional instructions and protocols for QAS, Engineers, and Contracts

  38. DCMA Nonconforming Material Instruction • NCM MULTIFUNCTION WORKING GROUP • QA, Engineering, Contracting, & Supply Chain • Each functional element must incorporate this approach into their respective surveillance plans

  39. DCMA NCM Process OVERVIEW Lesson Topics: Definitions and Authority Nonconforming Supplies and Services Policy Documents Frame Our Approach to NCM DCMA NCM Process Material Review Board Basics Surveillance of NCM

  40. Topic 4: DCMA NCM Process 1 2 3 4 5 Develop NCM Plan ReviewRequests Document NCMs Analyze Trends Update Plans Establish NCM Team & Develop Surv Plan Document NCM Surv Results Conduct NCM Surveillance Update NCM Surv Plan Analyze NCM trends Reassess Risk These steps are based on the Nonconforming MaterialsDCMA Policy Instruction

  41. Step 1: Develop NCM Plan 1 2 3 4 5 Develop NCM Plan ReviewRequests Document NCMs Analyze Trends Update Plans • NCM plan may be separate or included in the overall surveillance plan. • When developing NCM plan, the QAS should involve: • Administrative Contracting Officer (ACO) [interfaces with Procuring Contracting Officer (PCO)] • Engineers (technical experts) • Multifunctional NCM Working Group approach • Plan should define: • NCM reduction goals • High/Moderate/Low NCM risk surveillance actions • Reporting process (QAS → ACO) • Data to support cost consideration decisions

  42. Step 2: Review NCM Requests 1 2 3 4 5 Develop NCM Plan ReviewRequests Document NCMs Analyze Trends Update Plans • QAS must review all (100%) NCM Requests for Variance (RFV): • Completeness & Accuracy • Classification: Minor/Major/Critical • Disposition: Use-as-is/Repair • Root cause and corrective action/preventative action plan • Other special circumstances

  43. Step 3: Document NCM Submittals and Decisions 1 2 3 4 5 Develop NCM Plan ReviewRequests Document NCMs Analyze Trends Update Plans • Review of each MRB RFV considered a Product Exam Document per DCMA Product Examination Policy • ECP/MRB RFV Tracking Log Minimum required data fields - per Policy Instruction • When delegated, summary of submittals/decisions at subcontractor level must be reported from the sub-tier CMO • Delegation eTool contains an area for providing monthly reporting

  44. Document NCM Submittals and Decisions * Sample ECP/RFV Tracking Log with Required Data Fields

  45. Step 4: Perform NCM Trend Analysis 1 2 3 4 5 Develop NCM Plan ReviewRequests Document NCMs Analyze Trends Update Plans • Analyzes the NCM process as it is being implemented • Identifies recurring issues • Included as part of Data Collection and Analysis (DC&A) plan • Reassess risk based on DC&A results • Must be performed at least Quarterly • (Recommended Monthly)

  46. Step 5: Update NCM Surveillance Plans 1 2 3 4 5 Develop NCM Plan ReviewRequests Document NCMs Analyze Trends Update Plans • CMO must review NCM Surveillance Plans and Memorandums of Agreement (MOAs) • Compare current NCM Surveillance Plans and MOAs against issues identified in the DC&A trend analysis • Establish NCM reduction goals • Update NCM Surveillance Plans accordingly • QA personnel are not responsible for updating MOA • MOA is an agency requirement on major programs • Program Integrator (PI) updates MOA

  47. Question and Answer The DCMA NCM process specifies that the QAS does what step after developing an NCM Surveillance Plan? • Review 100% of NCM requests. • Document NCMs monthly. • Analyze NCM trends. • Develop NCM reduction goals.

  48. NCM Process Responsibilities Quality Assurance (QA) Responsibilities for performing the NCM process Quality Assurance Engineer (QAE)

  49. Quality Assurance’s Responsibilities • Responsible for day-to-day NCM and MRB tasks: • DCMA’s primary representative at a facility • Maintain records and provide appropriate reporting • Monitor QA systems • Escalate issues, as warranted • Work with QAE whenever: • Technical evidence is required to support a decision • Repair of an item is considered • Systems are audited

  50. Quality Assurance Engineering’s Responsibilities • More commonly involved at major suppliers where: • Product or system being developed is complex • Evaluate and approve new supplier-proposed standard repair procedures (SRPs) • Provide NCM technical assistance: • Formal engineering analysis included with submittal • Fatigue or fracture, ballistic properties, base material properties, or critical characteristics are involved • Classify NCM as minor, major, or critical

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