Development of Requirements for Material

DFARS § 252.242-7004(d)(2); see DFARS § 252.242-7004(b)(1)(i), (ii)

(compliance requirement for reasonable forecasts of material requirements and for charging costs based on valid, time-phased requirements).

1. Are the contractor’s BOMs at least 98% accurate?

a. Does the contractor have a BOM identifying the types and quantities of materials required to produce an item for each significant level of production (i.e., fabricated parts, subassemblies, assemblies, line replaceable units and final item)?

b. Is each BOM:

(i) Supported by and traceable to original contract or internal design requirements, including considerations for scrap, shrinkage, yield and other similar factors and subsequent contract changes?

Compliance criterion: [e]nsure that costs of purchased and fabricated material charged or allocated to a contract are based on valid, time- phased requirements as impacted by minimum/economic order quantity restrictions.

(i) A 98 percent bill of material accuracy and a 95 percent master production schedule accuracy are desirable as a goal in order to ensure that requirements are both valid and time-phased. (ii) If systems have accuracy levels below these, the Contractor shall

provide adequate evidence that—

(A) There is no material harm to the Government due to lower accuracy levels; and

(B) The cost to meet the accuracy goals is excessive in relation to the impact on the Government; . . .

(iii) Controlled to ensure consistency between BOMs and actual requirements as affected by contract changes and engineering changes?

(iv) Dated to show initial release date and each subsequent release made to reflect changes? (v) Prepared to include parameters on use of materials on

an “as-required” basis?

(vi) Approved by an appropriate authority prior to initial release and prior to any subsequent release? c. Does the contractor control and record the use of substitute

materials to ensure that any substituted materials are: (1) appropriate; (2) documented; and (3) permitted by specifications, contract provisions or government approval? d. Does the contractor verify that its BOMs are at least 98%

accurate by:

(i) Assessing annually BOM accuracy through sample auditing designed to achieve a high confidence level that the 98% accuracy level is being maintained? (ii) Assessing the BOMs within a sample for accuracy by,

for example, comparing the BOMs to:

(a) Source data (e.g., drawings, manufacturing specifications, engineering changes and contract requirements)?

(b) The next lowest level of production?

(c) BOMs used to support material acquisitions, after taking into account the impact of changes? 2. Are the contractor’s MPSs at least 95% accurate?

a. Does the contractor maintain an MPS for each production effort that involves significant costs?

b. For each MPS:

(i) Does it include adequate planning time?

(ii) Does it reflect current and accurate lead and flow times consistent with documentation regarding:

(a) Acquisition lead times?

(b) The type and length of each process in the schedule?

(c) Actual shop floor practice?

(iii) Is each MPS adjusted, if appropriate, to reflect historical past due/late deliveries, including situations where unplanned effort was used to accelerate delivery?

(iv) Are contractor and subcontractor/vendor capacity constraints reasonably considered?

(v) Are changes processed timely?

(vi) Is it approved by a designated approving official based upon the above considerations prior to initial release and prior to any subsequent release? c. Is MPS accuracy measured using appropriate techniques,

including the following:

(i) Assessing annually MPS accuracy through sample auditing designed to achieve a high confidence level that the 95% accuracy level is being maintained? (ii) For accuracy of timing of performance:

(a) Comparing end item deliveries accomplished (i.e., actual production) versus end item deliveries planned (i.e. planned production) for a given time period?

(c) Comparing actual completion dates for identified performance milestones with planned completion dates?

(iii) For accuracy of resource scheduling: (a) Comparing actual resource loading,

adjusted for changes, delays, etc., with planned resource loading?

(b) Verifying that resource scheduling has resulted in meeting committed-to contract milestones? 3. Does the contractor integrate into its BOMs and MPS processes

appropriate consideration of planned product changes? 4. Regarding BOM/MPS changes, does the contractor:

a. Process changes timely?

b. Issue revised and updated BOMs or MPSs? c. Provide changed BOM/MPS documents timely to the

appropriate buyers, requisition approval authorities and production managers?

5. When a BOM or MPS does not meet the required level of accuracy, does the contractor:

a. Assess why, take actions to correct the deficiency and document its corrective actions; or

b. Document that the government is not materially harmed and the cost of compliance outweighs the harm to the government?

C. System Monitoring

Compliance criterion: [p]rovide a mechanism to identify, report, and resolve system control weaknesses and manual override.

DFARS § 252.242-7004(d)(3); see DFARS § 252.242-7004(b)(1) (compliance requirement to reasonably forecast needs for materials, charge contracts on a valid time-phased basis and properly account for cost transfers).

1. Does the contractor timely identify, resolve and document system issues, including:

a. Unauthorized changes to a BOM? b. Unauthorized changes to an MPS? c. An outdated BOM or MPS?

d. Materials charged to contracts in excess of or inconsistent with valid requirements?

e. Materials charged to contracts that are not properly time- phased because the charging occurs prior to planned delivery or production need dates?

f. Attrition, rework, scrap and lost/found material that differs materially from the norm?

g. Manual overrides of the system?

2. Does the contractor recognize operational exceptions and have procedures to address these exceptions, including:

a. Transfers (see Secs. IV.F.1 and IV.G.3 below)? b. Loan/paybacks (see Secs. IV.F.2 and IV.G.4 below)? c. Excess/residual inventory (see Secs. F.3 and G.5 below)? D. Audit Trail

Compliance criterion: [p]rovide audit trails and maintain records (manual and those in machine-readable form) necessary to evaluate system logic and to verify through transaction testing that the system is operating as desired; . . .”

DFARS § 252.242-7004(d)(4); see DFARS § 252.242-7004(b)(1), (2) (compliance requirement for an adequate MMAS and assessments of system adequacy).

1. Are all transactions to acquire or fabricate materials recorded in the MMAS to enable verification of system performance that materials are required based on valid, time-phased requirements?

2. Does the contractor document how both purchased and fabricated materials flow through its physical inventory system from receipt to use or disposition?

3. Does the contractor document how the costs of both purchased and fabricated materials flow through its accounting and billing systems?