SUPPLY CHAIN SERVICES

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SCS 1 New Client information

SUPPLY CHAIN SERVICES

New Client Information

Rev: C

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Configuration Control Log

This log will ensure that there is a controlled record of revisions made to this manual

Date

Revision

Note

Management

Initial

4/7/05

-

C. Jeffries

CJ

2/21/06

A

Formatting, updates to

Project Creation, Project

Charges and Mgmt Charges

O. Cueff

OC

10/13/09

C

Formatting, verbiage,

inclusion of additional

information

D. Stanford

DS

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DEFINITIONS

Adder Mechanism by which management costs are assigned to projects

Billable Hour Authorized time spent by Supplier Quality Field Engineer, employee, or subcontractor in order to perform a service for SCS

Billing Cycle Portion of the accounting period in which costs are accumulated by SCS; this period is also known as the Billing Period.

Billing Rate Cost per hour that SCS pays for a subcontractor, employee, or Supplier Quality Field Engineer (SQFE); this rate is also known as Hourly Rate.

Client Organization for which SCS performs tasks.

Cost Assignment Process by which costs are identified as belonging to a particular project.

Cost Assessment Process by which costs are issued to clients for reimbursement.

Direct Charge Process of assessing a cost directly without adder to a non-SCS LM cost center for non-SCS expenses incurred by SCS personnel.

IWTA Document that authorizes SCS to bill project costs to a client.

Management Cost Cost incurred by SCS to manage SCS operations and perform.

Project General name for a client approved set of activities that can be billed through an IWTA.

Project Cost Cost incurred by SCS specifically for the execution of a given project.

Project Code Unique identifier assigned to each project for SCS tracking purposes.

Quality Services Company Company providing acquisition services for SCS; this company is also known as the QSC.

Subcontractor Individual contracted through a staffing agency to perform services for SCS.

Task Job performed for SCS in support of a project by the SQFE, subcontractor or employee and is priced by the hour.

Supplier Quality SQFE – Representative of a QSC performing services for SCS

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ABBREVIATIONS

SCS Supply Chain Services

SAP Financial Accounting/Reporting System

SQAE Supplier Quality Assurance Engineer

IWTA Intra-Lockheed Martin Work Transfer Agreement

LVN Launch Validation Number

PC Project Code

QSC Quality Services Company

T&E Time and Expense Report

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SCS Labor Pool

Quality Service Company

SCS will contract a QSC to provide SQFE’s for SCS projects. Hourly rates for various tasks are determined in advance. The QSC will submit invoice to SCS for reimbursement of costs.

Supply Chain Services Staff

Lockheed Martin Employees

SCS will employ full time employees as required. Hourly rates for employees will be calculated to include salary and benefit costs. Hourly rates will be updated as changes to the costs occur. Non-exempt employees will also have an overtime rate. Employees report their time and expenses through company provided means.

Subcontractors

SCS will employ subcontractors as required. Hourly and overtime rates for subcontractors are established by LMC at the beginning of their time of service and will be changed as required. Subcontractors submit time to LMC using an LLR.

Project Creation

Client Initiates Request

A prospective client wishing to utilize SCS will complete and submit a Service Request (SR) form including an IWTA authorizing SCS to perform the necessary functions and bill for services rendered. SCS will either accept the SR if it fits within the scope of SCS services or reject it. If the SR is accepted, SCS will create a new project for the client.

Project Code Is Established

SCS will generate a unique two-character code to be used for identification of all activity associated with the project. SCS will generate twelve-digit extended project codes for use by QSCs and LMC employees for various expense tracking purposes.

Parameters of Project are Established

SCS will determine which personnel may be utilized as part of the project and will provide candidates for the client to choose from unless the client has given direction to SCS to select the candidates on the client’s behalf. The client will provide SCS with the information necessary to perform the activity and to allow SCS to assess costs at the end of the billing period. This information includes but is not limited to: documentation or training requirements, BUC number, ADN number, total amount of IWTA, duration of IWTA, and client point-of-contact information.

Customer Agrees to Terms

The client shall be made generally familiar with SCS procedures including the method of assigning the adder and billing practices.

The client consents to the following:

• SCS will perform services for the client within the standard, pre-negotiated contract rates (including travel and training) plus the adder.

• SCS will bill the client for all authorized project costs and the client’s share of management costs via the adder.

• SCS has the responsibility (on behalf of the client) to accept or deny additional costs submitted by the SQFE for a specific assignment; these additional costs should not exceed 15% of the originally submitted and authorized costs.

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SCS 7 New Client information recommended the client utilize either the Field Quality Service Management system (FQSM) or the LM Procure-to-Pay (P2P) system for source inspection activity.

• SCS is not responsible for any funds misallocated as a result of the client’s instruction.

• SCS will not be performing services for the client’s customers or other organizations associated with the client unless the customer or other organization have or create a project independently with SCS.

• Unless the assignment is pre-determined as otherwise, SCS’s responsibility is to assess and report activity. It is the business unit’s responsibility to drive change in the supply base.

QSC Project Charges

SCS Assigns SQFE to Task

SCS will assign a task to a SQFE as required for the project. SCS will supply the SQFE with a Launch Validation Number or Inspection Lot Number and Project Code. The SQFE will perform the task as specified. If the SQFE is new to supporting Lockheed Martin, SCS will train the

SQFE in accordance with corporate, SCS and business unit policies and procedures, as applicable. Training costs are allocated depending on the activity to be performed; the customer may be required to support a portion of the training costs.

NOTE: SQFE’s performing surveys for Lockheed Martin are required to attend a multi-day surveyor workshop and a tag-a-long prior to conducting their own survey in accordance with Corporate Functional Procedures.

SQFE Requests Expense Authorization

If the SQFE expects to incur any non-labor expenses that are not covered under the QSC contract, he/she will submit an Expense Authorization form to SCS. Possible expenses include travel hours, mileage, and travel related expenses. SCS will obtain authorization and notify the SQFE. SCS is not required to reimburse any unauthorized expenses. NOTE: Expense Authorization forms must be approved by the client BEFORE the performance of any activity.

SQFE Submits T&E to QSC

The SQFE will report all time and expenses incurred to the QSC using the LVN or Inspection Lot Number and Project Code in order to properly identify the charges.

QSC Bills SCS

The QSC will submit an invoice for the charges to SCS within 30 (business or calendar) days of the date domestic charges are incurred and 90 days of the date international charges are incurred. Extensions can be authorized by SCS on a case-by-case basis. SCS is not required to reimburse any expenses not submitted within the allowed timeframe.

Billable Hours Included in Adder Determination

All billable hours included in the QSC invoice will be factored into the adder.

SCS Project Charges

SCS Project/Task Assignments

SCS will assign a task to an employee or subcontractor as required for the project. SCS will supply the employee or subcontractor with a LVN, Inspections Lot Number and Project Code. The employee or subcontractor will perform the task as specified.

Employee Submits Record of Time and Expenses to SCS

Lockheed Martin Employees

Lockheed Martin Employees record their time in STARS and expenses in SATRN. The extended Project Code is used as a charge number in these systems.

Subcontractors

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Employee Submits Time and Expense Log to SCS

Employees and subcontractors will submit a time and expense log to SCS. This will be treated as an invoice.

Billable Hours Included in Adder Determination

All billable hours included in the QSC invoice will be factored into the adder.

Management Charges

SCS Incurs Non-Project Charges

SCS records all costs of operations as Management Costs. These costs include rent, utilities, salaries and wages for non-project activities, phones, office supplies, vacation and holiday pay, and other expenses. Activities that are project, program or client specific, are not covered under Management Costs and must be performed under a charge number provided to SCS by the client.

Costs will be reported in SAP

LMC records all SCS payments in SAP

Management Costs are Liquidated Among the Sites

At the close of each fiscal month, estimated management costs are liquidated among the sites via the adder.

Invoice Processing

Invoices are Reviewed by SCS

SCS will review all invoices for accuracy and validity. SCS is not required to reimburse any vendor for charges found to be invalid.

Costs are assigned to Cost Centers

SCS will assign each cost to the appropriate cost center. All approved invoices will be sent to Lakeland, FL, for payment.

Adder Determination

Adder is Assessed Monthly

The adder is assessed at the end of the billing cycle. All project hours and management costs invoiced during the fiscal month are included in the calculation.

Adder Calculation

The adder is calculated as follows:

• [Adder] = [Management Costs]/[Project Hours]

• [Project Hours] = ([Labor Hours] + [Overtime Hours] + [Travel Hours])

Accounting Methodology

Accrual Method

SCS operates on a full accrual system of accounting. All charges will be assigned to the valid project or management cost center upon receipt of invoice or invoice equivalent. SCS will initiate manual accruals in SAP as necessary to allow for end-of-year closing.

Monthly Billing Cycle

SCS will operate using a monthly billing cycle. Project and Management charges are accumulated and assigned during the course of the cycle. At the end of the cycle, all charges are assessed to the

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SAP

SAP is SCS’s link to the Corporate general ledger. SCS will use SAP as a record of actual costs expended. SCS will monitor SAP transactions that involve SCS. SCS must ensure that the year-end balances of its SAP accounts are within the tolerance allowed by the Corporation.

Year End Closing

Year-end expenses will be held or accrued manually in SAP as appropriate. All remaining SCS employee time will be accrued manually as a management cost. All final adder adjustments will be assigned to the responsible sites before year end closing.

Debits/Credits

Audits of Records are performed

SCS will perform periodic audits of invoices and charges.

SCS Process for Invalid Charges

SCS will reject all misapplied charges revealed by the periodic audits back to the QSC’s. QSC’s are responsible to correct and resubmit any rejected charges as appropriate.(timeframe?)

Billing of Clients

SCS Billing Cycle

SCS will stop processing charges at the end of the billing cycle. Invoices received after the cycle end date will be processed in the following cycle. The billing cycle will end one week prior to each month’s IBS closing date.

Charges and Hours are Totaled

SCS will total the number of billable hours and charges assigned to each project.

The Adder is Calculated for the Billing Cycle

The adder will be calculated once the billable hours are determined.

Total Costs for Each Project are Calculated

SCS will combine the project charges and adder assigned to each project to form a total charge. This total charge – if positive – is the amount owed by the client for their SCS activity. A negative total charge indicates a credit due.

Invoice for Each Client Submitted to Shared Services

SCS will produce invoices for every client with a non-zero total charge. The invoices will be marked with the appropriate internal billing information. Each invoice will include a listing of all projects utilized during the cycle and the total charge assigned to each project.

SCS will forward the invoices to the appropriate Corporate Shared Services (CSS) point-of-contact. The CSS analyst will process all invoices using the Internal Billing System (IBS).

Reports Submitted to Client

SCS will provide the clients with the detailed reports of charges after the closing of the billing cycle. SCS may produce customize reports as requested.

Mid-term Reporting

SCS to Report Estimated Charges for Cycle upon Request

The client may request interim reports of charges during the course of the billing cycle. SCS may utilize additional resources as required to assist in the preparation of these reports.

Mid-term Numbers are not Considered Official

Since the adder is calculated at the end of the year, only an estimate of charges can be provided during a billing cycle. SCS will attempt to estimate as accurately as possible.

SUPPLY CHAIN SERVICES