MODULE 5 Subcontractors and Delegations 15November2013 Lesson 4: Safety Stock

Module Objective After completing this module, the student will be able to complete QA responsibilities in regards to subcontractors and delegated QA duties.

LESSON 1 Prime Control of Purchasing 15November2013 Lesson 4: Safety Stock

Lesson Introduction Given a contract, the student will be able to determine whether the supplier’s system for controlling subcontracted items and services is adequate.

Issues with Outsourcing (Made in America) (Not Made in America) CLICK FOR SOUND CLICK FOR SOUND

Lesson Objectives Upon completion of this lesson, you should be able to: Identify the requirements that drive the supplier's responsibility to implement the controls. Recognize the supplier's techniques for evaluating its vendors. Identify elements/areas of concern the supplier evaluates in regard to the vendor. Identify the methods the Quality Assurance Specialist (QAS) uses to ensure the adequacy of the supplier's control of its vendors. Recognize challenges and potential issues the QAS may have when evaluating the adequacy of the supplier's control of its vendors. Lesson 4: Safety Stock

Lesson Topics This lesson covers the following topics: Buy American Act Prime Supplier’s Evaluation Techniques Determining Qualified Suppliers Monitoring Prime’s Vendor Selection Process Basic QAS Issues

WIIFM? This lesson will: Stress the significance of purchasing subcontractor services using specific criteria. Emphasize the prime supplier's responsibility for ALL subcontracted materials. Examine the processes that warrant QAS focus.

Policy and Authority Federal Acquisition Regulation (FAR) 46.103 States the Contracting Office's responsibilities. FAR 46.105 States the supplier's responsibilities, primarily that the supplier is responsible for all purchased products. FAR 52.246-2 through -9 Gives the government the right to perform inspection at “all places and times.” FAR 52-246-11 Higher-level quality clause that brings in the other ISO standards that require some form of process control for purchased items.

Purchasing Control Guidance International Organization for Standardization (ISO) 9001 Standards 7.4.1 - Establishes control of the purchasing process. 7.4.2 - Specifies the purchasing requirements. 7.4.3 - Explains the verification of purchased products.

Question and Answer Which of these clauses defines the supplier’s responsibility to implement vendor controls? FAR 42.104 FAR 46.105 FAR 52.234 FAR 52.426

Buy American Act Lesson Topics: Buy American Act Prime Supplier’s Evaluation Techniques Determining Qualified Suppliers Monitoring the Prime’s Vendor Selection Process Basic QAS Issues

Topic 1: Buy American Act Buy American Act is legislation that requires the U.S. Government to give preference to U.S.-made products in its purchases. Policies Berry Amendment Requirements Exceptions QAS Role

Buy American Act (BAA) Policies Public Law - 41 Unites States Code (U.S.C.) 10a through 10d Multiple requirements in Public Law Supplement BAA with additional, specific requirements 100% vs. 51% FAR 25.1 (Supplies) through FAR 25.2 (Construction Materials) FAR 52.225 Buy American Act Policies Defense Federal Acquisition Regulation Supplement (DFARS) 252.225-7000

Berry Amendment Berry Amendment - 10 U.S.C. 2533a and 2533b Enacted during World War (WW) II Any item manufactured from or containing fibers, yarns, fabrics Clothing and materials thereof Tents, tarps, covers Cotton and other natural fiber products Silk, wool Specialty Metals Certain steel alloys Nickel, iron-nickel, cobalt Titanium and titanium alloys Zirconium and zirconium alloys 22 Ti Titanium 28 Ni Nickel 40 Zr Zirconium

BAA Requirements Applies to purchases over $3,000 Item must be manufactured in the U.S. The cost of domestic components must exceed 50% of the cost of all components

BAA Exceptions Procurement < $3,000 Products intended for use outside the continental U.S. (OCONUS) Non-availability – Items not mined, produced, or manufactured in U.S. in sufficient and reasonably available quantities and of satisfactory quality Inconsistent with public interest Unreasonable cost – Procuring Contracting Officer (PCO) determination

When in doubt, involve DCMA Management! BAA - QAS Role Contract Phase QAS Role Preaward Survey (PAS) Ask about source of components Contract Technical Review (CTR) Review contract clauses to identify Buy American FAR/DFARS requirements Post Award Confirm source of components Contract Performance Period Purchasing System Review Consult Administrative Contracting Officer (ACO) Consult PCO Consult Legal (CIC) Consult Industrial Specialist (IS) Accepting Product Basis of Confidence - Material Certifications When in doubt, involve DCMA Management!

Prime Supplier’s Evaluation Techniques Lesson Topics: Buy American Act Prime Supplier’s Evaluation Techniques Determining Qualified Suppliers Monitoring the Prime’s Vendor Selection Process Basic QAS Issues

Topic 2: Prime Supplier’s Evaluation Techniques Evaluation techniques include: Qualification/First Article Testing Review of Quality Data Surveillance Visits/Audits Source Inspection Receiving Inspection

Prime Control of Subcontractors Methods for prime control of subcontractors include, but are not limited to: Material certifications and vendor surveys Receiving inspections Periodic audits or surveys Source inspections Many primes NOT using source inspection Government relies on Government Source Inspection (GSI) for assurance of supplier compliance to requirements Prime should never rely on Government (DCMA) source inspection!

Evaluating Adequacy of Procured Items (1 of 6) Evaluation Techniques Qualification/First Article Testing Review of Quality Data Surveillance Visits/Audits Source Inspection Receiving Inspection

Evaluating Adequacy of Procured Items (2 of 6) Evaluation Techniques Qualification/First Article Testing Review of Quality Data Surveillance Visits/Audits Source Inspection Receiving Inspection

Evaluating Adequacy of Procured Items (3 of 6) Evaluation Techniques Qualification/First Article Testing Review of Quality Data Surveillance Visits/Audits Source Inspection Receiving Inspection

Evaluating Adequacy of Procured Items (4 of 6) Evaluation Techniques Qualification/First Article Testing Review of Quality Data Surveillance Visits/Audits Source Inspection Receiving Inspection

Evaluating Adequacy of Procured Items (5 of 6) Evaluation Techniques Qualification/First Article Testing Review of Quality Data Surveillance Visits/Audits Source Inspection Receiving Inspection

Evaluating Adequacy of Procured Items (6 of 6) Evaluation Techniques Qualification/First Article Testing Review of Quality Data Surveillance Visits/Audits Source Inspection Receiving Inspection Prime suppliers use these techniques to evaluate the adequacy of procured items.

Question and Answer Which of the following are used by the prime supplier in the evaluation of the adequacy of procured items? Material certifications Source inspections Periodic audits and surveys II only III only I and II I, II, and III

Determining Qualified Suppliers Lesson Topics: Buy American Act Prime Supplier’s Evaluation Techniques Determining Qualified Suppliers Monitoring the Prime’s Vendor Selection Process Basic QAS Issues

Topic 3: Determining Qualified Suppliers Equipment & Facilities Supplier Experience Type of Item or Service Qualifications & Certifications Available Quality Evidence

Equipment and Facilities Equipment & Facilities Supplier Experience Type of Item or Service Qualifications & Certifications Available Quality Evidence Type Production Rate Equipment Capability Equipment Control Facilities Control

Supplier Experience Equipment & Facilities Supplier Experience Type of Item or Service Qualifications & Certifications Available Quality Evidence Workforce Stability New Supplier Existing Supplier Similar Product Line New Product Line

Type of Item or Service Equipment & Facilities Supplier Experience Qualifications & Certifications Available Quality Evidence Engineering System/Subsystem Components/Assemblies/Subassemblies Processes/Tests

Qualifications and Certifications Existing? Controls and Procedures Compliance with Plans and Procedures Equipment & Facilities Supplier Experience Type of Item or Service Qualifications & Certifications Available Quality Evidence NOTE Design should be considered as applicable. Design Manufacturing Quality Engineers

Available Quality Evidence Industry Source Lists Internal Historical Data Equipment & Facilities Supplier Experience Type of Item or Service Qualifications & Certifications Available Quality Evidence

Question and Answer Which item should NOT influence the prime supplier's decision when determining a qualified vendor? Existing personnel certifications Number of inspectors The production rate of the equipment being used How long the supplier has been producing the product

Monitoring the Prime’s Vendor Selection Process Lesson Topics: Buy American Act Prime Supplier’s Evaluation Techniques Determining Qualified Suppliers Monitoring the Prime’s Vendor Selection Process Basic QAS Issues

Topic 4: Monitoring the Prime’s Vendor Selection Process The QAS must monitor the prime’s vendor oversight Prime is responsible for controlling quality of purchased products

Prime Supplier’s Responsibility for Quality The prime is always responsible for controlling the quality of the purchased products, regardless of the arrangement between the supplier and the subcontractor. The QAS must ensure that the prime supplier is capable of performing QA oversight for all subcontractors!

Evaluating Prime’s Subcontractor Control (1 of 5) Determine Adequacy of Purchasing Process Perform Product Examination QAS Considerations Periodically Select Random Lot Samples for Product Examination Prime’s Frequency and Intensity of Subcontractor Surveillance

Evaluating Prime’s Subcontractor Control (2 of 5) Determine Adequacy of Purchasing Process Are the prime's controls adequate? What are the supplier's methods of data collection? Are the controls used for vendor rating?

Evaluating Prime’s Subcontractor Control (3 of 5) Perform Product Examination Flow down of technical and quality requirements

Evaluating Prime’s Subcontractor Control (4 of 5) Prime’s Frequency and Intensity of Subcontractor Surveillance

Evaluating Prime’s Subcontractor Control (5 of 5) Periodically Select Random Lot Samples for Product Examination

Basic QAS Issues Lesson Topics: Buy American Act Prime Supplier’s Evaluation Techniques Determining Qualified Suppliers Monitoring the Prime’s Vendor Selection Process Basic QAS Issues

Topic 5: Basic QAS Issues QAS encounters issues relating to: Prime’s vendor control CMO coordination Corrective action Counterfeit parts

QAS Issues with Prime’s Vendor Control Vendor control concerns Prime procedures are inadequate, outdated, and/or unclear Lack of flow down of the technical requirements to vendors Lack of prime’s corrective action with vendors

Importance of Coordination Between CMOs Data sharing Problems

Information Feedback and Corrective Action To enable QASs to review and evaluate the supplier’s system for early feedback, use corrective action relative to the supplier's performance.

Counterfeit Parts The QAS should be aware of supplier sources of purchased items and potential for counterfeit parts to be introduced into production

Counterfeit Mitigation Material certifications available? Written plan needed? Has a visual examination been performed WITH material certifications? Have the manufacturer and the product origins been evaluated?

QAS Issues with Prime (1 of 7) Procedures Technical Requirements Corrective Action Receiving Inspection Insufficient Vendor Evaluation Insufficient Product Assessment

QAS Issues with Prime (2 of 7) Procedures Technical Requirements Corrective Action Receiving Inspection Insufficient Vendor Evaluation Insufficient Product Assessment Inadequate Missing Ineffective Unclear Not written Cumbersome Lack of authority/responsibility Not followed/adhered to None for rating suppliers

QAS Issues with Prime (3 of 7) Procedures Technical Requirements Corrective Action Receiving Inspection Insufficient Vendor Evaluation Insufficient Product Assessment Not passed down Ineffective technical review of purchase order Incorrect or inadequate requirements Contractual requirements missed or dropped during vendor procurement effort Not available at verification point Purchase order not tailored to requirements

QAS Issues with Prime (4 of 7) Procedures Technical Requirements Corrective Action Receiving Inspection Insufficient Vendor Evaluation Insufficient Product Assessment None required No follow-up to verify action taken Incomplete action as to cause of discrepancy Incomplete root cause analysis Wrong party accomplishing

QAS Issues with Prime (5 of 7) Procedures Technical Requirements Corrective Action Receiving Inspection Insufficient Vendor Evaluation Insufficient Product Assessment Condition and count only Improper inspection or inspection levels utilized Inability to verify/test at incoming inspection Documentation of inspection results (none, inadequate, improper, not used)

QAS Issues with Prime (6 of 7) Procedures Technical Requirements Corrective Action Receiving Inspection Insufficient Vendor Evaluation Insufficient Product Assessment No provisions for evaluation of first time suppliers Audits lacking capability/depth to provide decision basis History used for evaluation

QAS Issues with Prime (7 of 7) Procedures Technical Requirements Corrective Action Receiving Inspection Insufficient Vendor Evaluation Insufficient Product Assessment Testing not performed at receipt No routine survey to assure testing accomplished correctly at supplier No objective evidence for unique chemical and physical property requirements Receiving inspects count and condition only No engineering involvement at MRB

Summary Having completed this lesson, you should now be able to: Identify the requirements that drive the supplier's responsibility to implement vendor controls. Recognize the supplier's techniques for evaluating its vendors. Identify elements/areas of concern the supplier evaluates in regard to the vendor. Identify the methods the QAS uses to ensure the adequacy of the supplier's control of its vendors. Recognize challenges and potential issues the QAS may have when evaluating the adequacy of the supplier's control of its vendors. Lesson 4: Safety Stock

Questions

Review Question 1 In addition to receiving inspections, what technique(s) does the prime supplier use to evaluate the adequacy of procured items? (Select all that apply.) Reviews of quality data Purchase Order reviews Facility inspections Government source inspection

Review Question 2 Which technique should be used in monitoring the prime supplier’s selection process of subcontractors? Checking for the review of quality data. Issuing a Corrective Action Request (CAR) and following up on progress within 96 hours. Determining if the prime's controls are adequate. Ensuring cooperation between Contract Management Offices (CMOs) is kept to a minimum.

Review Question 3 Which of the following must be present to ensure the supplier’s flow down of technical requirements to subcontractors? Historical safety data Material specifications, drawings, or industry standards Statistical samples from receiving inspections Ensuring small businesses are used for 25% of work

Exercise: Supplier Purchasing Control Concerns Students work in pairs to complete the exercise. Open the exercise document, read the scenario, and answer the questions. CMQ101_M5_L1_E1_SupplierPurchCtrlConcerns.pdf Time: 15 minutes