1. Leaders in Asset Management How to Conduct a Supplier Risk Assessment Pat Jacklets, CPPM CF Pam McFarland, CPPM CF “Risky Business”

2. Leaders in Asset Management Objectives Share ILP for Supplier Risk Assessments Develop the risk assessment questions Place values on the risk assessment questions Complete the risk assessment tool Identify limited and full surveys Prepare Schedule

3. Leaders in Asset Management What Do You Know? Who your suppliers are? Where they are located? Are they common to other sites/entities in your company? The number of line items and the dollar value of that property? What contracts are involved? What agencies? DoD? NASA? DHS? DOT? Any delegations? History of Supplier: Responsiveness? Losses? Inventory Results?

4. Leaders in Asset Management What is the Requirement? FAR 52.245(f)(i)(v) Subcontractor control. (A) The Contractor shall award subcontracts that clearly identify assets to be provided and shall ensure appropriate flow down of contract terms and conditions (e.g., extent of liability for loss, damage, destruction or theft of Government property). (B) The Contractor shall assure its subcontracts are properly administered and reviews are periodically performed to determine the adequacy of the subcontractor’s property management system. What Risks Do You Want to Address?

5. Leaders in Asset Management Develop the Risk Assessment Questions Does the subcontractor have documented evidence of an adequate Government Property System? If so, has the system received an adequate rating within the last 2 years? Is the supplier responsive to requests for reports, and are the reports deemed accurate? Is the value of government property reported on the previous years report in excess of $500,000 and 50 items? Has the subcontractor subcontracted with a lower tier supplier and provided assigned government-owned property? If so, is the subcontractor ensuring the lower tier subcontractor is complying with contractual requirements? During the previous year, has the subcontractor reported ANY Losses? Did the subcontractor respond to a request for a limited desk survey? Is the supplier reporting excess property in a timely manner? Are the disposition instructions completed in a timely manner?

6. Leaders in Asset Management How Do I Assign Values? Determine which questions are the riskiest! For instance: If supplier does not have an adequate Property Management System or if they have never had a Government contract, they would represent a high risk. Assign the highest points to that situation

7. Leaders in Asset Management Assign Points to Risk Assessment Questions Does the subcontractor have documented evidence of an adequate Government Property System? If so, has the system received an adequate rating within the last 2 years? (1) Yes (2)Yes/CA (3) No Is the supplier responsive to requests for reports, and are the reports deemed accurate? (1) Yes (2)Yes/CA (3) No Is the value of government property reported on the previous years report in excess of $500,000 and 50 items? (2) Yes (0) No Has the subcontractor subcontracted with a lower tier supplier and provided assigned government-owned property? If so, is the subcontractor ensuring the lower tier subk is complying with contractual requirements? (1) Yes/Yes (3)Yes/No (0) No (2) unknown

8. Leaders in Asset Management Assign Points to Risk Assessment Questions During the previous year, has the subcontractor reported ANY losses? Assign 0, or 1 point (non significant); 3 points fairly significant; 5 points alarming problem Did the subcontractor respond to a request for a limited desk survey? (0) Yes (1) Yes with "Go Backs" (3) No Is the supplier reporting excess property in a timely manner? Are the disposition instructions completed in a timely manner? (0) Yes/Yes (1)Yes/No (3) No/No

9. Leaders in Asset Management EXAMPLE of DoD Risk Assessment Questions WeightRisk CriterionDefinition Positive Response Negative Response 6 Adequate Gov't Property Sys. Does the subcontractor have documented evidence of an adequate Government Property System? If so, has the system received an adequate rating within the last 2 years? 06 5UID CompliantIs the subcontractor UID compliant, if applicable?05 4 Value of Government Property Is the value of government property reported on the previous years financial report in excess of $1,000,000? 40 3Lower Tier Subcontractors Has the subcontractor subcontracted with a lower tier subcontractor and provided assigned government-owned property? If so, is the subcontractor ensuring the lower tier subk is complying with contractual requirements? 13 2 Loss, Damage, Destroyed or Theft Reports During the previous year, has the subk reported ANY LDDT? (Assign 1 point per report for possible total of 5) 01-5 1 Desk Surveillance Assessment Responses Did the subcontractor respond to a request for a limited desk survey? 01

10. Leaders in Asset Management WeightRisk CriterionDefinition Positive Response Negative Response Understanding the Columns Weight: The factor applied to a risk criterion – the higher the number, the more important the risk Risk Criterion/Definition: The risks you have identified and what it means Positive Response: Points assigned for a positive response Negative Response: Points assigned for a negative response

11. Leaders in Asset Management EXAMPLE of NASA Risk Assessment Questions WeightRisk CriterionDefinition Positive Response Negative Response 6Adequate Gov't Property Sys. Does the subcontractor have documented evidence of an adequate Government Property System? If so, has the system received an adequate rating within the last 2 years? 06 5NFS 1845.7101-3 Compliance Is the subcontractor reflecting unit acquisition costs to include all costs incurred to bring the property to a form and location suitable for its intended use? Adding fee? 05 4Value of Government Property Is the value of government property reported on the previous years financial report in excess of $1,000,000? 40 3Lower Tier Subcontractors Has the subcontractor subcontracted with a lower tier subcontractor and provided assigned government-owned property? If so, is the subcontractor ensuring the lower tier subk is complying with contractual requirements? 13 2 Loss, Damage, Destroyed or Theft Reports During the previous year, has the subk reported ANY LDDT? (Assign 1 point per report for possible total of 5) 01-5 1 Desk Surveillance Assessment Responses Did the subcontractor respond to a request for a limited desk survey? 01

12. Leaders in Asset Management Prepare Subcontractor List Owning Div Proposed Auditors DelPAPO/ PO Supplier Code Supplier Name AddressCityState ZipTotal L/ITOTAL $ Division A 2734382459448 Company A PO Box 123Any CityKY400662 $12,015 Division B 869942 Company B PO Box 124Any CityNY1175721 $11,930 Division B 760000279890008074 Company C PO Box 125Any CityNY11552651 $330,739 Division A 72655290011295 Company E PO Box 126Any CityCA95838-170155 $1,197,445 Division A 47703590011316 Company F PO Box 127Any CityFL3377779 $681,418 Division A D7424390024430 Company G PO Box 128Any CityNC2789683 $512,818 Division A 90056619 Company H PO Box 129Any CityCA910166 $24,989 Division B 74190, 28807790021975 Company I PO Box 130Any CityCA90245-35071622 $94,617,665 Division C 760000381990022028 Company J PO Box 131Any CityCA9027814 $147,794 Division A D 7600003315, 760000311890013817 Company K PO Box 132Any CityCO803011886 $40,080,279 Division C 269967490024605 Company L PO Box 133Any CityNY11716744 $257,545 Division A D7419990027816 Company M PO Box 134Any CityCO80127-176295 $3,318,052 Division C D 7600003129, 760000330690027944 Company N PO Box 135Any CityCA902451443 $25,700,088 Division C D 7600002744, 760000443290027944 Company O PO Box 136Any CityCO800111536 $37,787,527

13. Leaders in Asset Management Supplier Risk Assessment Sample Supplier Risk Assessment

14. Leaders in Asset Management Metrics Subcontract Management Metrics

15. Leaders in Asset Management ILPs for Subcontract Property Control Subcontract Control 5-01Use a Risk Assessment in determining which subcontractors require a "site visit“, frequency of visit or a limited survey (i.e. total amount of property, amount of lost property, use of property, new property type, etc.) 1.Long time practice throughout industry - 72% of companies responding utilize this method. Allows for the managing of risk by identifying low risk suppliers. This results in cost savings for both the contractor and the customer by identifying and reducing resources for low risk suppliers. 2.“To achieve efficient operations, the System must shift its focus from “risk avoidance” to one of “risk management.” FAR § 1.102-2 (c)(2) Performance Standards 3.Use suppliers who have a track record of successful past performance or who demonstrate a current superior ability to perform. FAR §1.102(b)(1)(ii) Statement of Guiding Principles for the Federal Acquisition System 5-02Combine onsite and limited system analysis surveys where more than one company unit has property located at a subcontractor/supplier. 1.Cost savings for both the contractor and the customer 2.Eliminates redundancy and confusion for the subcontractor responding to multiple limited surveys 3.Minimizes administrative operating costs and potential travel and resource costs if onsite review necessary. 5-03Use a standard format for Government/contract owned property when requesting reports from subcontractors. 1.A standardized and consistent format expedites and enhances the subcontractor/supplier’s capability to respond. 2.Minimizes administrative operating costs 5-04Use a standard format for flowing down Government/contract property requirements, including proper extent of liability for LDD items. 1.Standardized and consistent language to enhance subcontractor capability to comply. 2.Minimizes administrative operating costs

16. Leaders in Asset Management How Do I Access the AIA Website? http://www.aia-aerospace.org/resource_center/resources/property_management_etools/

17. Leaders in Asset Management QUESTIONS?