Atch_26_TSSA_Determination_and_Incentive_Fee_Arrangement.pdf

ATTACHMENT 26

15 OCT 2012

Tunner System Sustainment Availability (TSSA) Determination and

Incentive Fee Arrangement

Overview: This attachment contains the following sections:

I. METHODOLOGY FOR TSSA: The methodology to be followed during contract execution to measure the Contractor’s performance by use of the Tunner System Sustainment Availability (TSSA) metric.

II. TSSA INCENTIVE FEE ALLOCATION BY REGION: The methodology for allocating the TSSA incentive fee by region and incentive fee periods.

III. INCENTIVE ARRANGEMENT FOR NON-OVERHAUL FPI(F) CLINs: Detailed information on cost and performance incentive fee for Non-Overhaul FPI(F) CLINs

IV. INCENTIVE ARRANGEMENT FOR OVERHAUL FPI(F) CLINs (EXCLUDING CLINs 0005 AND TRANSITIONAL SUPPORT): Detailed information on cost, performance, and schedule incentive fees for Overhaul FPI(F) CLINs.

V. INCENTIVE ARRANGEMENT FOR OVERHAUL QUALIFICATION FPI(F) CLIN 0005

VI. INCENTIVE FEE EXAMPLE

I. METHODOLOGY FOR TSSA:

1. A concerted effort shall be made to minimize the amount of reconciliation of the data collected by both the Contractor and the Government without sacrificing reliability of the TSSA rating system.

All metrics will be regional, with four regions: East, West, CONUS‐South and CONUS‐North;

every Tunner operating base is assigned by the Government to one of the four regions, defined as follows:

CONUS-North: Within the 48 contiguous United States, north of 37.0 degrees north latitude

CONUS-South: Within the 48 contiguous United States, south of 37.0 degrees north latitude

Eastern: Outside of the 48 contiguous United States, east of 85.0 degrees west longitude and west of 60.0 degrees east longitude

Western: Outside of the 48 contiguous United States, west of 85.0 degrees west longitude and east of 60.0 degrees east longitude

2. The Government will provide a list of all active Tunner locations by region to the Contractor, and will revise the list as required. The required minimum TSSA for each region per the user Operational Requirements Document (ORD) is 72 percent. The Contractor will be evaluated for compliance with the monthly 72 percent TSSA requirement for each of the four geographic regions.

3. Data Adjustments: The data from the USAF’s Online Vehicle Interactive Management System

(OLVIMS) is not perfectly clean and reliable. Sometimes field maintainers report the odometer mileage readings in lieu of the engine hour meter readings; report work orders, jobs, or parts orders multiple times; claim Not Mission Capable for Supply (NMCS) status before they order parts; and, sometimes bases will inconsistently enter data into OLVIMS. The Tunner team (Government and Contractor) jointly analyzes and reconciles the data each month to correct reporting errors of operating hours (engine-on time); duplication of work orders, jobs, and/or part orders; NMCS times; and, the Government contacts bases that have not reported. Any other errors discovered during this process are also addressed. The Government is the final approval authority for adjustments to the data.

4. TSSA Requirement Adjustment from 72% to 68%: Review of historical data reveals the post‐reconciliation number is still affected negatively approximately 2% due to remaining data errors. Therefore, the requirement is adjusted downward by 2% in lieu of further data corrections due to the excessive investigation time required to correct these remaining errors. The Government has also determined, from review of historical data, that maintainers are not regularly reporting minor maintenance work orders separately as they should using AF Form 1827 as was assumed when identifying the requirement of 72%; therefore, the requirement is adjusted downward by another 2%. This results in the contractual TSSA requirement of 68% as follows: TSSA requirement of 72% ‐ 2% for errors ‐ 2% for not using minor maintenance work orders = contractual TSSA requirement of 68%.

5. TSSA definitions:

a. TSSA is defined as: TSSA = ETI / (ETI + NMCS + DL) X 100%

Where:

ETI: Elapsed Time Indicator (accumulated operating hours (engine-on time)) NMCS: Not Mission Capable for Supply (accumulated time in hours) DL: Direct Labor (actual accumulated time in hours spent performing unscheduled maintenance; all other maintenance downtime is not counted since the Contractor has no control over Government maintenance priorities)

(All times are accumulated for one month)

The calculated TSSA number shall be rounded off to the nearest tenth (i.e., 71.94% is 71.9%, and 71.96% is 72%).

b. Other Definitions.

i. Failure: event, or inoperable state, in which any item does not or did not perform as intended

ii. Field Data Inputs: data used to calculate metrics shall come from OLVIMS and the Contractor’s metric database

iii. Not Mission Capable for Maintenance (NMCM): the total clock time (24 hours per day) the system is rendered not mission capable while maintenance is being performed

iv. Not Mission Capable for Supply (NMCS): the total clock time (24 hours per day) the system is rendered not mission capable while awaiting parts; same as vehicle down for parts; applies only when NMCS status is declared by the Government and entered into OLVIMS; if Saturday, Sunday or holiday delivery of an NMCS causing part was possible but refused by the Government, the NMCS end date will be amended as if it was delivered on that Saturday, Sunday or holiday; if an attempted delivery on any given day of an NMCS causing part at a Government base or port was not accepted and was documented by a third party, the NMCS end date will be amended as if the part was delivered that day

v. OLVIMS: a Government information management system used at each maintenance facility to track vehicles, fleet operations, vehicle dispatch operations, maintenance cost, and utilization data

vi. Scheduled Maintenance: periodic prescribed inspection and/or servicing of loader accomplished on a calendar, mileage, or hours of operation basis

vii. Unscheduled Maintenance: any maintenance activity required as a result of random failures of the loader and not of a periodic or scheduled basis

viii. Work order: the OLVIMS form used to record maintenance data

6. Each Month - Hours and TSSA Determination:

a. By the 5th working day of the month (“working days” are defined as excluding weekends

(Saturday and Sunday) and Federal holidays): The Contractor shall make available to the Government all data for parts ordered in the previous month, including:

i. Part Number

ii. Loader for which the part was ordered (identified by Air Force registration number)

iii. Work order number

iv. Date and time order was received by the Contractor

v. Date and time parts ordered were received by the Government customer

b. By the 10th working day of the month:

ix. The Government will receive data from OLVIMS from the field operating bases for each loader, including information on operating hours, work orders, jobs, and parts ordered in the previous month.

x. The Government will process the received data to correct significant errors.

c. By the 11th working day of the month:

i. The Government will provide the processed OLVIMS data from the field operating bases to the Contractor.

(This data, as of the 10th working day of the month, will be considered the total of all field reports, and will not be updated further throughout the monthly analysis process. Any reports from field operating bases received by the Government after the 10th working day of the month will only be used for final calculation of evaluation period TSSA numbers [see para. 7.c. below])

d. From the 11th–15th working days of the month:

i. The Contractor shall perform analysis of the OLVIMS data provided by the Government, to include operating hours, NMCS hours, and direct labor hours. The data will be analyzed for each loader. Details below:

ii. Operating hours:

NOTE: “operating hours” are defined in this document as the elapsed time recorded on the Engine Time Indicator (ETI). Each Tunner loader is equipped with an ETI (part of the tachometer; see TO 36M2-3-35-14, Figure 68, Index 74). The ETI is the only source of operating hours accepted by the Government.

a) For loaders reported in OLVIMS, the initial assumption will be that the OLVIMS ETI data is correct. However, the Contractor may compare OLVIMS data with Contractor ETI information from work orders and field service technician reports.

b) For loaders not reported in OLVIMS, actual operating hours for each loader will be estimated based on other (non-OLVIMS) sources, such as field technician ETI reports or work order ETI records.

c) Or, lacking such information for a loader, zero (0) hours will be used as the operating hours for that loader for that month.

d) Engine hours accumulated while loaders are in overhaul status (from induction at the Contractor’s facility until delivery to the Government) will not be used for calculating TSSA. This is because no direct labor hours for maintenance required when received due to field neglect will be included in the OLVIMS. The Contractor shall provide the T/HPO with the actual ETI readings at the point of entering and exiting the overhaul process at the Contractor’s overhaul facility.

iii. NMCS hours:

a) The Contractor shall consider the NMCS data in OLVIMS to be accurate. Only work order entries with NMCS declared in OLVIMS shall be considered for NMCS calculations.

b) Exception: The Contractor may propose to the Government that the NMCS data be revised when the TSSA for a region is below the contractual threshold (adjusted 68%).

Such revision will be based on the actual date and time the order is placed, and the actual date and time the part is delivered to the unit (as documented in the Contractor’s records). Proposed revisions to NMCS shall be calculated using:

the latter of either the date and time when the USAF ordered the part from the

Contractor or the date and time when the USAF declared NMCS in OLVIMS (starts NMCS clock) and the earlier of either the date and time of signature/receipt at the operating base, or the date and time when the USAF declares the end of NMCS in OLVIMS (stops NMCS clock).

(Convert all times to a single standard time zone, and use for all NMCS calculations, to ensure actual elapsed time is recorded.)

iv. Direct Labor hours:

NOTE: Direct Labor hours are maintenance manhours charged for unscheduled maintenance not related to accidents or abuse. The Contractor may communicate obvious reporting errors in the OLVIMS data to the Government. There shall be no Contractor effort to adjust those hours on the WOs; however, the Government may choose to investigate obvious errors.

a) Incidents to be assessed as accident-caused or abuse-caused will be identified by combining the work order numbers coded “accident” and “associated jobs” or coded “abuse” in OLVIMS, with those declared “accident” or “abuse” when the part was ordered and reported in incident reports from the field or call center reports as “accident” or “abuse”. No determination of root cause or proof beyond these "first-hand" reports will be investigated. Note: Parts ordered/replaced because of Government loss or misplacement shall be considered “abuse”.

b) Reported Direct Labor hours shall exclude all hours of work performed under the following work order codes: All 43 (except 43AA, which will be included), all 34, all 35, 01HX, routine 05LT, and all 29R system codes. However, there could be cases in which it is appropriate to include some other 43 system codes besides 43AA. A Time Compliance Technical Order (TCTO) and the associated base-level road testing may be included if the Government determines the primary purpose of the TCTO is to correct a Contractor-caused deficiency.

c) Reported Direct Labor hours shall exclude all hours for repairs accomplished because of the use of biodiesel fuel. The following examples are provided to illustrate the type of repair actions to be excluded: (1) repairs to cab heaters or any related components, such as cab heater fuel tanks and lines, due to the use of biodiesel (Note: Biodiesel is not authorized for use in the cab heater); (2) biodiesel-related repairs to loaders containing biodiesel, which are stored in WRM (Level A), active storage (Level B or C), low-use, or cold-weather location. Collaborating evidence must be provided and root cause determination confirming a biodiesel failure must be approved by the Government.

d) Reported Direct Labor hours shall exclude all hours (and/or NMCS hours) directly associated with the DLSP-160 Tunner/dock interface. The DLSP-160 is a system that synchronizes the high-line dock conveyor speed with the Tunner conveyor speed and operates the two systems from a remote cable that can reach both the Tunner deck and high-line dock.

e) Reported Direct Labor hours shall exclude System Codes beginning with “33” (Engine tune-up is a requirement of the scheduled inspection at 1500 hours, or every 3 years;

any tune-ups accomplished in addition to this schedule shall be chargeable).

f) Where the Government agrees that sufficient documentation exists, maintenance direct labor hours that were expended due to the incorrect field installation of a TCTO are to be excluded. Examples would be “failed to hook up sensor,” “did not fully seat a connector disturbed during the installation,” etc. (these are obvious maintainer-induced issues and should not be chargeable to the Tunner TSSA).

g) Reported Direct Labor hours shall exclude Work Orders created to repair off-Tunner items in local spare parts inventory. Such items may include tires, manifolds, conveyor assemblies and like items for which the Air Force has the skills, data and resources to effect repair of such commodities.

e. No later than close of business on the 15th working day of the month:

i. The Contractor shall determine, and provide to the Government:

a) The Contractor’s assessment of the operating hours (engine-on time) for each Tunner loader in the preceding month. This assessment may compare Government-provided OLVIMS data with Contractor information from work orders and field service technician reports.

b) If applicable, any Contractor-proposed revisions to the OLVIMS NMCS data.

c) If applicable, any Contractor-proposed revisions to the OLVIMS Direct Labor data.

f. Between the 15th working day of the month and close of business on the 25th of the month (not 25th working day)

i. The Contractor shall work with the Government representative to come to mutually agreed hours for the previous month, for all four regions and all three metrics (operating hours, NMCS hours, and Direct Labor hours).

ii. The Government will use the final hours to determine the TSSA for each region for the previous month.

(The Government is the final authority on hours for each month.)

g. The final monthly report for each month, issued by the Government, of operating hours, NMCS hours, and Direct Labor hours will be reported by the four regions, not by base or by Tunner. There shall be no minimum hours of usage addressed.

7. TSSA and Hours Determination for Evaluation Period 1 and Period 2:

a. Most task orders subject to TSSA incentive fees are anticipated to be placed with twelve‐month periods of performance. For task orders with less than 12 months and a minimum of 9 months period of performance, the evaluation periods are as follows:

Evaluation

Period From To

1 Date of Award End of 6th full Calendar month 2 Beginning of 7th month Last day of Performance Period

There will be only one incentive fee evaluation period for task orders with a period of performance of less than 9 months as follows:

Evaluation

Period From To

1 Date of Award Last day of Performance Period

b. In the month following the end of period 1 and period 2, the Government and the Contractor shall follow the process above for evaluation of the periods last month’s data (paragraphs.

6.a. – 6.f.). Simultaneously, the Government and the Contractor shall proceed as follows for determining the final numbers for the entire evaluation period:

c. By the 11th working day of the month:

i. The Government will provide six months of cumulative OLVIMS data from the field operating bases to the Contractor. These data will include any new reports from field operating bases that were received by the Government too late for incorporation into the previous monthly TSSA determinations of the six-month evaluation period.

d. From the 11th–15th working days of the month:

i. The Contractor shall perform analysis of the OLVIMS data provided by the Government, to include operating hours, NMCS hours, and direct labor hours. The data will be analyzed for each loader.

ii. For loaders previously analyzed and reported on, the initial assumption will be that the data is correct. Analysis should only be required for added reports (those received late by the Government), and any errors discovered during the analysis.

e. By close of business on the 25th of the month (not 25th working day)

i. The Contractor shall work with the Government representative to come to mutually agreed hours, for all four regions and all three metrics (operating hours, NMCS hours, and Direct Labor hours) for each of six months of the evaluation period.

ii. The Government will use the final hours to determine the TSSA for each region for each month of the evaluation period.

iii. The Government is the final authority on hours for each month.

f. This evaluation period TSSA determination shall be the sole basis for the TSSA incentive payment to the Contractor in accordance with the contract.

II. TSSA INCENTIVE FEE ALLOCATION BY REGION

1. There are four regions, and the performance incentive fee shall be split as follows between them:

1/3 of the fee for East, 1/3 of the fee for West, 1/6 of the fee for CONUS‐North, and 1/6 of the fee for CONUS‐South.

2. The following table is an example of the fee distribution by region by month for a 6 month evaluation period. For periods other than 6 months, the monthly allotment will be adjusted accordingly to meet the 1/3 East, 1/3 West, 1/6 CONUS‐North, and 1/6 CONUS‐South allocations for the evaluation period.

REGION Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Total CONUS North 1/36 1/36 1/36 1/36 1/36 1/36 1/6 CONUS South 1/36 1/36 1/36 1/36 1/36 1/36 1/6 East 1/18 1/18 1/18 1/18 1/18 1/18 1/3 West 1/18 1/18 1/18 1/18 1/18 1/18 1/3

3. Performance will be measured on a monthly basis by region with each region either meeting or not meeting the TSSA requirement. Incentive fee is awarded after the end of each evaluation period for each region and month meeting the TSSA requirement. For example, if the 68 percent requirement is met 5 out of 6 months in the East region, the Contractor will earn fee associated with that region for those 5 months. Similar calculations will be performed for each region, and then totaled to obtain the cumulative TSSA incentive fee earned for that period.

4. For any month within an incentive fee period in which the available incentive fee is not earned due to the inability to achieve the 68 percent requirement and the achieved value is equal to or greater than 64 percent, the unearned fee for that month will be placed in a special cumulative regional pool. This special pool shall be awarded if the regional cumulative value for the evaluation period is equal to 68% or greater.

*NOTE: The TSSA 68% requirement, and the 64% for the unearned fee threshold, will both increase by 2% if the USAF determines the users are documenting a significant number of minor maintenance work orders on AF Forms 1827 in lieu of using OLVIMS. Should the USAF determine the need to perform this re‐adjustment, the USAF will provide the Contractor the rationale of same.

III. INCENTIVE ARRANGEMENT FOR NON-OVERHAUL FPI(F) CLINs:

1. General: This is a Fixed Price Incentive Firm target (FPI(F)) contract with cost and performance incentives. The maximum total price paid on each task order, including incentives earned under this clause, shall not exceed the established ceiling price (120% of target cost). Total Incentive Profit Pool = Cost Incentive Profit Pool + Performance Incentive Profit Pool. 50% of the target profit will be placed in the performance incentive pool (see note below), and 50% will be placed in a cost incentive pool payable to the Contractor as normal profit subject to adjustment IAW FAR Clause 52.216-16, Incentive Price Revision – Firm Target.

2. Cost: The cost incentive will be subject to a share ratio of 50%/50% (Government/Contractor).

3. Performance: The Contractor will earn performance incentive for achieving Tunner System Sustainment Availability (TSSA). The definition and calculation methodology for TSSA is defined above.

Table 1

Incentive Profit Pool Distribution

Profit Pool Distribution Percentage of

Tgt profit Dollar

Amount

Cost Incentive 50% $*

Performance Incentive 50% $*

* Note: Dollar amount will be filled in at time of task order award

IV. INCENTIVE ARRANGEMENT FOR OVERHAUL FPI(F) CLINs (EXCLUDING CLINs 0005 AND

TRANSITIONAL SUPPORT)

1. General: This is a Fixed Price Incentive Firm target (FPI(F)) contract with cost, performance and schedule incentives. The maximum total price paid on each task order, including incentives earned under this clause, shall not exceed the established ceiling price (120% of target cost).

Total Incentive Profit Pool = Cost Incentive Profit Pool + Performance Incentive Profit Pool + Schedule Incentive Profit Pool. 50% of the target profit will be payable to the Contractor as normal profit subject to adjustment IAW FAR Clause 52.216-16, Incentive Price Revision – Firm Target, 35% will be placed in the schedule incentive pool, and the remaining 15% will be placed in the performance incentive pool (see Table 2 below).

2. Cost: The cost incentive will be subject to a share ratio of 50%/50% Government/Contractor).

3. Performance: The Contractor will earn performance incentive for achieving Tunner System Sustainment Availability (TSSA). The Contractor must also achieve on-time delivery for overhauled loaders to receive this overhaul TSSA performance incentive. The definition and calculation methodology for TSSA is defined above.

4. Schedule: The schedule incentive to be earned will be based on “on-time” delivery of each of the overhauled loaders. The Contractor will earn the schedule incentive for each "on-time" delivery as set forth in the Schedule, based on the due dates established therein. Although the schedule incentive will be obligated, the Contractor is not authorized to invoice for the schedule incentive earned for the "on-time" delivery until all of the following conditions are met:

a. The Contractor has completed the loader overhaul in accordance with the terms of this delivery order on or before the delivery date set forth in the Schedule, with acceptance as documented on a DD Form 250,

b. The Contractor submits a request for payment of the "on-time" schedule incentive along with the signed DD Form 250 as documentation that delivery of the overhauled loader occurred on or before the delivery date set forth in the Schedule of each task order,

c. The Government reviews the submitted documentation and the Contractor provides any additional information necessary to support the Contractor's request for schedule incentive payment, and

d. The Contractor's request for payment of the schedule incentive is approved by the cognizant Contracting Officer as evidenced by the signed request for payment on the "on-time" schedule incentive.

5. Schedule Incentive adjustment: Beginning with contract option II, the Government will assess the Contractor’s past Tunner overhaul delivery performance. If the Government determines the Contractor is capable of continuing on-time overhaul deliveries, the Government may, at its sole discretion, remove the schedule incentive and add all schedule incentive fee dollars to the Cost Incentive profit pool distribution in table 2 below. The Government will unilaterally reinstate the schedule incentive on any future task order if the Contractor fails to meet contractual overhaul delivery dates.

Table 2

Incentive Profit Pool Distribution

Profit Pool Distribution Percentage of Tgt profit

Dollar Amount

Cost Incentive 50% $*

Performance Incentive 15% $*

Schedule Incentive 35% $*

Table 3

Schedule Incentive Milestone Dates

Schedule Incentive Milestones Target Completion

Date

DD250 of each completed Tunner overhauled loader

* Note: Loader delivery dates will be filled in at time of task order award

V. INCENTIVE ARRANGEMENT FOR OVERHAUL QUALIFICATION FPI(F) CLIN 0005

1. General: This is a Fixed Price Incentive Firm target (FPI(F)) contract with cost incentives. The maximum total price paid on this task order, including incentives earned under this clause, shall not exceed the established ceiling price (120% of target cost). 100% of the target profit will be payable to the Contractor as normal profit subject to adjustment IAW FAR Clause 52.216-16, Incentive Price Revision – Firm Target.

2. The share ratio for this CLIN is 50%/50% Government/Contractor.

Table 4

Incentive Profit Pool Distribution

Profit Pool Distribution Percentage of

Tgt profit Dollar

Amount

Cost Incentive 100% $*

VI. INCENTIVE FEE EXAMPLE

The following is an example of how performance and cost incentives will be applied. All dollars in this example are for illustrative purposes only and do not reflect actual contractual amounts. Ceilings prices are set at 120% of Target Cost. This example assumes a task order period of one year with two 6-month performance evaluation periods and a cost share ratio of 50/50 (Government/Contractor). It also assumes the Contractor earns 100% of the performance incentive but overruns by $1,000K.

CLIN Name unit BEQ Tgt Cost Tgt Profit Tgt Price Ceiling price

0001 PES mo. 12 $300K $30K $330K $360K

Target Profit will be divided at time of task order award as follows: 50% allocated for performance incentive and 50% for cost incentive. The first 6 month performance assessment period will be performance only.

- 12 month target profit is $360K ($30K X 12 mo.)

- 12 month cost incentive is $180K (50% of the 12 mo. target profit)

- 12 month performance incentive target cost is $3,600K ($300K X 12 mo.)

- 12 month ceiling price is $4,320 ($360K X 12 mo.)

First 6 months evaluation period represents ½ of the total effort and includes performance incentive only

- Available performance incentive is $90K ($180K/2)

- Earned performance incentive is $90K ($90K X 100%)

Last 6 mo performance evaluation: first for cost and then performance

- $3,600K tgt cost + ½ of the $1,000K overrun for Govt’s share (i.e. $500K @ 50/50 share ratio) = $4,100K

- $180K for cost incentive

- $90K for this performance incentive plus 90K for last period for a total of $180K

- Final total task order calculation: $4,100K + $180K (cost incentive) +$180K (performance incentive) = $4,460K

Final total task order obligations (combined cost, profit, and incentives) are $4,320K (the lesser of final task order calculation or ceiling price). See table below:

Target Neg/Final

Cost $ 3,600,000.00 $ 4,600,000.00

Share ratio 50/50 ($500,000.00)

Profit $ 360,000.00 $ 360,000.00

Subtotal $ 3,960,000.00 $ 4,460,000.00

Ceiling

(120%) $ 4,320,000.00 $ 4,320,000.00

If the final negotiated cost exceeds the ceiling, the contractor absorbs the difference as a loss. In this example the Government would pay the ceiling and the contractor would absorb the $140,000 as a loss.