Inventory_PWS_Revised_7_2_2014.pdf

ATTACHMENT 1-1 HDEC05-14-R-0002

PERFORMANCE WORK STATEMENT

FOR

DOLLAR VALUE INVENTORY

(REVISED JULY 2, 2014)

1. GENERAL: The Contractor is required to perform a dollar value inventory of items sold in a Department of Defense (DoD) Commissary (military grocery store). The Contractor shall be responsible for providing all supervision, personnel, supplies, equipment (excluding material handling equipment (MHE) and safety ladders, which the Government will provide), and any other items necessary to perform the inventory. Unless otherwise specified, the term “Contractor” refers to all Contractor personnel who participate in the inventory process.

Unless otherwise specified, the terms “Government” and “Government Representative” refer to any Government employee whom the Store Director or Manager authorizes to participate in the inventory process. To ensure the integrity of the inventory process, the Contractor must have enough personnel to ensure a disinterested party is available for validation and reconciliation counts. This means that an inventory can never be conducted by less than two people, or no less than three people if the team leader approach is used (because a team leader usually has knowledge of the inventory section counts, and therefore, not a disinterested party). Commissary representatives may provide contractor personnel with the proper forms to document the inventory. Automated Inventory documents are available in DeCA’s public folder, under “Store Library”, Inventory Information, and Inventory Tools.

a. The Contractor shall inventory those items that the Government classifies as Grocery Department excluding tobacco and contractor owned inventory, i.e., Deli, Bakery, Fish items. It is the Government’s responsibility — not the Contractor’s responsibility — to clearly and correctly identify the items that the Contractor is required to count/value as part of this inventory. Areas to be inventoried may include any or all of the following:

the sales area, perishable and non-perishable storage rooms, processing and/or preparation rooms, contiguous and remote warehouses, and distribution centers (collectively referred to hereafter as “warehouse/back up storage area.”).

b. The Contractor and team leader(s) shall have a minimum of 6 months experience performing inventories in commissaries, grocery distribution centers, or retail supermarkets. The Government estimates that Contractor personnel should, on average, count $100,000 of inventory value per 8-hour shift. In projecting staffing required to satisfactorily perform this inventory, the Contractor shall consider this Government estimate of Contractor productivity, the Government’s estimated value of inventory, the requirement to perform validation (second) counts, and the time period allowed to complete inventory, and shall provide sufficient staffing to complete the inventory in the time specified elsewhere in this contract. For the purposes of this contract, the Contractor is considered to have completed the inventory when the Contractor has finished initial counts of all sections that the Government has identified, and all validation (second) and reconciliation (third) counts required, and has provided the values of all of these counts to the Government, all in accordance with procedures described in paragraphs 3 and 4.

c. The Government’s estimate of the dollar value of inventory indicated in the Request for Quotes(RFQ) and the contract is accurate within +/- 15% of the actual value at time of inventory. In instances where the estimate is +15% of the actual value of inventory, then the Government will adjust the award amount accordingly.

d. The Contractor is not required to perform a pre-inventory site visit. However, the Contractor must contact the Store Director at least 2 weeks prior to the performance date to coordinate arrival time, to ensure that any installation access requirements are met and to discuss any other matters pertinent to this inventory. Since this area can affect a contractor’s past performance rating, the contractor shall record the date and time that they contacted the commissary’s designated representative that is listed on Standard Form 1449. If a contractor has problems contacting the commissary’s designated representative, he/she should contact the contracting office for assistance.

When the contractor contacts the commissary, the contractor must also provide the commissary with any required information about their personnel so they can be cleared for access to the installation.

ATTACHMENT 1-2 HDEC05-14-R-0002

e. The Government will provide, on the day the inventory is to be conducted, the most current diagram showing areas to be inventoried which indicates the department and section number assignments, and that indicates which sections are sales area, and which are warehouse/back up storage area. If desired by the contractor, the Government will provide the Contractor with DeCA Form 40-55 (Inventory Control Log) annotated with department and section designations that correspond to the diagram. (Column number references throughout this PWS are to various columns on the Inventory Control Log.) The Government will identify sales area sections and warehouse/back up storage area sections on separate sets of Inventory Control Logs. These Inventory Control Logs must contain no information that will give the Contractor any advance knowledge of sections selected for validation.

f. Immediately prior to the start of the contract inventory count, a Government representative will orally brief contractor personnel on safety and security concerns, on the location of break rooms, restrooms, and smoking areas, and on any other matters considered pertinent to performance of the inventory. A Government representative will conduct a “walk-through” of the commissary facility(s) with the Contractor, using the inventory diagram, to review inventory preparation and to identify unique or unusual facility characteristics. In the space provided on the Inventory Certification, DeCA Form 40-106, the Contractor shall sign to indicate that the Government has provided this “walk-through,” and may opt to comment on this form to indicate the Contractor’s estimate of the state of preparedness observed.

g. The Contractor shall conduct a dollar value inventory, by means of automated or mechanical devices, of all sections identified by the Government as within the scope of the Contractor’s responsibility. As described in paragraph 4., the Contractor shall do a second count of sections that the Government has selected for validation. After the successful completion of the inventory, but prior to the completion of the inventory dollar value certificate – if directed by the Government – shall perform a reconciliation (third) count of any section for which the difference between the initial Contractor count and the validation (second) count exceeds the 10% variance stated in paragraph 4.f. This count will be used in determining the overall dollar value of the inventory.

h. Neither the Commissary, nor the Contractor, is authorized to change inventory performance dates/times without concurrence from the area office, the resale accounting branch office and the contracting officer.

To initiate a change in performance dates/times, the Commissary or Contractor shall submit a request to the contracting officer for approval at least 30 days prior, unless circumstances do not permit, to the original dates/times established in the contract. If any delays occur on the day of the inventory (i.e. delays due to base entry procedures or contractor problems), the commissary must annotate this in the remarks section of the Dollar Value Inventory Certification form (DeCA Form 40-106), and notify the region and contracting officer of the situation.

2. GOVERNMENT RESPONSIBLITIES: The Government will prepare the commissary for the inventory process. All preparations described below will be completed in sufficient time to allow the Contractor to proceed with the inventory count without any delay. The inventory control log maintained by the Government is the "official inventory log." Annotate all pages of this Inventory Log as “Official Government Inventory Control Log.”

a. Divide commissary merchandise into numbered sections, as follows.

(1) Use Section numbers 001 through 019 to identify Sections in the Produce Department and section numbers 020-049 to identify sections in the Meat Department. Tobacco and Contractor-owned Bakery/Deli/Fish operations are NOT included in this contract and will not be assigned sections.

(2) Use the section numbers shown below to identify sections that contain Grocery Department items.

The Contractor shall count/value all merchandise in these sections. During the pre-inventory “walk-through,” a Government representative will point out to the Contractor those areas that the Contractor is required to count and those areas that the Contractor is not required to count. Section 50 will be used only for markdown/distressed/dissimilar or misplaced items displayed in the sales area. The value of these items should be supported by calculator tape (reference para 2e.). Section 300 will be used only for damaged merchandise awaiting rework in the warehouse.

SALES AREA 050 - 299

(includes all Grocery Department assets in SALES AREA)

ATTACHMENT 1-3 HDEC05-14-R-0002

WAREHOUSE/BACKUP STORAGE AREA 300 - 500

(includes all Grocery Department assets in WAREHOUSE/BACK UP STORAGE AREA)

(3) Assign section numbers only once to all merchandise that the Contractor is required to count, and correlate the assignment of sections to the inventory diagram and Inventory Control Log. Within the ranges of Section numbers indicated above, the Government will number sections consecutively (one after the other) in the sales area and in the warehouse/backup storage area, and will have the start and end point of each numbered section clearly identified by tape and by cards that indicate section number and that also show the start and end of each section; e.g., “START SECTION 063”/”END SECTION 063, etc. If a section number is skipped, a reason must be written in the field for that section on the section log. In any areas where merchandise that the Contractor is required to count is immediately adjacent to or intermingled with merchandise that the Contractor is not required to count, the Government will clearly indicate which merchandise the Contractor is required to count, and which merchandise the Contractor is not required to count.

(4) Follow these guidelines when determining section sizes:

(a) In the sales area, a section will consist of a run of gondola/wall shelving, or refrigerated display cases, that measures NOT less than 24 base feet nor more than 72 base feet, or to the end of the gondola run. Every effort should be made to keep like items together in the same inventory section. Do not split canned fruit or start or end a section in the middle of a shelf. Sections maybe less than 24 base feet only for difficult to count items, e.g., HBC, spices, canned meat and fish, packaged lunchmeats. Easier to count items may be assigned longer than 72 base feet sections, e.g. big paper products, canned fruits or vegetables, soups, etc. Each section should contain at a minimum $1000.00 dollars of inventory.

(b) Off-shelf promotional displays, or end caps, free-standing racks, or front end merchandisers will be grouped together and assigned separate section numbers (i.e. one number for the front end caps and another section number for the back end caps, one section number for the mass display etc). Free-standing racks located adjacent to an end cap will be included with the end cap section. Multiple free-standing racks located in the aisle will be grouped together and assigned separate section numbers.

(c) In smaller enclosed storage spaces, e.g., refrigerated storage areas, etc., a section will consist of a run of shelving or racks, or rows of pallets, stock trucks or carts, that measures not less than eight base feet nor more than 20 base feet. In larger open storage spaces, e.g., semi-perishable storage areas, etc., a section will consist of racks, or rows of pallets, stock trucks or carts, that measures not less than 40 base feet not more than 100 base feet.

b. Prominently post a unit price for all items to be counted. Post prices in the sales area either on shelf labels, on display signs, or on individual units or packages of merchandise. In the warehouse/ backup storage area do not manually annotate prices on cases or pallet loads of the same items using black markers, prices will be posted using labels, or signs.

c. To expedite counting, merchandise displayed on shelves in the sales area will be “pushed back”.

Whether in the sales area or in the warehouse/backup storage area level, organize, and stack merchandise so that all items to be counted, are clearly visible or identified to the Contractor. Walk around clearance will be maintained for product stored on pallets. The government is not required to level or otherwise organize dump bins and other types of displays that are not typically stacked evenly or uniformly.

d. Weigh any bulk items such as candy, coffee, cookies, etc., and will indicate weights and price per pound on the packages so that this information is readily available to the Contractor.

e. Determine the value of collections of dissimilar items or misplaced items by totaling the prices of the individual items and by posting such totals on or near items, supported by a calculator tape. The value of these items will be posted only to section 50 of the Inventory Control Log.

f. Indicate either by posting a label or tag on cases or pallets: the tie and tier of pallet lots, the unit or pound pack per case, the number of units and prices of contents of “open and broken” cases or containers. Provide

ATTACHMENT 1-4 HDEC05-14-R-0002

information that may assist the Contractor in correctly identifying and making an accurate valuation of merchandise.

In providing this assistance to the Contractor, the Government will NOT provide information that undermines the independence of the Contractor’s valuation. For instance, the Government may record that pallet tie = 15, that there are 5 tiers, that case pack is 24 (if not clear from information on outside of case), and that price per unit is $0.79;

BUT MUST NOT DO ANY OF THE CALCULATIONS NECESSARY TO ARRIVE AT THE VALUE OF THIS

MERCHANDISE. Such calculations must be left to the Contractor. “Open or Broken” cases refers to situations in which items are in original shipping containers, but the seal has been broken or the quantity indicated on outside of container, e.g., 18 cans of fruit cocktail in original case that shows unit pack of 24, etc. Items are “mixed” either if items are in a container other than the original item shipping container, e.g., cans of peas in a case that shows item description for catsup, or in milk crates, etc.--OR—if there are two or more items in a case or other container, e.g., 6 cans of peas and 6 cans of corn and 6 cans of baked beans in the case in which corn was originally shipped, or in a milk crate or other container, etc.

g. Personnel will be available throughout the inventory period to identify product, to locate or clarify designation of sections, to verify/provide missing prices, and to operate material handling equipment. As a minimum, one point of sale hand held will be made available for checking prices in the sales area and back up areas.

One register for every 10 registers will be placed in training mode to be used for price checks.

h. Limit except for emergency repairs the scheduling of non inventory work in the sales and back up areas during the entire scheduled time of the inventory i.e. do not allow scrubbing/waxing floors, shelf stocking, display building etc.

i. DeCA reserves the right to have a 3rd party validation by individual UPC item for the validation sections. This third party validation would be in addition to the accountable inventory contractor's validation.

Where a discrepancy of more than 2% occurs between the two contractors, the accountable inventory contractor will be provided the contradictory information and will be provided up to one hour to reconcile the discrepancy at the UPC item level. If the error is the fault of the third party validator, the accountable inventory contractor will be paid for the additional time at a rate equal to the wage determination rate multiplied by the time expended. If the accountable inventory contractor is in error, the overall count should be changed and the third count accepted. The error will not show in the overall count, however, the error will be included in the inventory validation results. The accountable inventory contractor will not be paid any additional amount when the accountable inventory is in error.

The severity and frequency of inventory errors will be taken into consideration regarding overall contractor performance.

3. CONTRACTOR RESPONSIBILITIES: With the exception of validation (second) counts and reconciliation (third) counts, discussed in paragraph 4, the Contractor shall perform all counts independently.

The Contractor is not to accept any inventory dollar amounts from the government except as noted in section 2 e above, these counts will only be posted to section 50 or 300. Immediately upon completion of an initial section count, Contractor personnel shall identify the section as being counted with a tag or other indicator i.e., making of section ID tag, but shall not post the Section value at the physical Section location. As soon as possible after completing a Section count, the Contractor shall either record the dollar value of the section LEGIBLY IN INK, in column 2 of the Inventory Control Log, or provide/show the Government an automated Inventory Control Log that shows Section value. The Contractor shall begin providing section totals to the government not later than two hours after the inventory count begins, and shall continue to provide Section totals as soon as possible after Section counts are completed, until the Contractor has counted all sections and has provided all Section values to the Government.

As a minimum, after 20 sections have been provided to the Government, the Contractor will reconcile their inventory control log with the Government's official inventory control log. This is a continuous reconciliation process with both the Contractor and Government arriving at one fully reconciled dollar value for each section and one equal inventory grand total. The first or third validation counts, if accomplished, will be used to calculate the total inventory value.

a. Upon completing a count of any area in which the Contractor has to move merchandise from its original location to get an accurate count, the Contractor shall return such merchandise to its original location.

b. The Contractor shall determine the value of bulk items that the Government has weighed by calculating poundage times price per pound. The Contractor shall determine the value of random weight items that

ATTACHMENT 1-5 HDEC05-14-R-0002

are processed or packaged, and that are stored in boxes or on trays, by counting the value of each package, if total tray or case value or weight is not available, or by calculating total case weight times price per pound, if total case weight is available. In determining the value of collections of dissimilar items that the Government has counted, the Contractor may accept the total shown on the calculator tape that the Government has used to determine the value of these items.

4. VALIDATION: The Government will advise the Contractor of the sections that require validation after the Contractor has completed the initial count, posted the section value to their inventory control log and provided the section value to the Government. A Government representative will observe validation counts. All computations of percentages will only be carried out to two places past the decimal point, i.e., 1.99, 2.01, the third decimal place will not be used in determining pass/fail of section validation. To assist you in determining the number of validations required, an automated spreadsheet named “Master Inventory Control” is available in DeCA’s public folder, under “Store Library”, Inventory Information, and Inventory Tools, see the Validation tab in the excel workbook. To document compliance with the validation process, contracting provides the commissary a “Log for Validations” when the delivery order is originally distributed. The Log for Validations will be completed by the commissary to reflect the name of the individual that conducted the initial count of the validated sections, the name of the individual that performed each validation, and the name of the Government representative that observed the validation counts.

ATTACHMENT 1-6 HDEC05-14-R-0002

If Total Sections

Are:

The Sample Size Is:

And, the Inventory Results are Based on the Following:

If Inventory Results are Inconclusive:

Total Sample

Size Exceptions

Decision Exceptions

26 to 50 5

2 or more Inventory results are invalid

1 Results are Inconclusive Expand sample size by (+5) 2 or more Inventory results are invalid

0 Results are valid 1 or less Inventory results valid

51 to 90 8

3 or more Inventory results are invalid

1 or 2 Results are inconclusive Expand sample size by (+8) 4 or more Inventory results invalid

0 Results are valid 3 or less Inventory results valid

91 to 150 13

4 or more Inventory results are invalid

2 or 3 Results are inconclusive Expand sample size by (+13) 5 or more Inventory results invalid

1 or less Results are valid 4 or less Inventory results valid

151 to 280 20

5 or more Inventory results are invalid

3 or 4 Results are inconclusive Expand sample size by (+20) 7 or more Inventory results invalid

2 or less Results are valid 6 or less Inventory results valid

281 to 500 32

7 or more Inventory results are invalid

4, 5 or 6 Results are inconclusive Expand sample size by (+32) 9 or more Inventory results are invalid

3 or less Results are valid 8 or less Inventory results are valid

ATTACHMENT 1-7 HDEC05-14-R-0002

a. The selection of validation sections must be a cross section of all areas inventoried. Do not select more than two validations in the same common group. When possible, attempt to validate every inventory counter.

b. The Government will select the total number of validation sections needed as specified in Attachment 1-6. For instance, if the Government identifies a total of 198 sections in the sales area and 66 sections in the warehouse/back up storage area, for a total 264 sections, the total number of validation sections for the inventory is 20, the Sample Size shown on the Table above for section range of 151-280. The Government will identify TWICE the number of validation sections indicated in the Sample Size column (in this example--2x20=40), in the event that it becomes necessary to expand the sample size, a process described in paragraph 4e. below. The first set of validations MUST be completed and posted to the Official Inventory Control Log before a decision can be made to increase the sample size.

c. The Government will select sections for validation on the sales floor and in the warehouse/back up storage area roughly in proportion to the number of sections identified in each of those areas. In this example, 198/264 =75% of sections are in the sales area, and the remaining 66/264=25% of sections are in the warehouse/back up storage area. The Government should therefore select about 20x0.75=15 sections for validation in the sales area, and about 20x0.25=5 sections for validation in the warehouse/back up storage area.

d. Once the requirements of paragraph 4 have been completed, the Government advises the

Contractor to accomplish a validation (second count). The validation may not be performed by the individual who accomplished the initial count or by any individual who has knowledge of the section dollar value.

e. If, after comparing the values of the initial and validation counts of a section, the Government determines that a validation count in either the sales area or in the warehouse/back up storage area is less than +/- 2.0% of the Contractor's initial count, the Contractor's initial count is acceptable. For instance, if value of initial count is $2489.93, and value of validation count is $2526.88, the difference is $36.95. $36.95/$2489.93 = 1.48%.

In this and similar situations, the Contractor’s initial count is acceptable. ([Difference of initial count and validation count]/initial count = variance percentage)

f. If, after comparing the values of the initial and validation counts of a section, the Government determines that the difference between these two values is +/-2.0% or greater, the Government will assess the Contractor’s initial count/valuation of the section as an “Exception.” For instance, if value of initial count is $2489.93, and value of validation count is $2349.66, the difference is $140.27. $140.27/$2489.93 = 5.63%. The Government will assess the Contractor’s initial count/valuation of this section as an “Exception” by annotating “EX” in Column 6 of the Inventory Control Log opposite the appropriate section number.

g. Numbers of exceptions and actions that correspond to each number of exceptions are shown in the validation Table above. Using the example described above that calls for an initial sample size of 20 validation sections, the following may result:

(1) Should the Government assess 2 or fewer of the 20 validations as Exceptions, the inventory results are valid. No further validation action is necessary.

(2) Should the Government assess 5 or more of the 20 validations as Exceptions, the inventory results are invalid. The Government will stop the inventory at whatever point in the inventory process the Government has assessed 5 validations as Exceptions. The commissary must then immediately notify the region and contracting officer of the situation. The Contracting Officer will ultimately make a determination whether or not the Contractor is entitled to any compensation under the contract.

(3) Should the Government assess 3 or 4 of the 20 validations as Exceptions, the inventory results are inconclusive. The Government will expand the sample at whatever point in the inventory process the Government has assessed 3 or 4 validations as Exceptions. The expanded sample requires validation of up to an additional 20 sections. Validation procedures for these additional 20 sections are the same as those described in paragraphs c. and

d. above. Using the example described above that calls for an expanded sample of 20 validation sections (40 validation sections in all), the following may result:

ATTACHMENT 1-8 HDEC05-14-R-0002

(a) Should the Government assess a total of 6 or fewer of the 40 validations as Exceptions, the inventory results are valid. No further validation action is necessary.

(b) Should the Government assess a total of 7 or more of the 40 validations as Exceptions, the inventory results are invalid. The Government will stop the inventory at whatever point in the inventory process the Government has assessed 7 validations as Exceptions. The commissary must then immediately notify the region and contracting officer of the situation. The Contracting Officer will ultimately make a determination whether or not the Contractor is entitled to any compensation under the contract.

h. Once the Government has accepted the inventory. The Government may direct the Contractor to perform a third count with a Government observer of any validation section with a variance of equal to or greater than +/- 10% of any previous counts. The results of the 2nd validation will be posted to column 7 of the Inventory Control Log and used to calculate the overall inventory dollar value.

5. REPORT OF INVENTORY CERTIFICATION:

a. Government personnel shall complete the automated Dollar Value Inventory Certification (DeCA Form 40-106) at completion of the inventory and prior to departure from the commissary. The Store Director and the Contractor will review the criteria described on the certification form, following which each will sign the certification form in order to verify the accuracy of the DeCA Form 40-106 and section logs.

b. The Store Director will provide copies of the Inventory Certification and Inventory Control Log

(automated) DeCA 40-55 as follows:

(1) At the completion of the inventory, provide one copy of the Official Inventory Control Logs and Inventory Certification to the Contractor.

(2) The “original” official inventory control logs DeCA 40-55 and Inventory Certification DeCA 40-106 will be maintained at the Commissary and scanned into DERMAS within two calendar days of the completion of the inventory. The layout drawings will be stored by the Commissary but not scanned into DERMAS.

c. No later than two working days after completion of the inventory, the Contractor shall send their original Dollar Value Inventory Certification DeCA 40-106, and their DeCA Form 40-55, Inventory Control Log(s), by e-mail or fax, with the following information:

By E-mail: InventoryDocs@deca.mil

Subject: Store Name_Current FY_Inventory Certification Body: Contractor Company Name and Point of Contact

By Fax: 804-734-8009 (pause) (pause) 78878 d No later than two working days after completion of the inventory, the Store Director shall e-mail the automated Commissary Inventory Performance Evaluation form to InventoryDocs@deca.mil. The E-mail Subject should be: Store Name_Current FY_Commissary Performance Evaluation.

e. The signed Dollar Value Inventory Certification and the Inventory Control Logs confirm the inventory service was received by the commissary. The contract administrator at HQ DeCA, Contracting Business Unit, will review the signed Dollar Value Inventory Certification and document acceptance and receipt of the service in the Wide Area Work Flow system. The commissary is not required to process any receiving reports for this contract.

6. CONTRACT PAYMENTS: All contract payments will be made through the Defense Finance and Accounting Service using the Wide Area Work Flow electronic commerce. Contractor shall refer to paragraphs F.

ATTACHMENT 1-9 HDEC05-14-R-0002

and G. of ADDENDUM TO FAR 52.212-4, CONTRACT TERMS AND CONDITIONS – COMMERCIAL ITEMS, for payment processing instructions/requirements.

7. CONTRACTOR LIABILITY:

LIQUIDATED DAMAGES: If the Contractor fails to complete the inventory within the time specified in the task order, the Contracting Officer may assess liquidated damages. For the rate of liquidated damages, see Clause 52.211-11, LIQUIDATED DAMAGES--SUPPLIES, SERVICES, OR RESEARCH AND DEVELOPMENT

(SEP 2000).

8. ENTERPRISE-WIDE CONTRACTOR MANPOWER REPORTING:

The contractor shall report ALL contractor labor hours (including subcontractor labor hours) required for performance of services provided under this contract for the Defense Commissary Agency (DeCA) via a secure data collection site. The contractor is required to completely fill in all required data fields using the following web address:

http://www.ecmra.mil/.

Reporting inputs will be for the labor executed during the period of performance during each Government fiscal year (FY), which runs October 1 through September 30. While inputs may be reported any time during the FY, all data shall be reported no later October 31 of each calendar year, beginning with 2013. Contractors may direct questions to the help desk at:

http://www.ecmra.mil/.

9. CELL PHONES AND/OR PERSONAL DEVICES:

Personal cell phone use is prohibited during the actual time inventory is being conducted. To include the use of mp3 Players, Bluetooth earpieces, and all other personal electronic devices. Contractors shall not access data stored in inventory machines or other inventory recorded data while using a telecommunication device during a break, meal period or any other time unless the communication is with DeCA contracting office personnel. Inventory contractors must remain vigilant to ensure the integrity of a clean validation count where the person validating has no knowledge of the first count. One way to maintain a sanitized inventory process is to abstain from the appearance of a possibility that inventory values could have been shared with the person validating. Inventory validity is a crucial element of the inventory process and contractor failure to ensure the integrity of a sanitized process may result in a termination for cause of both the delivery order and contract.

If an emergency arises during the process of inventory, the Contractor Supervisor as well as Commissary Store Director should be notified immediately by the Contractor's employee.

ATTACHMENT 1-10 HDEC05-14-R-0002

DEFINITIONS

Bulk items—Refers to items that are not sold in standard count/weight packages, and for which a patron may determine the exact amount of the item she or he wishes to purchase. Some examples of bulk items are candy or coffee or cookies that are sold by the pound or by the piece—a patron may purchase one ounce/piece or 100 ounces/pieces of these items—at a patron’s discretion.

Collections of dissimilar items; e.g., misplaced or damaged items—Because patrons sometimes select items and do not return these items to the shelf or display locations designated for these items, commissary personnel have to collect these items and eventually return these items to proper locations. To the extent that the Government has such collections of dissimilar items on hand at time of inventory, the government is responsible for determining the total value of collected items, and for providing these values to the Contractor. Additionally, the Government has to include these collections in section 50 or 300.

Consecutively—Means that the Government will not skip a number or numbers when assigning section numbers, and also that the Government will—to the extent feasible—identify sections that are adjacent or physically close to one another in numerical sequence.

Dollar value inventory—Refers to an inventory in which value of merchandise is determined as item price x quantity, without reference to or recording description of items counted/valued.

Exception—Refers to a situation in which the value of a Contractor’s initial counts of a section and the Contractor’s validation (second) count of a section differ by more than a variance established by the Government. In such cases, the Government charges the Contractor with an exception, and annotates “EX” opposite the appropriate section number on the Inventory Control Log.

Grocery Department, Meat Department, and Produce Department—Refers to designations that the Government uses to classify and account for items sold in commissaries. Items classified as “meat” are principally fresh and smoked beef, lamb, pork, and veal processed into retail cuts in the commissary. Items classified as “produce” are principally fresh fruits and vegetables. All items except those classified as “meat” and “produce” items are classified as “grocery” items. “Grocery” items include items that physically are a type of meat, such as packaged lunch meats, bacon, sausage, canned hams, and poultry products.

Initial count—Refers to the Contractor’s first count/valuation of a section. Unless validation of a section count/valuation calls the initial count into question, the initial count determines the value of a section reported in total inventory value.

Inventory Control Log (DeCA Form 40-55)—The administrative mechanism that the Government and contractor uses to manage the inventory process. The Government and contractor both record section numbers on their respective log. As the Contractor provides initial count, validation count or reconciliation count section values to the Government, the Government records these section values in the appropriate columns of this log, performs computations relating to section values as necessary, records differences in section dollar values and percentage differences in the appropriate columns of this log, and also records any exception that the Government charges to the Contractor in this log. This log is the official detailed record of inventory value.

Mass display area, end cap, rack, front-end merchandisers, and shippers—Refer to various types of displays/display areas that might be found in a commissary. These are considered to be “off-shelf” displays, as opposed to items displayed on shelving that borders the aisles in a commissary. To the extent that these various types of “off shelf” displays contain merchandise that the Contractor is required to count, the Government has to include these “off shelf” displays in sections, assign section numbers, etc., as the Government is responsible for doing for any other merchandise that the Contractor is required to count during inventory.

Material handling equipment (MHE)—Refers to manually operated or powered equipment such as forklifts, pallet jacks, etc., that the Government provides and operates to assist the Contractor during conduct of inventory.

ATTACHMENT 1-11 HDEC05-14-R-0002

Performance date—Refers to the date specified in the task order on which the Contractor has agreed to conduct inventory, and on which date the Government will be prepared for inventory as described in the PWS.

Performance time—Refers to the period of time specified in the task order during which the Contractor has agreed to conduct and complete inventory. The Contractor is required to be present at the site of the inventory and ready to perform at the specified start time. The Contractor is required to have completed inventory no later than the specified end time.

Reconciliation (third) count—Refers to the Contractor’s count/valuation of a section—witnessed by a Government observer-- for which the difference between the initial and validation counts exceeds a variance established by the Government. Whenever a reconciliation count/valuation is done, the value determined becomes the value of a section that is reported in total inventory value.

Sales area—Refers to that portion of a commissary in which items are displayed principally by individual units readily available for sale to patrons, although a commissary may also have some items in case lot quantities in the sales area.

Section—Refers to a physical division of items that the Contractor is required to count/value that the Government uses to manage the inventory process.

Section number—Refers to the means that the Government uses to identify the various physical divisions of items to be counted/valued. The ranges of section numbers that the Government will use are specified in the PWS.

Tobacco products—Refers to cigarettes, cigars, chewing tobacco and snuff products. Tobacco products are classified as grocery Department items, but the Contractor is not required to count/value tobacco products during inventory. The term “tobacco products” DOES NOT include smoking cessation items, such as Nicorette, etc., nor does it include items such as cigarette lighters or matches. Smoking cessation items and such items as cigarette lighters and matches are included as part of the inventory.

Validation (second) count—Refers to the Contractor’s count/valuation of a validation section—witnessed by a Government observer--which is compared to the initial Contractor count of the section to assess the accuracy of the Contractor’s count/valuation.

Validation section—Refers to a section selected by the Government for which the Contractor is required to do a second count/valuation that is compared to the initial Contractor count of the section to assess the accuracy of the Contractor’s count/valuation.

Variance—Refers to the percentage of difference between a Contractor’s initial count/valuation of a section and validation count/valuation of a section that the Government allows before charging the Contractor with an exception.

Warehouse/back up storage area—Refers to that portion/those portions of a commissary in which items are held principally in case lot quantities not readily available for sale to patrons, although a commissary may also have some items in individual units in the warehouse/back up storage area. Sub-areas of the warehouse/back up storage area may include refrigerated or non-refrigerated storage areas, a “salvage” area in which a commissary holds/processes damaged items, a “sensitive item control area” in which a commissary holds high value items, or other areas used for processing/preparation of items for sale.