USC-8_Industry_Day__19_Feb_15_.pdf

UNIVERSAL SERVICE CONTRACT-8 (USC-8) INDUSTRY DAY

19 FEB 2015

MITRE BUILDING, SCOTT AFB, IL

OPENING REMARKS:

Mr. J. R. Oliver, USC-8’s contracting officer, welcomed and thanked everyone for attending. He began by discussing the agenda and then turned over the discussion to Mr. Jerome Colton to brief the Surface Deployment and Distribution Command’s (SDDC) key requirements.

BRIEFINGS:

Overview of SDDC’s Key Requirements – Mr. Jerome Colton Mr. Colton discussed the key requirements not covered in the subsequent briefings. The key requirements below generated dialogue between Industry and Government.

Accept rates for scheduled liner service only - A carrier’s rate will be withdrawn if they do not have liner service for the designated route/lane/area. Liner service can be U.S. Flag or Foreign Flag. If a carrier does not have a rate in one performance period, they can offer rates during the rate refresh process if they establish liner service for a new route/lane/area or if their rate was previously rejected. SDDC G-6 is working on an auto feed feature to upload the carriers’ vessel schedules; however, this may not be implemented by contract award.

Reduce number of rates - The goal is to clean up the Carrier Analysis and Rate Evaluation (CARE) system to ensure the Government only solicits rates that they are actually using. In the past 12 months, the Government only utilized approximately half of the contract line item numbers (CLINs) solicited.

Clarify required delivery date (RDD) by balancing rewards - There will no longer be a RDD matrix in the contract. The RDD will be based on the booking. The bookers will have guidance to help ensure they are not offering unrealistic RDDs.

Clearly indentify cases when carriers must accept a booking – The Government clarified language as to what is a mandatory booking.

Invoicing and Payment – Mr. Kevin Cockrell Mr. Cockrell provided an overview of the new provisional payment and invoice submission terms. He explained SDDC’s objective is to streamline the invoicing process with more auditable functions.

Carriers will have an option to submit 2 invoices, 70% upon vessel departure and 30% on X1, or a first and final invoice upon X1. The Government will also provide training on the Treasury IPP in late March / early April. Additionally, the Government will work with the carriers’ developers.

Industry proposed alternate solutions to come to more agreeable terms. They asked the Government to consider paying ocean and linehaul charges upon vessel departure with accessorials paid upon XI. Mr. Cockrell said the Government would review Industry’s feedback and explore alternative payment options. Mr. Cockrell also said the Government would confirm how BAF, CAF and FAF will be handled since they are not ordered services.

Container Issues – Mr. Mark LaRue Mr. LaRue briefed the draft container detention and purchase language. It was discussed the Government has received direction from OSD-TP that it shall not pay more than the value of the container. There will be further discussions to determine the fair value of a container. He addressed several other questions received in reference to the draft RFP.

Free Time – Industry stated free time can be a concern when they have a fixed price on contract and then an area is declared as an exigency area because the carrier’s costs increase the longer a container is out. Industry was asked if they could provide an estimate of additional costs incurred for changing free time. The carriers were unable to quantify.

Leasing – It was explained that leasing terms were inserted for exigency or surge capabilities.

Similar language has been used in the past for areas such as Korea and Japan. Industry pointed out a possible conflict in language in the Exigency Annex (para B.1) wherein the Government could switch between detention and lease rates.

Government Furnished Containers (GFC) – Mr. LaRue briefed the need to ‘surge’ GFC in the event of a major world event. Industry noted that a commercial standard is having a surcharge be applied in addition to the ocean rate for the use of GFC or shipper-owned containers.

Carrier Notification For Pickup – A discussion was had on the Carrier Return Module (CRM). It was explained that CRM allows the carriers to provide feedback in the system and that the information provided will be adjudicated by the Government. Industry raised concerns about visibility into who is inputting the information in CRM as that can play an important role in the process.

Diego Garcia – The rationale behind adding the additional Diego Garcia language to the contract was outlined. Industry raised several concerns about adding this language to the contract. Mr.

Oliver asked for Industry feedback on how we can solve the problem that is good for both Industry and the Government.

Drop and Pick – Carriers raised concerns that drop and pick is not being applied correctly. For example, shippers are asking carriers to drop a container 500 miles out and then return to pick it

up. The rates for drop and pick, in this example, Industry feels are not compensatory.

Driver Wait Time – Industry expressed that the driver wait time amounts need to be reviewed by the Government as the rates have not been updated for quite a while.

Defense Logistics Agency (DLA) Prime Vendor Requirements – Industry raised concerns that the Prime Vendor Attachment language in USC-8 does not match the language in the Prime

Vendor contracts. DLA and the contracting officer took the action item to work out the differences in language.

Chassis Requirements – Industry has several concerns with the chassis requirements in the USC- 8 contract and state they are no longer able to provide chassis under this contract. It was also explained that SDDC does not want to maintain a separate contract for chassis outside of USC-8.

Liability Issues – Mr. Peter Ries Mr. Ries discussed the USC-8 liability terms and stated the Government does not want to pay for unlimited liability, but it also wants make sure it’s not underinsured. The Government’s intent is to have COGSA and CARMAC; however, the Government owes Industry the liability cap as well as to what the liability will be tied to.

Industry proposed alternate solutions such as tiered liability.

There was significant amount of discussion regarding the Amended Jason Clause and General Average. While there’s not a statutory requirement to include General Average in a FAR contract, Industry discussed this is a customary commercial practice. The Government requested Industry to provide them information as to whether removing the clauses will or will not make them uninsurable.

Ordering Procedures – Mr. Richard Smith Mr. Smith provided an overview of the ordering procedures and explained what is changing between USC-7 and USC-8.

Industry expressed concerns with the draft language. They requested examples as to when an ordering officer would offer cargo to a carrier that does not have the lowest best value number (BVN). Additionally, they would like to know if a carrier will receive a debriefing or an opportunity to refute a booking awarded to a carrier that does not have the lowest BVN.

Industry also has concerns that they may be harmed by providing service to problematic locations. Therefore, they may make the business decision to pull their service for that location if it could have a negative impact of them operationally.

Incorporating RDC in to USC – Mr. Jerome Colton Mr. Colton briefed the benefits of combining the USC and RDC contracts. Industry discussed how it appears some of the RDC specific language was omitted from the USC-8 draft RFP. Mr.

Oliver explained some language was inadvertently deleted, which was not the intent. The RDC omitted language will be added to the final RFP as long as the Government still has a need for the requirement.

Readiness – Colonel Edward Koharik Col Koharik introduced the draft readiness language. He explained the readiness factors have not been defined but would be determined and included at the individual task order level, if/when determined appropriate. Col Koharik stated this language will not have an impact of the majority of the business as there will be a threshold when it may apply.

GENERAL DISCUSSION ITEMS:

Mr. Oliver opened the floor for any questions and/or comments. The following topics were addressed:

The Use of Book Date versus Sail Date – Mr. Oliver stated the Government has decided to continue to the use Sail Date for bookings similar to USC-7 and RDC-6.

Compensable Delays – Industry raised concerns that paragraphs 6.3 and 6.4 from Exhibit 2 were deleted. It was explained that those paragraphs were meant to be moved to the exigency annex and not deleted from the contract. An overview of the role of Contracting Officer Representatives (COR) was given and the role they play in approving delays. There was further discussion on the desire by Industry to have the Government provide notification of damage or theft within 48 hours of discovery as well as the difficulties and the desire for a Proof of Delivery system.

Performance Metrics – Industry noted that Performance Metrics in the contract are higher than commercial standards.

Bunker Adjustment Formula (BAF) – Industry noted that the BAF does not properly account for the circuitous nature of a vessels routing and that the Technical Factors had decreased significantly. Mr. Oliver explained that Technical Factors were still under review.

CLOSING REMARKS:

Mr. Oliver reviewed the acquisition milestones. He then provided closing remarks and thanked everyone for their participation.

DUE OUTS:

Post the USC-8 Industry Day briefing slides to FebBizOpps (FBO).

Post revised draft Performance Work Statement (PWS) and Attachments to FBO by 6 March based on Industry’s comments, Industry Day and internal review.

Post Q&A’s to FBO by 6 March for comments received in response the draft RFP posted on

FBO.

Provide Industry with the draft readiness language.

Follow up with OSD to see if the IDA study is releasable. Additionally, the Government will set up an IPT to determine the fair container value.

Provide the liability cap and what it will be tied to.

Provide transition plan from RDC-6 to USC-8 prior to release of final RFP.

Confirm how BAF, CAF and FAF will be handled during the payment process since they are not ordered services.