VISA_Industry_Day_12-10-14_Minutes.pdf

VISA INDUSTRY DAY MINUTES

Industry Day meeting held: 12/10/2014

Industry Attendees:

Company Name Attendee Company Name Attendee

American Roll-on/Roll-off Sandy Santianna Horizon Lines Kathy Reeves

American Roll-on/Roll-off Chris Heibel Horizon Lines Ed Berti

APL Lars Magnusson Maersk Lines, Ltd Greg Dunnuck

APL Jim Kelly Matson Mike Garvin

Central Gulf Lines Inc Bob Chambers Pasha Hawaii Transport Lines Margaret Groth

Crowley Jay Brickman Patriot Shipping Leo Bonser

Euro American Shipping & Trade Obaid Ahmad Schuyler Line Navigation Co. LLC Russell Paret

Farrell Lines Kevin Farrell Totem Ocean Trailer Express Claudia Roberts

Hapag-Lloyd Jared Henry Totem Ocean Trailer Express Kevin Bachel

Hapag-Lloyd Ryan Casey

USTRANSCOM

Col Ed Koharik (TCERC) Tim Boemecke (TCERC) Tim Grout (CGI) Gina Lee (TCAQ-I) Nick Weiss (TCAQ-I) Melinda Lewis (TCAQ-I) Dave Hoag (TCAQ-I) Donna Green (TCAQ-I) Peter Ries (TCJA)

MARAD

Mike O’Malley

Agenda:

Opening Comments and Introductions (Col Koharik, Tim Boemecke)

Emphasis placed on open dialogue to move contract renewal forward (voice concerns, issues, and recommendations for consideration), continue to align VISA contingency contracts with VISA program, refer to peacetime contracts where possible and streamline the contingency contract without effecting the key tenants agreed by the original creators. In addition, the differences between the VISA program level extension through 2019 by MARAD and the need for updated and renewed USTRANSCOM VISA contingency contracts were reiterated.

VISA Contingency Contract Renewal Purpose (Nick Weiss) Discussed VISA contingency contract history (DCC, VCC, VEC origination, extensions, USTRANSCOM contract consolidations and singular contract authority) and statutory requirements to renew vice extend. In addition, recommendations for flexibility, the need to eliminate contract redundancies and desires to get the renewed contingency contracts updated and kept current with peacetime contracts and changing environments moving forward was highlighted.

New Requirements (Tim Boemecke) Facility Clearances:

Discussed the requirement for a DD Form 254 in the new contract. It was also noted that a Facility clearance was required previously for the VISA contingency contracts; however, the contracts did not include a completed DD Form 254.

Industry expressed concerns that they must clear as many as 50 or 60 personnel to work under the VISA contract upon activation and do not want to have to initiate or get new facility clearances due to VISA.

Response: The requirement will work similar to USC. There will be a requirement for certain personnel on board to be cleared and it will be voyage specific. If there is no classified activity associated with a particular voyage, it will not be necessary to provide cleared individuals.

Industry advised that they use personnel hired out of the Union Hall and asked if the facility clearance could be held by the Union.

Response: Not likely that the union hall could hold the facility clearance since they do not hold a Government contract. If Carrier’s personnel will have access to classified material (supporting the JPAG or classified shipment) the carrier will still be required to have their own facility clearance.

A question was asked regarding the DD Form 254. The draft form has the box checked that allows Carrier access to NATO information. Concern is whether this will require additional facility clearance reviews or training on the Carrier’s behalf.

TCERC/TCAQ will take action to obtain guidance from TCJ3 regarding whether the Carriers must incur additional responsibilities in order to access NATO information.

A question was asked regarding new DD Form 254 requirements for carriers that already have a facility clearance (i.e. peacetime contracts).

TCERC/TCAQ will take action to obtain guidance from and engage TCJ3-FP to work with DSS to determine specific requirements for the VISA contract DD Form 254 as it relates to carriers that already have a facility clearance. The expectation is carriers that already have a facility clearance will not be required to obtain a “new” clearance but rather only initiate a new DD Form 254 reflecting the VISA contingency contract since the DD Form 254 requirement is contract specific.

Cyber Security:

Cyber Security is a mandatory USTRANSCOM contract requirement.

Industry expressed concerns with compliance and wanted to be assured that they would be informed should their Company be subject to a breach. In addition, requested to know what the process is if a breach occurs and whether there could be a reporting mechanism for both the Contractor and the Government.

Response: Due to counter intelligence and potential to compromise an open investigation USTRANSCOM may not be able to provide any information.

Incident reporting is included the solicitation/contract terms and conditions and contractors may contact the Cyber Operations Center at transcom.scott.tcj3.mbx.cyoc@mail.mil for further reporting details.

No new plan or changes from what is currently acceptable for USC/RDC providers.

Posted Draft VISA Documents (Nick Weiss)

Posted VISA contingency contract documents (SF Form 1449 Solicitation, Charter Terms & Conditions, and Business Rules) were discussed briefly. For drafting the updated charter terms and conditions, the newest version of MSC’s Drytime Charter Contract was base-lined with all revisions from the previous VISA contingency charter contract (DCC) annotated via “track changes”. Based upon questions and comments received, the below actions were taken in regards to the posted documents:

General Comments:

1. Reviewing the offered documents, there does not appear to be much change.

Correct. Minimum changes have been made to the documents posted. Our goal is to make the VISA contingency contract renewal, administration and utilization a less onerous process for both industry and government while maintaining its usefulness in an activated state.

2. Would appreciate an opportunity to review the specific liner T&C’s which were not included in the posted Draft documents.

Following industry day discussions, draft liner documents are being finalized for posting and industry will have the opportunity to provide comments.

3. Question was asked about how to bill since there was no billing information in the documents.

Billing instructions will be provided upon VISA activation as provided by J8 and will coincide with the billing instructions utilized in current peacetime contracts.

Charter T&Cs

1. Sec 3.1 Regulatory Compliance; paragraph 3.1.1 “the contractor shall file rates/terms with the FMC and/or STB and/or other Governmental agencies…” was removed. Updated language will be included in the final draft posting of the solicitation.

2. Sec 3.2 Liability for Lost or Damaged cargo removed. Information was duplicated in section (j) of clause 52.212-4 Contract Terms & Conditions (tailored). Revision will be included in the final draft posting of the solicitation.

Business Rules

1. Sec 1.3.4.1 Last In First Out Proposal – Opened discussions for removal based on question of relevance. Industry wanted to keep this in the business rules for their control in the allocation of activated assets.

Liner Terms & Conditions (T&C’s) (Nick Weiss)

The proposed Liner T&Cs were not posted prior to Industry day and it was noted; only 14 carriers have VISA Liner contracts. Of those, 5 are RDC carriers and 7 are USC carriers.

As a recommendation, the following Courses of Action (COA) were offered as a means forward to developing updated Liner T&C’s with pros, cons and concerns discussed.

1. Link VISA to USC & RDC liner T&C’s?

Reference peacetime contracts T&C’s, as applicable Supplement with existing VISA T&C’s

2. Baseline USC/RDC T&C’s for VISA Contingency Contract?

Supplement with existing VISA T&C’s

3. Utilize existing VISA liner T&C’s?

Supplement with current USC/RDC T&C’s, as applicable?

4. Utilize existing VISA liner T&C’s; revise as appropriate?

Carriers present rejected COA’s 1 and 2 and favored either 3 or 4. Comments below:

USC is one-sided and VISA is more neutral/friendly. Need more flexibility to perform in a contingency environment so stay away from USC/RDC COA 1 and 2.

Do not want to mirror USC T&C’s. USC is a competitive contract and viewed to have punitive performance measures. VISA is a voluntary contract in which industry’s contingency operations and requirements will vary based upon the conflict and activation requirements. Thus, the T&Cs should not be the same as those agreed upon and utilized in a competitive environment. An example provided utilized USC EDI requirements and impact: i.e. If you take a ship from a string and have to work at another carrier’s terminal or go into a new environment, EDI problems are likely and may not be immediately available. Under USC if you do not provide the appropriate EDI transmission within the times required you will not be paid. In a VISA activated state, it could take many days to get spun up and carriers should not be penalized for performance when contingency changes are dictated outside their normal or known operations.

Though USC, RDC and the VISA contracts have an extensive amount of pages, industry did not favor reducing the number of VISA contingency solicitation/contract pages by base-lining and referencing peacetime contract T&C’s. The consensus was the VISA contingency contract should be all inclusive of the contingency contract requirements without cross-references to peacetime contracts for identifying VISA contingency contract responsibilities.

The VISA contingency contracts needs to keep/maintain the existing terms and ability to “revise as appropriate”; as currently written since there are so many uncertainties surrounding activation needs and/or location requirements. The ability to negotiate changes as the contingency dictates was intentionally built into the existing contracts to accommodate any contingency requirement/environment.

VISA has never been activated and is untested; thus industry is leery of making any changes to existing terms and conditions given all the unknowns.

Though the prevalent industry desire is to utilize the existing contract liner T&C’s with minimal revisions (COA 4), it’s not practical given the 10 years of change experienced in liner requirements since USC-2. Thus, in moving forward with the contract renewal, COA 3 will be utilized for drafting the liner T&C’s with all industry comments discussed and considered prior to issuance of the final solicitation. The USTRANSCOM team will highlight and draft recommended new/updated/revised liner T&C’s using the existing VISA liner contract T&C’s, supplement with current USC/RDC T&C’s as applicable, and post for industry comment within the next month.

Existing Liner Pricing Schedule (Nick Weiss)

The existing liner pricing schedule was summarized and string based unit pricing discussed.

A recommendation was made to remove the Middle East Foreign Flag combination rates since no carriers priced or utilized the CLINs in the previous contract and appeared no longer relevant. Industry provided insight on the original inclusion of the CLINs and agreement was reached to remove from a new pricing schedule moving forward. In addition, it was noted that no carriers priced CLINs 4000-7000 or 9000. Also, industry was advised that CLIN 8000 for $1000 will not be included for the reimbursement to establish a command center. Though a command center is still a contract requirement, sufficient contract consideration for binding the parties will be peacetime priority as identified within the VISA program terms and conditions.

Pricing Vision (Nick Weiss)

The pricing vision forward is carriers will continue to be allowed to use any of the 3 rate methodologies previously authorized (Revenue Based, Peacetime, or Negotiated) for pricing.

However, for Revenue Based rates, a recommendation to conduct DCAA audits post activation vice initially/annually to streamline non-value added administration and resource allocations is being offered. In addition, no changes will be made to the existing rate formulas. Carriers will be required to price charter and liner vessel daily rates upfront to include tug and barge providers utilizing one of or a combination of the 3 rate methodologies.

In the absence of an initial DCAA audit, fair and reasonable rate determinations will be made based upon the range of rates provided, like vessels, negotiated versus revenue based rates, revenue based versus peacetime rates and historical comparisons. In addition, the rate increases for Stage I (140%) and Stage II (115%) activations will remain unchanged. For negotiated rates, carriers will be allowed to refresh rates annually, if desired.

Initial Pricing Recommendation for Revenue Based Rates:

1. Provide upfront vessel daily rates utilizing Revenue Based formula

2. Agree to utilize USC/RDC peacetime rates upon activation (i.e. seamless transition)

3. Gov’t edit booking system to allow Stage I (140%), Stage II (115%) increases

4. During activation - Carrier re-apply Revenue Based formula to re-calculate vessel daily rates and unit rates

5. DCAA audit post activation to validate proper formula application

6. Industry determine difference between rates; submit difference to CO

7. Government compensate IAW VISA contingency contract via Request for Equitable

Adjustment (REA)

Industry response to pricing recommendation for Revenue Based rates:

Not on board with using peacetime rates as a basis for initial activation or payment under the Revenue based method since USC is competitively priced. Industry stated that this is why none of the carriers chose to use Methodology B (peacetime rates) for VISA pricing.

Carriers against submitting REA reimbursements for differences between activated peacetime rates and actual revenue rates; does not want to wait for years to get paid.

For Stage I, a carrier suggested that they get the 140% of USC rate for existing lanes and the DCAA audited revenue rate for any new lanes. Industry consensus needed but a reasonable recommendation for further industry consideration.

To close the pricing discussions, industry was asked if there was any value in keeping the existing liner pricing schedule based upon strings/unit rates and/or recommendations for a new way to price given current commercial practice. Carriers maintained that they have not looked at this information for several years and need to internalize to determine what is still relevant prior to putting forth pricing recommendations. Thus, the initial draft pricing schedule to be posted will coincide with the existing liner pricing schedule.

Based upon the meeting discussions and issues raised, the following edits to the pricing recommendation are put forth for consideration/comments:

Pricing Recommendation (Revised) for Revenue Based Rate offerors:

1. Carrier develop revenue rates (vessel, unit) upfront utilizing methodology instructions

2. TCAQ determine rate fair and reasonable utilizing various methods

3. Carriers provided opportunity to make changes to submitted rates annually, if desired, or as changes are made to VISA fleet

4. Revenue based rates validated only once, post-activation via DCAA audit

5. Audit differences compensated to carrier/government via Changes modification

General VISA Question:

Will Foreign Flag be allowed to enroll in VISA? No Is an updated copy of the VISA Battle Book available? No. The book was an internal procedural guide from 2007, is not a contractual guide and has not been updated.

ACTION ITEMS:

1. TCERC/TCAQ will take action to obtain guidance from TCJ3-FP regarding whether the Carriers must incur additional responsibilities in order to access NATO information.

2. TCERC/TCAQ will take action to obtain guidance from and engage TCJ3-FP to work with DSS to determine specific requirements for the VISA contract DD Form 254 as it relates to carriers that already have a facility clearance.

3. TCERC/TCAQ will provide proposed liner T&C’s and a revised pricing schedule to industry for review/comments (30 Jan 2015)

4. TCAQ will post copy of slides used to facilitate Industry Day Meeting (posted 12/11/14)

5. Industry will review existing commercial liner pricing practices and provide recommendation for pricing the VISA renewal requirement or recommend continued string pricing.

MILESTONES:

Continue Industry Dialogue (Jan-Feb 2015) Issue Final Solicitation for Request for Proposals (Feb-Mar 2015) Award New VISA Contingency Contracts; effective 1 Oct 2015