N0001425RFI0001 - Attachment 1.docx

N0001425RFI0001

Attachment 1 Performance Work Statement (PWS) Royalty Auditing Services for the NAVY Trademark Licensing Office

1. Background.

The Navy Trademark Licensing Program Office (NTLPO), is responsible for registering trademarks, licensing commercial companies, conducting enforcement and educating trademark users worldwide to protect and enhance the Navy brand in the commercial marketplace.

In order to promote a positive, strong trademark licensing program, all officially licensed products must adhere to the requirements set in the Navy’s Trademark License Agreement. These standards help Navy provide a tracking system for the Trademark Licensing Program Office (NTLPO) to use for auditing purposes. A royalty audit analysis a licensee’s compliance with the various obligations laid out in the license agreement. Financial compliance is generally determined through an examination of the accounting books and records of the licensee and its sublicensees (if applicable).

2. Scope/Objectives.

2.1 This requirement is for royalty auditing of a licensee's compliance to be conducted on behalf of the Navy’s Trademark Licensing Office. For the purpose of this requirement one (1) royalty audit is required for the base year, and for each of four option years. The first and second option years may include one (1) additional royalty audit resulting in a total of two (2) royalty audits per option year. The third and fourth option years may include two (2) additional royalty audits resulting in a total three (3) royalty audit per option year. The royalty audit will be conducted on sales records of commercial business and merchandise.

2.2 The objective for this requirement is to select a trademark licensing royalty auditing company to conduct audits on behalf of the NTLPO in accordance with industry standards as per the terms of the trademark licensing agreements.

3. Requirements.

3.1 Royalty Audit services must include an inspection of books and records of sales that determines whether a Licensee (user of a Navy trademark) is paying the Licensor (NTLPO) the correct amount of royalty or licensing fees and the selling of approved products through approved distribution channels and approved manufacturers. The Licensor and Licensee have each entered into an agreement regarding use of NAVY owned trademarks. The agreement has explicit audit rights by the licensor to check that royalties and other agreements terms are being adhered to correctly.

3.2 The audit services must include analysis, assessment, and reporting of the Licensees’ compliance with both financial and non-financial terms and conditions of their respective license agreement(s) between the NAVY and Licensee.

3.3 The performance of the audit services for each Licensee audit will consist of the following key phases:

a. Pre-Fieldwork: The contractor shall obtain all sales documentation from the Licensee for last five (5) years (from the start of the audit) and will show sales listed quarterly, unless the license agreement is for annual reporting.

1. The NTLPO will provide historical sale and reporting documentation to assist with validating accuracy of sales by the company.

2. The NTLPO will provide licensing agreement for all years being audited.

b. Fieldwork: The Contractor shall examine all sales and documentation provided by the Licensee and NTLPO to determine all unreported royalties, incorrect royalty rates, unapproved manufacturers, disallowed chargebacks and unapproved products / designs based on the licensee agreement / reporting procedures agreed upon.

c. Post-Fieldwork / Audit Completion / Client Meetings: The Contractor shall provide all findings to the NTLPO Financial Management Analyst, Director and auditor will review the findings and agreement to determine what dollar amount will be owed based on historical reporting from the Licensee.

1. The Contractor shall then provide all findings and supporting documentation, as required by industry standards to validate the findings of the auditor, to Licensee.

d. Meeting: Meetings will be conducted upon request.

1. Settlement (table below): After all parties have come to an agreement on the final settlement, the settlement will include a total dollar amount reflecting all unreported sales, unapproved products sold, interest, and cost of examination found by the royalty auditor with comments from the Licensee and the auditor, the final settlement will be the Claim.

A Claim indicates the final settlement amount to be paid by the Licensee. Agreement terms are between NTLPO, Licensee, and auditor. At the discretion of the NTLPO, the settlement negotiation will be completed through or separately from the Contractor at no additional cost. Once settlement has been finalized, NTLPO will submit a request to have an invoice generated by Centralized Receivable Services (CRS) to the Licensee to pay the debt.

The Auditor checklist.

Request NTLP to verify licensee to be audited.

Obtain licensee contact information.

Obtain five (5) years of royalty documentation pertaining to Navy branded merchandise, to include royalty reports submitted, invoices, general ledgers, sales registers and sales analysis reports, inventory, shipping documents, price lists/catalogs/brochures, purchase records, artwork submissions, distribution channels, royalties paid, license agreements, and from NTLPO dating back five (5) years from the start of the audit.

Notify licensee that audit will be performed as an inspection of books and records of sales that determines whether a licensee is paying the licensor (NAVY) the correct amount of royalty or licensing fees in accordance with the licensee agreement.

Obtain five (5) years of sales documentation from licensee dating back five (5) years from the start of the audit.

Examine all sales and documentation provided by licensee and NTLPO to determine all unreported sales and unapproved products based on the licensee agreement / reporting procedures agreed upon. The royalties due for the investigational periods should be recalculated

All findings will be provided to the licensee to review and provide any supporting documentation to validate the findings by the auditor.

Once the Licensee has reviewed and agreed with the findings, the NTLPO and auditor will review the findings and agreement to determine what dollar amount will be owed based on a licensee’s historical reporting data.

All meetings between auditor and NTLPO will be conducted upon request.

The NTLPO, Auditor, and Licensee will come to an agreement to finalize the Audit Settlement Agreement.

A finalized Audit Settlement Agreement approved by the NTLPO, will be sent by the Contractor and will be provided to all parties to conclude the auditor’s audit report.

4.0 Place of Performance.

4.1 Most of the work will be performed electronically via telecommunication measures. However, traveling to Licensee’s place of business (CONUS) may be necessary. The contractor will be required by the NTLPO to be onsite at least once per audit.

4.2 Comprehensive and auditable records will be kept at the Licensee location.

4.3 The Contractor shall conduct an audit and travel/fieldwork may be necessary to complete a thorough finding.

4.3.1 The Contractor shall be knowledgeable of trademark licensing royalty audits as well as NTLPO licensing reporting processes and shall be able to determine how much onsite work is required.

5. Deliverables.

5.1 The Contractor shall provide a Final Settlement Report. For reference, see sample below.

NAVY / Licensee Name

Audit Settlement

As Per Audit Report

Response from Company Name

Updated

Company Name identified several items they assert should be removed from the findings for the following reasons:

(1) Pet products produced prior to 2018 were sold without a NAVY trademark

(2) Royalty Exclusive Insignia Uniform items

(3) NAVY unit specific designs sold with products that were not included in the license until 2017

(4) Miscoded item numbers on the royalty reports used during the audit caused certain items not to match in testing We agree with the items (2) and (4) and have removed them from the claim.

Regarding the other items:

(1) Please provide product images for the following product numbers prior to 2018 so we can verify whether these products were royalty bearing:

Item # 1111 Item # 1114

(3) Regardless of whether the NAVY unit specific designs were included in the license agreement, Company Name still sold items using NAVY designs and trademarks without having that license. All items incorporating NAVY licensed trademarks were royalty bearing.

Therefore, while we agree that there were no unapproved sales based on our original sample, we would like to review a revised set of sales reports with the product numbers updated and select a new sample to test.

TBD

Total

6. Required Information.

6.1 The Contractor shall provide details of any Trademark Licensing Royalty Audits performed by their company within the last three (3) years relevant to this PWS. This information must indicate any relevant trademark licensing royalty audits performed in either or both the government and private sector. Contractors lacking specialized trademark licensing royalty auditing experience will not be considered.

6.2 The Contractor shall provide two (2) client references. All references must have a comparable profile to other Brand owners with similar trademark licensing programs.

6.3 The Government will not contact a client reference without the Contractor approval.

6.4 The Contractor shall provide a High-Level Plan on how they conduct trademark licensing royalty audits services in accordance with industry standards. This plan must include the following:

· Description of how service will be performed and details of tasks to be undertaken. Process of the trademark licensing royalty audit shall include detailed and logical steps from start to finish.

· Proposed personnel shall include resumes reflecting relevant experience in conducting trademark licensing royalty audits.

7. Audit Request.

7.1 One (1) Royalty Audit request will be completed within 365 days of the start of the base year. One (1) Royalty Audit request will be completed within 365 days of the start of each option year. If the NTLPO decides to request two (2) Royalty Audit requests in the first and/or second option years, two (2) Royalty Audit requests will be completed within 365 days of the start the option year. If the NTLPO decides to request three (3) Royalty Audit requests in the third and/or fourth option years, three (3) Royalty Audit requests will be completed within 365 days of the start the option year.

Audit requests for any of the base or option years will be provided at the start of each year to allow the auditor the full 365 days to complete the audit. Upon request, Contractor shall provide an additional Royalty Audit Report at no additional cost to the Government during purchase order period of performance (base period and/or option periods).

8. Period of Performance.

8.1 The Period of Performance is one (1) twelve-month base year and four (4) twelve-month option periods.