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NOTICES

This report is not to be construed as an official Department of the Armyposition.

Mention of any trade names or manufacturers in this report shall not beconstrued as an official endorsement or approval of such products orcompanies by the U.S. Government.

Destroy this report when it is no longer needed. Do not return it tothe originator.

-4----- - -- - - -*m~j

UNCLASSIFIEDSeCURITY CLASSIFICATION Or THtS PAGe

Form,,, Appr'ovedREPORT DOCUETTO PAE MS No 0104-0188

________________________________________ PAG Ep Valte Jun 30. 1986

la REPORT SECURITY CLASSIFICATION lb RESTRICTIVE MARKINGSUnclassified________________________2a. SECURITY CLASSIFICATION AUTHORITY 3. DISTRIBUTION /AVAILABILITY OF REPORT

2b. DECLASSIFICATION/OOWNGRA!V4NG SCHEDULE Approved for public release:distribution is unlimited

4. PERFORMING ORGANIZATION RE-PORT NUMBER(S) 5. MONITORING ORGANIZATION REPORT NUM8E.R(S)

13352

& AMOFP0,AIGORGANIZATION 6b. OFFICE SYMBOL 7&. NAME OF MONITORING ORGANIZATION

Command AMTA-TMV U.S. Army Tank-Automotive Command6.-. ADDRESS (City, Stete, and ZIP Code) 7b. ADDRESS (City, State, and ZIP Code)

Warren, MI 48397-5000 Warren, MI 48397-5000

go. NAME OF FUNOING /SPONSORING lOb. OFFICE SYMBOL 9. PROCUREMENT INSTRUMENT IDENTIFICATION NUMBERORGANIZATION j(it applicable)

Sc. ADDRESS (City. State, and ZIP Code) 10. SOURCE OF FUNDING NUMBERSPROGRAM IPROJECT ITASK IWORK UNITELEMENT NO. NO. NO. 1ACCESSION NO

11. TITLE (Includle Secu~fty Clasfication)

Value Engineering fCopperheaid" Evaluation of the Heavy Expanded Mobility Tactical Truck (U)12. PERSONAL AUTHOR(S)Richard ork uij MTjhen aslakw

13a. TYPE OF REPORT 13.TME COVERED , 14. DATE OF REPORT (Year, Month,D) 15. PAGE COUNTFnlFROMJUfl 86 _TO Sep 87 Jun 88 7 1 62

16. SUPPLEMENTARY NOTATION

COSATI CODES 18. SUBJECT TERMS (Continue on reverse If necessary end identify by block number)FIELD GROUP SUBAROUP Value Engineering, HENTT, Heavy Expanded Mobility Tactical

'Truck, Copperhead, Value Analysis

19. ABSTRACT (Continue oin reverse if necessary and kimntily by block number)This final. technical report details the results of a preliminary Value Engineering (yE) studyperformued on the Heavy Expanded Mobility Tactical Truck (HEMTT). This study was performedto determine whether to proceed with the inclusion of a mandatory VE clause in the HEMTT

* contract, thereby making an intensive VE study of the vehicle a requirement, The results ofthe preliminary study indicate that an intensive VE study would be inappropriate nit this time.

20. DISTRIBUTION /AVAILABILITY OF ABSTRACT 21 ABSTRACT SECURITY CLASSIFICATIONJ3 UNCLASSIFIED/UNLIMITED E0 SAME AS RPT. El OTic USERS Unclassified

L22A.NAME OF RESPONSIBLE INflIVIDUAL 22b TELEPHONE (Include Area Code) 22c OFFICLE5,YMBOL ]

T akg(1)7-11QAS

DD FORM 1473,84 MAR 83 APR edition may be used until e~xhausted. SECURITY CLASSIFICATION OF THIS PAGEAll other editions are obsolete.

UNCLAS SIFItED

TABLE OF CONTENTS

Section Page

1.0. INTRODUCTION........ . . . . ... ......................... 5

2.0. OBJECTIVES . . .. .......... . . .. ....... .................... 5

3.0. CONCLUSIONS. . . . . . . . . . . . o . . . . . . . . . . . . . 5

4.o. RECOMMENDATIONS ..... . . . . . ...... .. 6

5.0. DISCUSSION . . . . . . . . . . . . . . . . . * 6

APPENDIX A. OMB CIRCULAR A-131, VALUE ENGINEERING . . . . . . . .. A-IAPPENDIX B. LETTER FROM GENERAL THOMPSON . . . . . . . . . . . . . B-IAPPENDIX C. VALUE ENGINEERING CANDIDATE ITEMS LISTS . . . . . . . . C-IAPPENDIX D. LETTER TO OSHKOSH TRUCK CORPORATION PRESIDENT . . . . . D-IAPPENDIX E. LETTER TO MAJOR GENERAL HOLMES. ...... . . . . . . . E-IAPPENDIX F. INFORMATION PAPERS . . . . . . * * * e . * % . * . * F-iAPPENDIX G. VALUE ENGINEERING PROGRAM REQUIREMENTS CLAUSE . . .. G-iAPPENDIX H. AR 70-1, par. 7-3 . . ................. H-i

DISTRIBUTION LIST . . . . . . . . . . . . . . . . . . . . . Dist-i

0copy

INGPEICTEO

Accession For

NTIS GRA&IDTIC TABUnannouncod ElJutit if loation

By.DI-3tribution/

Availability Codes

Avail and/or'3Dist Special1

1.0. INTRODUCTION

This final technical report, originating from the Value EngineeringBranch, Design and Manufacturing Technology Directorate, U.S. ArmyTank-Automotive Command (TACOM), details a preliminary study performedon the Heavy EKpanded Mobility Tactical Truck (HEMTT). This study wasperformed to determine whether to proceed with the inclusion of a man-datory Value Engineering (VE) clause in the HEMTT contract, therebymaking a VE "Copperhead" study of the vehicle a requirement.

In June 1986 then Army Materiel Command Commander General RichardThompson requested that all major subordinate commands identify can-didate systems for intensive VE efforts. A review of all TACOM systemsnarrowed the field to the major activities currently in production.Further study indicated that the system that might most benefit was theHEMTT. This system also presented the challenge of dealing with asystem identified as a Non-Developmental Item (NDI), which basicallyconsists of an assemblage of commercial components selected by thecontractor. (See Appendix H for a detailed explanation of NDI.) Thesesystems constitute a major portion of the Command's procurements andhave been historically resistant to VE efforts. It was hoped that theintensive activity which represents the "Copperhead" VE approach wouldbreak that historical precedence.

"Copperhead" is the name applied to a government-contractor task forcetechnique which was originally applied to the Copperhead missile weaponsystem. This is an intensive method which uses multidiscipline teamsfrom both sides to evaluate the system in great detail, while lookingfor cost savings. One of the conditions of the VE program is that theexpense of such an effort must be offset by the savings potential. Inthis instance, the ability to bear costs and provide savings was thesubject of the study reported here.

2.0. OBJECTIVES

The objective of the project was to perform a preliminary review Lodetermine whether to proceee with a full blown "Copperhead" VE studythrough the use of a mandat .-y VE clause in the current contract for theHEMTT vehicle.

3.0. CONCLUSIONS

The results of the preliminary review indicate that a mandatory VE"Copperhead" study would not be cost effective and, therefore, wasinappropriate at the time. This report constitutes compliance withparagraph 4b(6) of OMB Circular A-131 (Appendix A) and closes the actioninitiated by the Commander's directive of 25 Jun 86 (A;uDendix B).

5

4.0. RECOMMENDATIONS

It is not recommended that an in4;ensive VE study be performed on theHEMTT. Therefore, no mandatory YE clause should be included in theHEMTT contract with the current contractor, Oshkosh Truck Corporation.

5.0. DISCUSSION

In mid-1986 General Richard Thompson, the AMC Commander, requested thatall major subordinate commands identify a candidate system for a"Copperhead" type of intensive VE study. The type of effort envisionedwas to be similar to the production review conducted to assess the cost,schedule and technical risk of the Copperhead Missile ProductionProgram. The Copperhead VE Program cokisisted of combined brainstormingsessions by government and industry personnel to identify cost driversin the production of Copperhead missiles. Significant savings wereachieved, with all necessary organizations (production, accounting, engi-neering, etc.) involved. According to General Thompson an invest-ment of "...19 man-months of time and appropriate funding on the part ofthe government..." produced a savings of between $121 and $1,74 million.(See Appendix B.)

A review performed in 1986 of candidates for VE study at TACON includedthe HEICIT as a possibility. (See Table 5-1 for a detailed time tableof events.) The HEMTT, a 10-ton truck used for missile hauling, generalpurpose ammunition transport, fuel transport, recovery (wrecker), andPatriot semitrailer tractor activities, is manufactured by Oshkosh TruckCorporation. The HEMTT was identified as TACOM's candidate system toAMC Headquarters, in August 1986.

The HEMTT system was chosen as the "Copperhead" target because of itsunique configuration and the dollar value of the contract($190,000,000). Additionally, the contract, because of its size, waswritten with a Value Engineering Program Requirements Clause (VXPRC) asan option (see Appendix G). While the results were not as had been ori-ginally hoped, the study did highlight those characteristics that shouldbe considered in the selection and implementation of high-visibility VEefforts.

Because of the costs involved in a "Copperhead" VE study, the thenevolving Program Executive Office (PEO) for Tactical Systems at TACOM,now PEO Combat Support, determined that a preliminary evaluation was inorder. Following agreement in principal, between the Oshkosh president,Mr. Carrel and the TACOM Commander, Major General Holmes (see Appendices Dand E), personnel from both organizations were tentatively assigned todevelop lists of items that could be exploited for possible savings.This action essentially constituted a preliminary brainatorming sessionand was supported by personnel trained in the value analysis technique.

At the conclusion of the preliminary brainstorming sessions, personnelat TACOM and Oshkosh provided independent lists of item3 (see Appendix

6

Table 5-1. Time Table of Events

25 Jun 86 A letter dated 25 Jun 86 from General RichardThompson (Commander, AMC) to Major GeneralArthur Holmes, Jr. (Commander, TACOM),requested a review of TACOM's program/projectmanagers' VE programs "...to assure that allthat can be done is being done." GeneralThompson asked that an activity or program fora concerted VE effort (such as that done onC1r._o rhecd) be identified. See Appendices Band C.

12 Aug 86 A letter from MG Holmes to John Carroll,President of the Oshkosh Truck Corporation,solicited his assistance in reviewing the HEMTTPrograw in a manner similar to that of theCopperhead Program. The letter stated that theCopperhead Program can provide significant savingsthrough VE. See Appendix D.

30 Oct 86 Mr. Carroll, President, Oshkosh Truck Corp.,wrote MG Holmes, suggesting that theCopperhead VE effort begin upon award of thefollow-on contract. See Appendix E.

12 Feb 87 - 2 Jul 87 Preliminary study was undertaken to determinedesirability of proceeding with the"Copperhead" effort. Information papers pro-vided at Appendix F.

Aug 87 Final decision was made by PEO, General Ball,not to pursue Copperhead VE approach on HEMTTfurther.

Sep 87 - May 88 Project follow-up and final report preparation.

7

C) on the HEMTT which seemed promising for VE study. The items on both

lists were as follows:

* elimination of rear cab windows

@ replacement of Delco starter with Leece-Neville starter

a replacement of a cast bednm in the Hendrickson suspension witha forged beam, and the use of a nonbonded center bushingon the RT-340 system. (Hendrickson Co. is the supplier. Thebeam is a connector between the rear tandem axles.)

* use of molded rear fenders on M977/M985

@ incorporation of engine mounts into hard lift brackets

o use of molded composite crane remote control box

* elimination of M977/M985 front crane remote

* replacement of air motors with electrics on the wind-shield wipers

# elimination of cargo body sides from M985

# proposed use of Integrated Logistics Support (ILS) items

The contractor-submitted list contained an l1th item for possible VEstudy--the use of tandem air, bralce hoses.

The results of the initial activity looked promising. The listssubmitted independently were almost identical. The Droposed areas werefurther reviewed for cost savings potential.

As the study progressed, the end users of the HEMTT (TRADOC personnel)assigned values to each of the items on the list. This is the nextstep in the value analysts process. Comparison of the cost associatedwith a function can then be made with its value to the customer to iden-tify possible areas for changa. High differences, where an item oflittle value carries a large cost, are primary targets for change. Inthis case, the values of a number of the items (for example, the cab

• rear windows and crane remote control), were considered so high thatthese items could not be changed or eliminated without causing quite a

hardship to the end users. These high-value items were removed from

consideration for cost saý'1.ngs potential.

Other items were removed from consideration as time went on, where it wasdetermined that a change in the manufacturing process would have beentoo costly to implement at such a lAte date in the contract. In somecases full production runs of components were already committed for. Inaddition, the costs of maintaining multiple vehicle confJgurations was

IS

prohibitive. The interchangeability of new designs (parts) withexisting ones in the field was of paramount importance. Furthermore,several of the items required extensive testing programs before theycould be approved for change.

In the end analysis, the few remaining efforts could not support theirown implementation costs as well as the weight of an intensive (andexpensive) detail study effort.

Meetings between LTC Robert Whaley, Program Manager (PM), HeavyTactical Vehicles; Mr. George Cowie, PM, Heavy Tactical Vehicles; Mrs.Connie Tucker, Procurement and Production; Mrs. Sharon Thomas,Contracting; and Mr. Wasyl Mackiw, Value Engineering Office, all ofTACOM, determined that the activation of the mandatory VE clause wouldnot be cost effective or in the government's best interests at thistime. (See Appendix G for a copy of the part of the Federal AcquisitionRegulation (52.248-1) pertinent to the proposed HEMTT VE contractclause.) This conclusion was reached based on the following findings:

0 The HEMTT is a nondevelopmental item (NDI)--it consistsof an assemblage of commercial components selected bythe contractor. See Appendix H (AR 70-1, par. 7-3). Since thecomponents are being produced commeoicially, economies of scalehave already been realized through competitive bidding.

• The contractor had already selected the least costlycomponents for assemblage consistent with the required perfor-mance characteristics. By its very definition, NDI items onsystems available from various sources require little or nodevelopmental effort by the Army, since these efforts have beenaccomplished by industry.

* The cost of testing required to achieve even minimalsavings would have been greater than the projected savings.

* The contractor's required fee for participation in the perfor-mance of the VE study was considered too high ($300,000)for the projected return.

* The contract had only two years left to run (Nov 87 to Nov 89)with no expected extensions. Therefore, the production base waslimited.

Consequently, it was decided that the HEMTT was not a good subject forfurther "Copperhead" activity. It was deemed more appropriate to allowthe normal progression of events to take effect under the contract'sincentive clauses. This was determined to be in the government's bestinterests.

9

iil

APPENDIX A

OMB CIRCULAR A-131, VALUE ENGINEERING

A-i

A- 2

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OMB CIRCULAR A-131, VALUE ENGINEERING

UflCUTV OFFKF OF THE PAESOENTC VP MlO N'IbNT NAIC SCI0T

WAMM 0o PC. 2M03

January 26, 1968

CIRCULAR NO. A- 131

TO THE HrAD5 OF IXECUTMI DEPARTMENTS AND ESTABLISIHKEWTS

SUJLJCT: Value Engineering

1. Pukiag. The purpose of this Circular is to requirethe use of value engineering, as appropriate, by FederalDepartments and agencies to identify and reduce rioneweentialg rocuroment and program costs. The Circular requires agencymade to establish and improve their use of value engineerng

program.

2. A,,,gT,., Value engineering in the Federal Governmentis a means for som Federal contractors and Government.entities to change the plane, designs and specifications forFederal programs and projects. Those changes are intended tolower the Government's costs for goods and services andmaintain necessary qu&,.Lty levels.

a. Prior fRanrta. Over the last several years,reports isatuad by the General Accountinq Office(GA0) and many Inspectors Generals (IGs) have4"sLstm.Ly aGonoluded that greater use of vel&%awLaoee"iag .Wnud vesnlt in subetantial savilna to"ate Gevemmt. While some Federal agencies havevalue ewWineerinq-proqrass, other agencias have notutilized value engineering fully. Even foragencies with establ ished programs, the GAO and XGreports conclude that such more can and should bedone to realize the benafits of value engineering.

b. Identifled YT dexlsu n. T.he impedimenta that arefrequently noted in these reports and that haveprevented a greater use of value engineeringincludes

(1) 4ailure of senior manageuent to allocate theTnecessary resources, both in effort and infunds, to establirah and run value engineeringprograms,

(2) Absence of good criteria Cor selectingprojects and programs for value engineeringstudies;

(3) Failure to prop(orly perform value ernqxneerinqstudies;

(4) Inadequate attantion by aqer.cy manqemaent toreviewing and implementing the icommaendationsmade in value engineering studios.

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APPENDIX B

I ~LETTER FROM~ GENERAL THOMPSON

B-i

DEPARTMENT OF THE ARMYHEADOQUARTERS. U. S. ARMY MATEFIEL COMMAND

101 MSNHOWER AVENUE. ALEXANOPMA, VA 22333-V'11

June 25, 1986

Major General Arthur Holmes, Jr.CommanderU.S. Army Tank-Automotive CommandWarren, Michigan 48090

Dear General Holmes:

Fiscal Year 1985 was a record setting year for AMC in ValueEngineering (VE). Value Engineering accomplishments to dateindicate that FY86 will be another record year for VE savings.Records are not the goal for VE within AMC - hard dollar savingsthat offset inflation is the goal.

I am convinced that this goal is attainable and there zreample opportunities for achieving the savings necessary to meetthat goal. The key to success is participation. In reviewing thesynopsis of program/project managers' FY86 VE plans, I am not

satisfied with the level of participation or the plans for achiev-ing our goal of offsetting inflation. Every activity, program andcontract represents an opportunity for VE savings only if there isactive parnicipation. Any lack of participation representsopportunities lost. There is nothing mysterious or complicatedabout the vast majority of VE efforts. Value Ensgineering has aproven track record for those who have expended the time and moneyto investigate and analyze.

A production review of the Copperhead Program is a classicexample of what can be done when tndustry and Government truly getserious about reducing Costs, I have enclosed a synopsis of thestudy and some of its results in the area of Quality Assuranze,The bottom line is that by investing approximately 19 man-monthsof time and appropriate funding on the part of the Government, thecost of the Copperhead program will be reduced between $121. and$174 million. I believe the results are worth the investmeknt.

I would like you to review your program/project managers' VEprograms to assure thatIllthat.can be done is being done.

B-3

-2-

Adgttitonal~y, select an acti.vity or pr0g!92MiPr!~1*ctL.L2r.a...concirtep -E eTtr as was donep topred meL know whatacii-or- rra/r 1eF Provide your plap for~adCo0ompiishing the Stuýdg nd gasnvng-agdentiried.

Enclosurely,

!:t

d H.

(1hr-, h pao4

t\

COPPERHEADAOINT PRODUCTION REVIEW

BACKGROUND:

During the period 6 Jun through 13 Jul 83b a production review wasconducted to assess Cost, schedulia and technical risk associated with theCopperhead production program. Ateam of Government and Martin MariettaOrlando Aerospace Specialists Was formed to conduct the review,

All necessary organizations were .nvolved, including several AMCorganizations and the Navy. The team examined the production of theCopperhead to determine what changes could be made in both the manufacturingprocess and the projectile itself with the primary goal of reducing the costto the Government (without degradation of performance or' reliability).

METHODOLOGY:

The Government provided a team chief and DOD personnel with specificeXpertise areas and the contractor provided corresponding personnel. The teamwas split into sub-teams concentrating on specific areas. Each sub-team wasjointly led by a Government and Martin Marietta team leader. Brainstormingsessions were conducted to Identify potential target areas (cost drivers) andpossible cost reduction actions in their areas.

A more detailed analysis was conducted to identify good candidates for costreduction and a summary chart was prepared with the candidates in priorityorder.

Individual studies were conducted and recommendations prepared. The

recommendations were generally categorized as:

o Government Value Engineering Proposals.o Value Engineering Change Proposals.o Martin Marietta Value Engineering Actions.

As a result of these recommendations, cost savings were calculated foreach project and then summarized. The total savings (over the life of theprogram) were estimated to be in the ratge of $121 to $174 million. A suramaryof some of the areas siudied and recommendations to reduce costs in thoseareas include:

REVISION OF TEST PLAN

During the study or the LAT/SOFT Recovery, it was determined that when theplanned production rate was reduced by approximately 50 percent the Test Planwas not adjusted.

The existing Chain Sample Plan was replaced with a sequential plan, lot sizeincreased to 2 months production or 500 rounds (whichever was less) and use of3 rounds per month for SOFT Recovery.

Total Net Savings: $21,372K B

I!

i-REDUCED INSPECTON

Duping the study of the Inspections being. conducted, it was determined thatthe inspection Check Sheets called for ioppeotions in addition to what wasrequired by the Inspection Teat Plan and many wore redundant. Addittonally,hardware was being inspected on a continuous basis Instead of lot saplingresulting in unnecessary 100 peroert inspections.

The non redundant inspections were included in the ITP together with a planfor reimpleuentation of the checks when defective m.terial was "discovered anda daily sample plan of 3 units per day was proposed in lieu of 100 percentinspection.

Total Not Savings: $ 2,766K

TEST FLOW

Study of electrical component failures during the final Guidance SectionHot/Cold Test resulted in discovery that burn in of the cards increased theyield at electronic package and guidance section level.

100 percent card burn in was incorporated into the production line, greatlyreducing rework of the cards after completed assembly in the Electronic Package.

Total Net Savings: $ 1,653K

B-6

"I,

APPENDIX C

VALUE ENGINEERING CANDIDATE ITEMS LISTS

C-1

C- 2

C-

A4WW- 49~W#b'X c-J2tl. ¢.iW t X X ' '#' IWA~~'~w , .x jt x .

-iAttachment 2

"VALUE ENGINEERING CANDIDATE ITEMS

Eliminate Rear Cab Windows- ai--jA^:, 7

Replace Delco Starter with Leece-Neville Starter

Hendrickson Suspension - Replace cast beam with a forged beam and use non-bonded center bushing on RT-340

Molded Rear Fenders on M977/M985

Incorporate Engine Mounts into Hard Lift Brackets

Molded Composite Crane Remote Contro) Stowage

Eliminate M977/M985 Front Crane Remote

Replace Air Motors with Electric Wipers

~ -- Tandem Air Brake Poses

Eliminate Cargo Body Sides from M985

0 ~OW /Z-44 If~?£- ss

C- 3( ore,.2.

TACON'S LIST OF POTENTIAL CANbIDATES (HEMTT)FOR COPPERHEAD SOTJD

ELIMINATE REAR CAB WINDOWS

REPLACE DELCO STARTER WITH LEECE-NEVILLE

HENDRICKSON SUSPENSION - REPLACE WITH A FORGED BEAM

MOLDED REAR FENDERS ON M977/M985

ELIMINATE FRONT CRANE REMOTE (M977/M985)

INCORPORATE ENGINE MOUNTS INTO HARD LIFT BRACKETS

REPLACE AIR MOTORS WITH ELECTRIC WIPERS

ELIMINATE CARGO BODi' SIDES FROM M985

MOLDED COMPOSITE CRANE REMOTE CONTROL STOWAGE

INTEGRATED LOGISTICS SUPPORT (ILS) ITEMS

TANDEM AIR BRAKE HOSES (Submitted by Contractor)

C-4

(I

APPENDIX D

LETTER TO OSHKOSH TRUCK CORPORATION PRESIDENT

r?

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KK

D- 2

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DEPARTMENT OF THE ARMYUNITED STAILS ARMY TANK AUTOMOTIVE COMMAND

WARREN MICHIGAN 48397.5000

112PY 10

"ITTINT04O

AHCMP-TV

Oshkosh Truck CorporationMr. John cGrrollP. 0. Box 25662307 Oregon StreetOshkosh, WI 54903

Dear Mr. Carroll,

In the past several months this Command has made a thorough review of theValue Engineering Program. Value Engineering has been a concern of thisCommand, as well as Headquorters AMC, as evidenced by the attached letter fromGEN Thompson to me dated 25 Jun 86. Also attached to the letter is a recentcooperative industry/government study of the Copperhead Program whereinsignificant 6avings were made through Value Engineering.

Because I believe there is a strong possibility to achieve a savings that canoffset inflation, I am soliciftting your personal help in reviewing the HEHTTProgram in the same manner as accomplished for the Copperhead "rogram. This isa very worthwhile program that I believe will be rewarding and could provide uswith some lessons learned that we can use in future programs.

I want you to know that I am serious about Value Engineering and look forwardto working with you in this effort.

Sincerely,

Arthur Holmes, Jr.Major General, USACommanding

Enclosure

D--3

D-4

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APPENDIX E

LETTER TO MAJOR GENERAL HOLMES

E-1

OSHKOSH TRUCK CORPORATIONP.O. SOX 2556 * 2307 OREGON ST. * OSHKOSH, WI 54903-2565 U.S.A.

Ia H TELEPHONE 414-235-9150 * TWX 910-266-1060 * TELEX 260197PARTS ANO SERVICE * TWX 910-260-1065 * TELEX 262750

October 30, 1986 C -

Major General Arthur Holmes, Jr., AMSTA-CGDepartment of the Army ) A XU.S. Army Tank - Automotive Command _____

Building 231Warren, MI 48397-5000 IJ jSubject: HEMTT Contract DAAE07-81-C-5760, Government/Industry Team t INFO 00

Identify, Document, and Implement Cost Reduction Ideas.

Dear General Holmes:

Please refer to your August 12, 1986, letter regarding the subjectteam approach to Value Engineering. Oshkosh Truck Corporation (OTC)concurs with your assertion that this concept has merit and acceptsthe challenge to participate in a short term, intensive program ofthis nature. The prospect of continuing to work with the GovernmentIn exploring cost savings possibilities to our mutual benefit is wel-comed.

Information regarding specific HEMTT program dreas where concen-trated efforts for cost savings might be directed, and the exper-tise of OTC personnel required to successfully accomplish programobjectives, would be appreciated.

Due to the intensive effort required by both parties to negotiatethe follow-on HEMTT contract by January 31, 1987, we suggest thatthis VE effort commence upon award of the follow-on contract..

Sincerely,

Sroll .President 1

lsd

cc: C.ol. W. B. Heggie, AMCPM-TVH

E- 3

APPENDIX F

INFORMATION PAPERS

---- U

AMSTA - TKV 12 February, 1987

INFORIATION PAPER

SUBJECT: Copperhead Joint Production Review Program with OTC (OshkoshTruck Corporation)

1. Reference, Ltr, CG AMC to CG TACOM, dated, 25 June, 1986 (Back-ground: Copperhead Program to be established at TACOM).

2. Per said reference, the HEMTT, 10 ton truck, has been selected asthe candidate for the Copperhead dtudy. At this time, tentitavely,several potential candidates have been identified for the study.

3. The Copperhead Format VE Program has been incorporated in the FY87/PY88 re-buy contract with OTC. As soon as the contract has been signedwith OTC, the Copperhead Program will be established, details workedout, and implemented.

4. TACOM - Providing Soldiera the Decisive Edge.

asyl 'ckiw P.E.

V-3

AMSTA-TMVSINPORMATION PAPER 9 Apr 87

SUBJECT: Status ;of Copperhead Program (Oshkosh Co.)

1. Purpoge: Updated information is needed in regard toCopperhead Programu.

2. Facts:

a. Ten (10) candidate items of HENTT (see attachedsheet) have been selected for the Copperhead study to beincluded as a VE clause in a contract now being negotiatedwith the Oshkosh Corp.

b. Priorities and the funding for the selected itemshavy not been determined yet.

c. The contract negotiations haven't been finalized andthe contract hasn't been signed as of this date ( 9 Apr 87)otherefore the status of the VE clause is not known.

*Wýasyl ackw/519Value Engineer

F-4

RFP No. DAAEO?-86-R-J335, HEMTT Rebuy

'Potential Value Engineering Candidate Items

Eliminate Rear Cab Windows

Replace Delco Starter with Leece-Neville Starter

Hendrickson Suspension - Replace beam with a forged beam and usenonbonded center bushing on RT-340

Molded Rear Fenders on M971/M985

Incorporate Zngine Mounts into Hard Lift Bracketsi Molded Composite Crane Remote Control StowageEliminate M977/M985 Front Crane Remote

Replace Air Motors with Electric WipersK' Tandem Air Brake HosesEliminate Cargo Body Sides from M985

Intergrated Logistics Support (ILS) Items

A';

I'• 1

iF- 5I

I I.,

POTENTIAL CANDIDATES (HEMTT) FOR COPPERHEAD STUDY

ELIMINATE REAR CAB WINDOWS

REPLACE DELCO STARTER WI TH LEECE-NEV I LLE

HENDRICKSON SUSPENSION - REPLACE WITH A FORGED BEAM

MOLDED REAR FENDERS ON M977/M985

ELIMINATE FRONT CRANE REMOTE (M977/M985)

I NCORPORATE ENGI NE MOUNTS INTO HARD L I FT BRACKETS

RFPLACE AIR MOTORS WITH ELECTRIC WIPERS

ELIMINATE CARGO BODY SIDES FROM M985

MOLDED COMPOSITE CRANE REMOTE CONTROL STOWAGE

INTEGRATED LOGISTICS SUPPORT (ILS) ITEMS

F-6

AMSTA-TMV

15 Apr 87

INFORMATION PAPER

SUBJECT: Status of Copperhead Program (Oshkosh Corp)

1. Purpose. Updated information is needed in regard to

Copperhead Program.

2. Facts.

a. The contract for the HEMTT has been awarded. Not-withstanding, the VE clause is being considered as an optionand will be called up as soon as the priorities and fundinghave been determined by the parties concerned. Also, the"contractor (Oshkosh Corp) has submitted his own list of itemsas candidates for Copperhead studies. Both, lists. contractorsand TACOM's must be reconciled.

b. A meeting has been set up for 21 Apr 87 (tentativedate), to discuss the VE clause option. TMV representativewill be invited to participate in the meeting.

.4

Wasyl Mackiw/45519F- 7

28 Apr 87

INFORRTAION PAPER

SUBJECT: Status of Copperhead program (Oshkosh Truck Corp.)

1. Purpose. Updated information is needed in regard to Copper-head Program.

2. Pacts:

a. Information Paper, 15 Apr 87,

b. A meeting was held on 21 Apr'87 (in Mr. Cowle's Office)to discuss the status of the Copperhead Program, an open optionin the contract (for HEMTT). The status is "quo" - still in thestages of ongoing negotiations which may be finalized and concludedby the end of June, 1987.

c. The contractor's list of candidates for Copperhead studiesis basically same as one submitted by TACOM except for one additJonalitem, i.e., TANDEM AIR BRAKE HOSES (submitted by the contractor).

3 Encl.

wasyl Mackiw/45519

F-8

Ikji

AMSTA-TKV 2 July 87

INFORMATION PAPER

SUBJECT: Update of Copperhead Program

1. Background:

a. Information Peper, 12 Feb 87. (Establish CopperheadProgram at TACOM per directive from HQ AMC. HEMTT Truck wasselected for the study).

b. Information Paper, 9 Apr 87. (List of items submitted forthe study, contract re-buy negotiatiorns in progress).

c. Information Paper, 15 Apr 87. (The contract has beenawarded. Contractor submitted list of candidates for the study).

d. Xnformation Paper, 28 Apr 87. (Mandatory VECP clauseincorporated in the contract as an option to be exercised at theconveniencu of the Government).

2. TACOM was directed to undertake Copperhead study. HEMTT wasI selected ae the candidate for the study.

3. In the course of recent re-buy negotiations with OshkoshTruck Co., VE clause as an option has been incorporated in thecontract. The contractor and PM were asked to submit a list ofpotential candidates for the study. A dozen of items wasproposed which initially appeared to be viable candidates.Further analyses of the candidates, and it was the consensus ofLTC Whaley, Mr. George Cowie (PM), and Ms. Connie Tucker(Procurement) that the undertaking of the Copperhead studies inthis particular instance will not generate the desired savings.The expended engineering effort., cost, and considering the lifeof the contract (2 years), may not be worthwhile; therefore, theoption has not been exercised.

Wasyl ackiw1455l19Encls. Value Engrg Br

F-9

*

APPENDIX G

VALUE ENGINEERING PROGRAM REQUIREMENTS CLAUSE

I

Ce-1 1

aSFOSITION FORMIrJU OiW um of m* fgn. IM AM 310. 15: go auiuont a'ev It TACO.

AnSh~3 7~!)Value E~n i near inc Frrcram Facuirements clauze

ToDir of Engr Data' C, Prc AnTl 1. 3 JUL 1287 cur

(AMSTA-G) Div (AMSTA-IP) Ms. Cox/dt/48675Dir of Tk-Autmv TechC AISTA-R)C, Ofc of the PEO(AM CPM-G CM)C, Prog Mgr, Lt Cbt Veh (Pray) BEST AVAILABLE COPYC AMCPM-L CV)C, Prog Mqr, Tac Veh (Pray)

* (AMCPM-TV)

I. Reference message, HO AMC, AMCPD-SE, 29113OZ May 86, (Encl 1).

2. The refer'enced message contains AMC policy regarding mandatoru use Of theValue Engineering Program Requirements Clause (VEFRC) in first and second,production buys for major systems. It further states that the VEPRC .is -to be-applied in all production contracts valued-at $10 million or more, unless thecontracting officer makes-a determination that it is unreasonable to expectsufficient savings to justify expenditures under the VEPRC. In this eveftt,the contract files must be documented with the justification.

3. Since the VEPRC by nature must obligate funds on the contract specificallyto pay 4for a range of YE activitu identified in the contract by theGovernment, (,as opoosed to the basic Value Engineering Incentive Approach, inwhich the contractor is paid for YE only if he submits- approved VE .proposals,)in no case will P&P-be able to use the VEPRC in a contract without specific,support from the System Manager. The purpose of this DF is to notify youroffices that in implementing the AMC policy regarding VEPRC, buyers have beeninstructed via the enclosed PIL (Endl 2) that before including the. '-~EPRC inýRny contract, they must send a'disposition form (DF) to the cognizant Systemr-anagcr requesting (i) confirmation of'.ý-funa availability to pay for a VEprogram requirement and (ii) an associatedistatement of work specifying whateffort the contractor must perform under the program requirement; or (iii4)recommendati~n to only include the Value Engineering Incentive clause in thecontract in lieu of the VEPRC. The System Manager's rl~spoinse will1 in all

*cases be retained in the contract file as support for the ContractingOfficer's determination of application or non-application of the VEPRC in t~hespecified acquisitions.

4. Thank you for your cooperation.

2 Endls GKIHC, Proc Anal & Compl Div.

6- 3

DAVG5 24o PREVIOUS EDITIONS WILL BE USED RC- 111,1 111 11 91 2 2 J L R C

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PT 0 0127 14 7/ 13356 Z 4p~ a: .3 1

TANK AUTOMOTIVE COPIMANO0 - USAIASC.,ýTMRIT

FOR COMMUNICATIONS ASSIST ANCE CALL EXT $5163

itCOMM8UNICATIONS DMT'RIBUTION At4STAI PM'SP, OTHER ACTIVITIES/

B Cs CC CFC C! C~J CN CO CR CT iCX ~CXA

CXV CZ D E F I L P 0 S V X Y XY PM'S 6CN

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UCSA-LUIO SELNO 70TH 300TH 524TH COLS/D/ HS XZ -WAR -------

PTTUZYUW RUKLOAR8624 1491323-UWUU--RUCIUMA.ZNR WUUQUP 291130Z MAY fs6*FM CORAMC ALEX VA //AMCPD-SE//TO £16 91222STUNCASSGN 0 Y CHIEF OF jSTAFF FOR PRODUCTIO%SUBJECiT: 41ANDATORY VALUE ENGINEERING, PROGRAM REQUIREMENTS CLAUSE

PRODUCTIO~l. CONTRACTSA* DEPSECDEF MEMqORA DUMv 26 M4AR 86,1 SUBJECT: VALUE ENGINEERING

(NOTAL)B. CDRAPC MSGv 101720Z DEC 85, SUBJECT: VALUE ENGINEERING (VE)

SAVINGS TO OFFkET INFLATION (NOTAL).C. HQAAC MSGv 171830bZ DEC 85v SUBJECT: VALUE ENGINEERING (EYE

GOALS FOR FY861(NOTAL).to REF A ANNOUNCED A CHANGE IN THE POLICY FCR'-APPLICATION-- OF VALUEENGINEERING (VE) EFFORTS FOR MAJOR SYSTEM ACQUISITIONS (0000 5000.1)WITHIN DOD. REF A REQUIRES TIHAT'THE VE POOGRAM REOUIREME4lT CLAUSE'(FAR 52.248-19 ALTERNAT4E, I OR II) WILL R3E INCO.RPORATED INALL INITIAL PRODUCTION CONTRACTS (FIRST AND SECOND PRODUCTION BUYS)FOR MAJOR SYSTEMS AW.ARDED AFTER 30 JUNE 1986 WITH THE FOLLOWING

PAGE 02 RUKLOARB624 UNCLASE XCE PT I OJS1

A* CONTRACTS WHEREip IN THE JUDGMENT OF THE CONTRACTINGOFFICERi THE PRIME CONTRACTOR HAS DEMONSTRATED AN EFFECTIVE VEPROGRAM DURING EITHER EARLIER PROGRAM PHASESP OR DURING OTHERRECENT COMPARABLE PRODUCTION CONTRACTS. (THE YE GOALS FOR SAVINGSTO THE GOVERNMENT ESTABLISHED BY REF 8 AND C SHOULD BE USED ASGUIDELINES FOR MEASURING EFFECTIVENESS BUT ARE NOT GO-NO-GO POINTSTO REPLACE THE MANAGEMENT DECISj6N PROCESS IN DETERMINING THE

-EFFECTIVENESS OF A CONTRACTORS'S PAST YE EFFORTS.)B. PRODUCTION CONTRACTS AWAROEn PRIOR TO JUNE 309 1986o.

PRIORITY *U N C L A S'S I F I E 0* **** * **988* * *8*88*88BEST AVAILABLE COPY

G-4

?-c " 7Y J 'I C L S S F~BSA~tALCp

C. PRICE-D OPTIONS FOR PRODUC`0N;01 C HiC HAV14E 2EEn.3 F7S-1A ;ZL TZ izP R .Orv TO J LINE 30 19cc86

D. CONTRACTS ý;HICH &RE AWARDED CN TýC SASIS OF PROCUCTIONCOPP ETITIOU.2. INCOPPORATION-OV-T1-E' VE PROSRAP~ REQUJIREMEN4T CLAUSE (VEPRC) INMA4OF SYSTEMS PROGUCTION CONTRACTS AS NOTED ABOVE IS MANDATORYWITHIN AMC. ADDITlONALLY9 THE VEPRC WILL BE APPLIED IN !IL OTHERPRODUCTION CONTRACTS OVER SlO MILLION UNLESS THF CONTRACTINGOFFICER MlAKES A CETERMINATION THAT IT IS UNREASONABLE TO EXPECTSUFFICIENT SAVINGS TO JUSTIFY EXPENDITURES UNDER THE VEPRC. LACK

PAGE 03 RUKI.DARS624 UNCLASOF PACT PRODUCTION VE ACTIVITY BY THE CONT4ACTOR UNDER THEINCENTIVE CLAUSE SHOULD NOT BE USED AS THEJ BASIS FOR AD3ETERM4INATION NOT TO INCLUDE THE VEPRC.3. SOLICITATIONPSOURcE SELECTION - AS THE BASIC DELIVERA~iLES UNDERTHE VEPRC CONSIST OF A LEVEL-OF-EFFORT FOR VE STUDY AND REPORTSWHICH DOCUMENT RESULTS OF THAT EFFORTi, IT IS ESSENTIAL THAT ANASSESSMENT OF A PROSPECTIVE PRODUCTION CONTRACTOR'S ABILITY TO MAK(EA MEANINGFUL.. CONTRIBUTIONI TO ClqST REDUCTION THROUGH VE BE MADE,PRIOR To CONTRACT AWARD. ACCORDINGLY# THE STATEMENT OF WORK. FORVE IN THE SOLICITATION MUST COMMUNICATE THE IMPORTANCE AND SCOPE OFTHE EXPECTED YE EFFORT. THE YE CAPABILITY (4VAILABLE/PL.ANNED)) 'OFTHIE CONTRACTOR SHOULD BE AN ELEMENT OF THE EVALUATION CRITERIAINCLUD3ED IN THE ASSESSMENT OF THE OFFEROROS MANAGEMENT ABILITY.ý'4a. FUNDING -. FUNDJING FOR WORK CHARGEABLE TO THE GOVERNMENTIRESULTING FROM THE VEPRC WILL BE CHARGED TO THE PRODUCTION CrONTRACTAS ENGINEERING IN SUPPORT OF PRODUCTION ClAW AR 700-99 AND DARCOI4-R70-8) AND IN. AN AMOUNT COMMENSURATE WITH THE CONTRACT AMOUNT~ ANtITHtE VE SAVINGS GOALS ESTABLISHED BY REF B AND C. THE FUNDING WILLBE TREATED AS A GOVERNMENT COST UPON APPROVAL OF ANYRESULTING VECPS (GOVERNMENT COSTS ARE To BE RECOVERED FROM THE

PAGE 04 TUKLOAR8624 UNCLASSAVINGS PRIOR TO SHARING WITH THE CONTRACTOR)...THE FUNOI6WL BFINCLUDE0 IN THE CONTRACT AS SEPARATE CONTRACT LINE ITEMS FOR.

A. VEPRC PROGRAM/REPORTING ('INCLUDING UDI--P-2OL483, Uloi-PL-ý*2')4(19w UDI-P-22'49o. AND UDI-P-2O4911.

B. VE E FFDR T.*5. 1IMPL E34EN TATI oP:

A.- ALL NEW SOLICITATIONS FOR PRODUCTION CONTRACTS O VER CýMILLION WILL CONTAIN A VEPRC REQUIREMENT. PRIME CONTRACTORS WI L!BE REQUIRED TO INCLUDE A MANDATORY YE REQUIREMENT IN APPROPRIATSUE-CO NTRACT S.

6. SOLICITATIONS FOR PRODUCTION CONTRACTS FOR WHICHI THEPROPOSALS OR RIDS WILL NOT BE RECEIVED BY 30 JUN 86 OR FOR WHICONTRACT AWARD WILL NOT BE 4ALIE IN THE 4TH QTR FY36 WILL 9EMODIFIED TO INCOPPORATE A MANDATORY VEPRC REQUIREMENT.

C. PRoposEn PRODUCTION CONTRACTS FOR WHICH PROPOSALS OR BIDHAVE BEEN RECEIVED BY 30 JUN 86 AND CONTRACT AWARD IS PLANNED FOP~.THE 4TH OTR FY88 WILL NOT EE DELAYED TO INCLUDE THE MANDATORYVEPPC. HOWEVER9 ANY CONTRACT AWARDED AFTER I JUL 836 MUST SE

PRIORITY *U N C L A S S I F I E 9

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PART 52-SOLICITATION PROVISIONS AND CONTRACT CLAUSES $3.234-1

this clause, including :this paragraph (d), in all subcon- site from the United States either for use in perform-tracts or purchase orders under this contract. ance of, or for incorporation in, the work called for by

(e) The requirement in paragraph (a) does not apply this contract, the Contractor shall use privately owned

to- U.S.-flag commercial vessels to the extent that such

(1) Small purchases as defined in 48 CFR 13; vessels are available at rates thAt are fair and reasonable

(2) Cargoes carried in vessels of the Panama Canal for privately owned U.S.-flag commercial vessels.

Commission or as required or authorized by law or (b) The Contractor shall not make any shipment ex-

treaty; ceeding 10 measurement tons (400 cubic feetJ by yes-

(3) Ocean transportation between foreign countries sels other than privately owned U.S.-flag commercial

of supplies purchased with foreign currencies made vessels without (1) notifying the Contracting Officer

available, or derived from funds that are made avail- tha, U.S.-flag commercial vessels are not available at

able, under the Foreign Assistance Act of 1961 (22 rates that are fair and reasonable for 3uch vessels and

U.S.C. 2353), and (2) obtaining permission to ship in other vessels. If

(4) Shipments of classified supplies when the classi. permission is granted, the contract price " be equita-

fication orohibits the use of non-Government vessels. bly adjusted to reflect the difference in cost.

(0 Guidance regarding fair and reasonable rates for (R 7.603.41 1979 JUNE)privately owned U.S.-flag commercial vessels may be 52.248-, Value Engineering.obtained from the Division of National Cargo, Office As prescribed in 48.201, insert the folloing clause inof Market Development, Maritime Administration, U.S. supply or service contracts to provide a value engi-

Department of Transportation, Washington, DC 20590, neering incentive under the conditions specfied in

Phone: 202426-4610. 48.201. Xn solicitations and contracts for items requiring(end of clause) an extended period for production (e.g., ship construc-

CR 1-19.108-2(b)) tion, major system acquisition), if agency procedures

Alternate I (APR 1984). If an applicable statute re- prescribe sharing of future contract savings on all unitsquires, or if it has been determined under agency pro- to be delivered under contracts awarded during thecedures, that supplies to be furnished under contracts thariiig period, the contracting officer shall modify sub-shall be transported exclusively in privately owned division (iX3)(i) and the first sentence under subpara-U.S.-flag commercial vessels (see 47.507(b)), delete graph (3) of the definition of acquisition savings byparagraphs (a) and (b) from the clause and substitute -substituting "under contracts awarded during the shar-for them the following paragraphs (a) and (b): ing period" for "during the sharing period." For engi-

(a) Except as provided in paragraph (b) below, the neering-development and low-rate-initial-production so-Confractor shall use privately owned U.S.-flag com- licitations and contracts, the contracting officer shallmercial vessels, and no others, in the ocean transporta- modify subdivision (iX3)(i) and the first sentence undertion of any supplies to be furnished under this contract. subparagraph (3) of the definition of acquisition savings

(b) If such vessels are not available for timely ship- by substituting for "the number of future contract unitsmeat at rates that are fair and reasonable for privately scheduled for delivery during the sharing period," "aowned U.S.-flag commercial veswels, the Contractor number equal to the quantity required over the highestshall notify the Contracting Offic-r and request (1) 36 consecutive months of planned production, based onauthorization to ship in foreign-flag vessels or (2) desig- planning or production documentation at the time thenation of available U.S.-flag vessels. If the Contractor VECP is accepted."is authorized in writing by the Contracting Officer to VALUE ENGINEERING (APR 1984)ship the supplies in foreign-flag vessels, the contract (a) General. The Contractor is encouraged to devel-price shall be equitably adjusted to reflect the differ- op, prepare, and submit value engineering change pro-ence in costs of shipping the supplies in privately posa•s (VECP's) voluntarily. The Contractor shallowned U.S.-flag commercial vessels and in foreign-flag Ghare in any net acquisition savings realized from ac-vessels. cepted VECP's, in accordance with the incentive shar-

(R 7-104.19, Clause paragraph (c) 1979 MAR) ing rates in paragraph (f) below.

Alternate II (APR 1984). If an applicable statute re- (b) Definioionr. "Acquisition savings," as used in thisquires, or if it has been determined under agency pro- clause, means savings resulting from the application ofcedures, that suppliei, matedals, or equipment to be a VECP to contrrts awarded by the same contractingshipped under construction contracts shall be transport- office or its successor (and by other contracting officesed exclusively in privately owned U.S.-flag commercial if included in an extekiled sharing base specifed in thevessels (see 47.507(c)), delete paragraphs (a) and (b) Schedule) for essentialiy the same unit. Acquisition say-from the clause and fsubstitute for them the following :ings include-paragraphs (a) and (b). (1) Instant contract savings, which are the net cost

(a) When ocean transportation is required to bring reductions on this, theminstant contract, and whichsupplies, materials, or equipment to the construction are equal to the instant Cnit cost reduction multiplied

SG-6 52-21l

BEST AVAILABLE COPY

". S2.484 FEDERAL ACQUISITION REGULATION PAR

by the numbet of instant contract units affected by funded after VECP acceptance. If this contract is athe VECP. less the Contractor's allowable develop- Ixed.price contract with prospective price redetermi.ment and implementation costs; nation, the term refers to the period for which rfrm

(2) Concurrent contract savings, which are mes- prices have been established.surable net reductions in the prices of other contracts "Instant unit cost reduction" means the amount ofthat are definitized and ongoing at the time the the decrease in unit cost of peirformance (without de-VECP is accepted; and ducting any Contractor's development or impr'imenta.

(3) Future contract savings, which are the product tion costs) resulting from using the VECP on this, theof the future unit cost reduction multiplied by the instant contract. If this is a service contract, the instantnumber of future contract units scheduled for deliv- unit cost reduction is normally equal to the number ofcry during the sharing period. If this contract is 8 hours per line-item task saved by using the VECP onmultiyear contract, future contract savings include this contract, multiplied by the appropriate contractsavings on all quantities funded after VECP accept- labor rate."aoater "Negative instant contract savings" means the in-"Collateral costs," as used in this clause, means crease in the cost or price of this contract when the

agency cost of operation, maintenance, logistic support, acceptance of a VECP results in an excess of the Con-or Government-furnished property. tractor's allowable development and implemcntation

"Collateral savings," as used in this clause, means costs over the product of the instant unit cost reductionthose measurable net reductions resulting from a VECP multiplied by the number of instant contract units af.in the agency's overall projected collateral costs, exclu- fected.sive of acquisition savings, whether or not the acquisi- "Net acquisition savings" means total acquisition sav-tion cost changes. ings, including instant, concurrent, and future contract

"Contracting office" includes any contracting office savings, less Government cost.that the acquisition is transferred to, such as another Saving les s G e en coss.branch, of the agency or another agency's office that is number of affected end items on contracts of the con-performing a joint acquisition action."Contractor's development and implementation tracting office accepting the VECP or, if the sharing"costs," as used in this clause, means those costs the base has been extended under paragraph 48.102(c) ofContractor incurs on a VECP specifically in develop- the Federal Acquisition Regulation (48 CFR ChapterCotato"nur'na EPsecfcll ndeeo. 1), the number-of &fdected end items on contracts of-"ing, testing, preparing, and submitting the VECP, aswell as those costs the Contractor incurs to make the contracting offices included in the extended base speci-

fied in the Schedule.contractual changes required by Government accept- F Sharin thi cluedeneh

ance of a VECP. "Sharing period," as used in this clause, means the

"Future unit cost reduction," as used in this clause, Feriod beginning with acceptance of the first unit in-means the instant unit cost reduction adjusted as the corporating the VECP and ending at the later of (1) 3Contractin3 Officer considers necessary for projected years after the first unit affected by the VECP is ac-learning or changes in quantity during the sharing cepted or (2) the last scheduled delivery date of anperiod. it is calculated at the time the VECP is accept- item affected by the VECP urier this contract's deliv-ed and applies either (1) throughoui the sharing period, cry schedule in effect at the time the VECP is accept-unless the Contracting Officer decides that recalcula- ed.tion is necessary because conditions are significantly "Unit," as used in this clause, means the item or taskdifferent from those previously anticipated or (2) to the to which the Contracting Offlicer and the Contractorcalculation of a lump-sum -ayment, which cannot later agree the VECP applies.be revised. "Value engineering change proposal (VECy)" means

"Government costs," as used in this clause, means a proposal that-those agency costs that result directly from developing (I) Requires a change to this, the instant contract,and implementing the VECP, such as any net increases to implement; andin the cost of testing, operations, maintenance, and lo- (2) Results in reducing the overall projcccd costgistics support. The term does not include the normal to the agency without impairing essential functionsadministrative costs of processing the VECP or any or characteristics; provided, that it does not involve aincrease in this contract's cost or price resulting from change-negative instant contract savings. (i) In deliverable end item quantities only;

"Instant contract," as used in this clause, means this .(ii) In research and development (R&D) endcontract, under which the VECP is submitted. It do-es items or R&D test quantities that is due solely tonot include increases in quantitics after acceptance Of results of previous testing under this contract; orthe VECP that zre due to contract modifications, exer- (iii) To the contract type only.cise of options, or additional orders. If this is a mul- (c) PECP preparation. As a minimum, the Contr...rtiyear contract, the term does not include quantities shall include in each VECP the informaiion des,:., ,:

52-21bG --7 BEST AVAILABLE COPY

•' : • • = • ''•• ' - • "•"•-•,,,,••,,ý . . . .. ... . . ... .. .. ...

PART 32-SOLICiTATION PROVISIONS AND CONTRACT CLAUSES 246

in subparagraphs (1) through (8) below. If the proposed plaining the reasons for rejection, Thec Contractorchange it aiTected by contractually zequired configura- may withdraw any VECP. in -whole or in pat. atNion management or similar procedures. the instructions any time before it is accepted by the Oovernzmentin thIs procedures relating to format, identification, The Contracting Officer may require that t6e Con.and priority assignment shall govern VECP prepara- tractor provide written notification before undeitak-tion.,The VECP shall include the following: ing significant expenditures for VECP effort.

()A description of the difference between the (3) Any VECP may be accepted. in whole or inexistir~g contract requirement and the proposed re- part, by the Contracting Officer's award of a modifl-quirement. the comparative advantages and disadvan- cation to this contract citing this clause and madetage. of each, a justification when an item's function either before or within a reasonable time after con-or characteristics are being altered, the effie~t of the tract performance is completed. Until such a contractchange on the end item's performance, and 3tty perti- modification applies a VECP to this contract, thenent objective test daui. Contractor shall perform in accordance with the ex-

(2) A list and analysis of the contract requirements isting contrac:. The Contracting Officer's decision tothat must be changed if the VECP is accepted, in- accept or reject all or part of any VECP and thecluding any suggested specifiation revisions, decision as to which of the sharing rates applies shall

(3) identification of thie unit to which the VECP be final and not subject to the Disputes clause orapplies, otherwise subje-ct to litigation under the Contract

(4) A separate. detailed cost estimate for (i) the Disputes Act of 1978 (41 U.S.C. 601-613).affected portions of the existing contract requirtment (f) Sharing rates. If 3 VECP is accepted, the Contrac-and (ii) the VECP. The cos.t reduction associated tor shall share in net acquisition savings according towith the VECP shal take into account the Contrac- the percentages shown in the table below. The percent-tor's allowable development and implementation age paid the Contractor depends upon (1) this con-costs, including any amount attributable to subcontract's type (fixed-price,; incentive, or cost-reimburs-tracts under the Subcontracts paragraph of this mn) 2jesaigarneetseiidi aa

clause, blow.graph (a) above (incentive, program requirement, or a(5) A description and estimate of costs the Gay- combination as delineated in the Schedule), and (3) the

ermient may incur in implementing the VECP, such source of ttre savings (the instant contract, or conicur-as test and evaluation and operating and support rent and future contracts), as follows:costs.

(6) A prdiction of any effect-, the proposed COTA ORSS RE FNTAQUST Nchange would have on collateral costs to the agency. COTACO' SHAVIE FNGS AQISTO

(7) A statement of the time by which a contractSAIGmiodification accepting the VECP must be issued in (figures in percent)order to achieve the maximum cost reduction, nioting -- SangArge'iany effect on the contract completion time or deliv-ery schedule. nctve Program

(?') Identification of any previous submissions of (voluntary) requirementi

the VECP, including the dates submitted, the agen- .Cn mnaoy

cies and contract numbers involved, and previous Conttant Tlrr eTn-- Government actions, if known.co- ad Istn ad

(d) Submission. The Contractor shall submit V1ECP's It rre t

to the Contracting Officer, unles this contri-ct states raetrcotherwise. If this contract is administered by other than -rate______ t

the contracting office, the Contractor shall submit a id-ceotrthnicnIcopy of the VECP simultaneously to the Contracting tive) 5 50 25 25Officer and to the Administrative Contracting Officer. Incenrive (fixed-price or cost2 so S 25

(e) Governmnent action. (1) The Contracting Officer Cost-reimbursement (other titanshall notify the Contractor of the status of the VECP inlcentive)" 25 25 1Swithin 45 calenidar days after the contracting officereceives it. If' additional time is required, the- Contract- aesaig rnem(asteotrcspr'toreeajteting officer shall notify the Contractor within the 45- formula.day period anti provide the rcason for the delay and "Includes, cowtplu;,-award-fee contracts.the expected date of the decision. The Government , (g) Calculating net acquisition so'ings. (1' Acquisitionwill procsI VECP'S expeditimisly: ho-.vver, it shall %avings are reali7ed when (i) the cost ior pticc is re-nfi, IV l1310lV r.r .any dcltliy in acoity* p 'itr 4 V ( 1 iricl on the instant contract, (ii) rlii '-at negoti-

(2)If heVL~.' is It')[ aCCCrpl.-.t. tile Coni ifcdl i~I' n concurrent contracts, (iii) futurc contracts aireOfficer shall notify (tic Contractor in wrilmrn. -x- ý%wardcd, or (i0, agreement is reached on a lump-sum

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oemi fully 181bl reproduc6MO BEST AVAILABLE COPY

COPY iva~u~ble to L)4it Qa0#1 LJOt FE RA32.248-1 P U tUDlV legible FEDERAL ACQUISITION REGULATION (FAR)

payment for future contract savings (see subparagraph shall be added as a separate firm-fixed-price ine item(iX4) below). Net acquisition savings are fiist reajizci, on the instant contract. The Contractor thall maintainand the Contractor shall be paid a share, when Gov- records adequate to identify the rst delivered trit foremiment costs and any negative insitant contract savings 3 years after final payment under this contract.have been fully offset against acquisition savings. (2) The Contracting Officer shall calculate the

(2) Except in incentive contracts, Government Contractor's share of concurrent contract savings bycosts and any price or cost increases resulting from (i) subtracting from the reduction in price negotiatednegative instant contract savings shall be offset on the concurrent contract any Government costs oragainst acquisition savings each time such savings are negative instant contract savings not yet offset andrealized until they are fully offset. Then, the Con- (ii) multiplying the result by the Contractor's sharingtractors share is calculated by multiplying net acqui- rate. Isition savings by the appropriate Contractor's per- (3) The Contracting Officer shall calculate thecentage sharing rate (see paragraph (f) above). Addi- Contractor's share of future contract savings by (i)tional Contractor shares of net acquisition savings multiplying the future unit cost reduction by theshall be paid to the Contractor at the time realized, number of future contract units scheduled for deliv-

(3) If this is an incentive contract, recovery of ery during the sharing period, (ib) subtrac:ing anyGovernment costs on the instant contract shall be Government costs or negative instant contract say-deferred and offset against concurrent and future ings not yet offhet, and (iii) multiplying the result bycontract savings. The Contractor shall share through the Contractor's sharing rate.the contract incentive structure in savings on the (4) When the Government wishes and :he Con-instant contract items affected. Any negative instant tractor agrees, the Contractor's share of future con-contract savings shall be added to the target cost or tract savings may be paid in a single lump sum ratherto the target price and ceiling price, and the amcunt than in a series of payments over time as futureshall be offset against concurrent and future contract contracts are awarded. Under this alternate proce-Savings, dure, the future contract savings may be calculated+

(4) If the Government does not receive and accept when the VECP is accepted, on the basis of theall items on which it paid the Contractor's share, the Contracting Officer's forecast of the number of unthContractor shall reimburse the Government for the that will be delivered during the sharing period. Theproportionate share of these payments. Contractor's share shall be included in a modification(h) Contract adjustment. The modification accepting contract see sua ph in abovefian

the VECP (or a subsequent modification issued as soon shal notb jct to subsqna djus) oent nas possible after any negotiations are completed) shall not be subject to subsequent adjustmen ,i

shall- (5) Alternate no-cost settlement method. WheN in(1) Reduce the contract price or estimated cost by accordance with subsection 48.104-3 of the Federal

the azount of instant contract savings, unless this is Acquisition Regulation, the Government and thean incentive contract; Contractor mutually agree to use the no-cost settle-(2) When the amount of instant contract savings is met method, the following applies:

negative, increase the coatract price, target price and (i) The Contractor will keep all the savings onceiling prize, target cost, or estimated cost by that the instant contract and on its concurrent contractsamount; only.. (3) Specify the Contractor's dollar share per unit (ii) The Government will keep all the savingson future contracts, or provide the lump-sum pay- resulting from concurrent contracts placed onment; other sources, savings from all future contracts,

(4) Specify the amount of any Government costs and all collateral savings.or negative instant contract savings to be offset in (j) Collateral sayings. If a VECP is acceptcd, thedetermining net acquisition savings reali.ed from instant contract amount shzdl be increased, as srccificdconcurrent or future contract savings: and in stbparagraph (h)(5) above, by 20 pcrcnmt of any

(5) Provide the Contractor's share of any net ac- projected c.,llateral savings detcrmined to be reahizedI quisition savings under the instant contract in nc- in a typical year of usc aftcr ubmracting any G~iern-cordance with the following: ment costs not previously off-ct. However, -1h- Con-

Ot Fixed-price contracts-add to contrict prw'%, tractor's share of collateral sa% ingi shall not excccd (1)(i) Cost-reimbursement contracts--add to the contract's fii:6.f1xed-price, target price, tn•l,;t cC.z.

tract fee. or estimated ,,OSt, at the time the VICP is -cccl.:v-d, or(i) Continent and future 'ontac' .u-'.'ngS. (1) l'I- (2) ýi0(),(00, whichever is grcater. The C,•ztr,,cing

ments of the Contractor's share of concurrnt and Offleer shall be the sole determiner of thc amount offuture comract savings shall be made by a modification coll.it::al savings, and that -.mount Thall nit hc ýuhj',_-tto the instant contract in accordance with subpara- to the Disputes c,.u'l.c or othetwise subjeC: it.,graph WhXS) above. For incentive contract,, shai., under 41 U.S.C. oJ)l-613.

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PART 521iSOLICITATION PROVISIONS AND CON'TRACT CLAUSES

(k) Relationship to other Incentives. Only those benefits (R 7-l04.44{SX6XiiXD) 1976 FEB)of an accejned VECP not rewardable under perform. (R. 7-204.32(b) 1976 JUL)ance. design-to-cost (production unit cost, operating (R 7.204.32(c) 1976 JUL)and support costs, reliability and maintainability), or (R 7-204.32,(dXi) 1976 FEB)similar inc~entives shall be rewarded under this clause. (R 7.204.32(dXii) 1976 FEB)However, the targets of such incentives affected by the (R~ 7.204.32(dXiii) 1976 JUL)VECP shal not be adjusted because ofr vECP accept- (R 7.204.32(dXiv) 1976 FEB)ance. If this contract specifies targets but provides no (R 7-1903.51 1976 JUL)incentive to surpass them, the value engineering shar' Alternate 1 (APR 1984). If the contracting officerbig shall apply only to the amount of' achievement select a mandatory value engineering program require-better than. target.

(I) ube~n~cts Th Cotracor hal inlud anap- ment, substitute the following paragraph (at) for Pam.propriate value engineering clause in any subcontract gah(a) oferl the bsConrco shal a)enagei'.of $100,000 or more and may include one in subcon- (aGerl.TeCnacoshl()egaeiatracts of lesser value. In calculating any adjustment in value engineering program, and submit value engineer.

thisconr~cs piceforinstnt ontactsavngs(or ing progress reports, as specified in the Schedule andnathiveotlts rc o instant contract savings) th(onrc or's (2) submit to the Contracting Officer any resultingnegablve inevetopmntrc savnd s) imp emenatontrctosts sall value engineering change proposals (VECP's). In addi-inld tysbotatrsalowable development and ipeetto ot hl tion to being paid as the Schedule specifie-s for thisimplemnicnation costs, and any value engineering incen- mnaoyporm h otatrsalsaei ntive paymeints, to a subcontractor, clearly resulting from net acquisition savings realized from accepted VECP's,a VECP accepted by the Government under this con. in accordance with the program requirement sharingtract. The Contractor may choose any arrangement for rates in paragraph (f) below.subcontractor value engineering incentive payments;-,7044()194ARprovided, that the payments shall not reduce the Gayv i 94.I tecnrctn liermient's' share of concurrent or future contract say- sce~iMboth a value engineering incentive and manda.ings or collateral savings, tory value engineering program requirement, substitute

(in) Da Ita. 'he Contractor may restrict the Govern- the following paragraph (a) for paragraph (a) of thement's right to use any part ofta VECP or the support- basic clause:ing data by marking-thc fo'llowing legend on the affct- (a) General. For those contract line items designateded parts:, in the Schedule as subject to the value engineering*1hs data, furnished under the Value Engineering clause of con. program requirement, the Contractor shall (1) engagetract . -...... ... shall not be disclosed outside the Government or in a value engineering program. ;nd submit value engi-duplicated, used, or disclosed, in whole or in part, fro any purpose neigpors eota pcfe nteShdlother than io evaluate a value engineering change proposal submittedunder the ýlause. This restriction does not limit the Goverment's and (2) submit to the Contracting Officer any resultingright to uw6 information co e in ths dat if it ha ben b VECP's. In addition to being paid as the Scheduletained or ý otherwise available from the Contractor or from another specifies for this mandatory program, the Contractorsource wiUiout limitations." shall share in any net acquisition savings realized from

If a ViECP is accepted, the Contractor hereby grants VECP's accepted under the program, in accordance'the Goi~ernment unlimited rights in the VECP and with the program requirement sharing rates in para.supportm~g data, except that, with respect to data qua~l- graph (f) bellow. For remaining areas of the contract,!fying and submitted as limited rights technical data, the the Contractor is encouraged to develop, prepare, andlGovernitent shall have the rights specified in the con- submit VECP's voluntarily; for VECP's accepteditract mo~dification implementing the VECP and shall under these remaining areas, the incentive sharing ratesýappropriately mark the data. (The terms "unlirnited apply.rightt" and "limnited rights" are defined in Part 27 of (NM)

theFedralAcuistio Rgultio.)Alternate 411 (APR 1984). When the head of' the'

( En of10. claus1)197SP contracting activity determines that the cost of calcu-1

(R 7-104.44(a)(2) 1977 SEL) lating and tracking collateral savings will exceed the

(R 7-104.44(a)(3) 1976 JIUL)(R ?104.4(a)4) 176 .UL)engineering incentive, delete paragraph 0) from the(R 7-04.44a)(5 1976JUL)basic clause and redesignate the remaining paragraph

(R 7-104.44(1X)(i5() 1976 JULl) accordingly.(R 7-104.44(a)(6)(i)(B) 1976 FEB) 52.248-2 Value Engineering Progrfim-Architect-Engl.(R 7 -104.44(a)X6)(i)(D) 1976 FEB) neer.(R 7-l04. 44(aM(6)(ii)(A) 1976 IT-ll) A% prcecri,%d in 48.201(f), inscrt the !(,flowing claise(R 7-l04.44(;i)(61(ii)jl) 19715 PFl.) in %oleicoatinn% and contract,; for arclitiect-engir-er

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:4y

APPENDIX H

AP 70-1, par. 7-3

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A

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11-2 Inh" -i

AR 70-1

i. The ASAP approach takes advantage of parallel initiatives introduced

by CBTDEV, bIATDEV and evaluators, being concurrently incorporated into AR 71-9,AR 70-10, AR 71-3, AR 71-2, AR 700-127, AR 1000-XX, and related acquisitiondocumentation.

7-3. "Nondevelopmental Items.

S~a. Nondevelopmental Items (NDI) are systems available from a variety ofsources requiring little -or no development effort by the Army. NDIs include

a materiel developed and in use by other US military services or Governmentagencies, and materiel developed and in use by other countries, as well ascommercially available materiel. The acquisition process for an NDI is not aseparate process, but a tailoring of events within the materiel acquisitionprocess and should be one of the first alternatives considered for solution to amateriel need.

b. There are two general categories of NDI:

(1) Category A -" Off-the-shelf items (commercial, foreign, otherservices) to be used in the same environment for which the items were designed.No development or modification of hardware or operational software required.

(2) Category B - Off-the-shelf items (commercial, foreign, otherservices) to be used Wan environment different than that for which designed.Item requires modification to hardware or operational software.

C. There is a third level of effort. This approach emphasizesintegration of existing componentry and essential engineering effort toaccomplish systems integration. This strategy requires a dedicated R&D effortto allow for system engineering of existing components, for softwaremodification/development, and to ensure the total system meets requirements.

d. For all types of NDI, the acquisition strategy will consider economicand time constraints and realities when determining needs and tradeoffs. Noacquisition, including NDI, is exempt from minimal essential test and evaluationnecessary to verify the MANPRINT, quality, safety, reliability, performance,supportability, transportability, and availability characteristics of a systemto include life cycle cost (LCC) unless previous test and performance data ormarket analysis (information) is adequate for verifying operationaleffectiveness and suitability of the system.

(1) Category A - NDI. Acquisition of commercial off-the-shelf productsto satisfy Army eeouirements is authorized and encouraged. These are generallyproducts or items in production, available on the public market at establishedmarkeL or catalog prices. Overly restrictive, duplicative, or unnecessarygovernment specification and military standardization should be eliminated.

(a) When possible, a commercial market specification or aperformance specification will be used in the acquisition of Category A - NDI.All commercially available and acceptable data (test and historical data,

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1 _i

technical publications, drawings, manufacturer's part Information, quality andsafety, atd reliability data) vill be procured when economically feasible andused to the maximum extent to preclude the costly development of such data.

(b)'A determination should be made as part of the AS whetherGovernment, contractor, or a mix of Government/contractor logistic support, isthe most cost and operationm1Ly effective approach to supporting the item.Interim contractor support (ICS), life time contractor logistic support (CLS),and/or full organic logiscic support must be considered early and planned for upfrout.

(c) Consider the use of the contractor's commercial distributionchairnels and other support services when consistent with Army regulation, it iseconomical co do so, and impact for commercial off-the-shelf items may beminimized or. eliminated when previous test or data document productacceptability; or when market analysis results are considered adequate forevaluating and determining military operational effectiveness and Suitability,and freedom from unwarranted hazards.

(2) Category B - NDI. In this case the commercially available itew-must be ruggedized or militarized to meet Army requirements. Therefore,modification of hardware and/or operational software is usually required. Themodificacion includes those R&D enginvering, design, or integration effortsrequired. to-modify the product or item to a configuration that satisfies Armypeculiar requirements, and/or performance specifications.

(a) Need to modify equipment to satisfy the Army requirementnormally Is usually determined when marktt anaXysia results indicate that astandard commercial product or an item developed by another service or countrycan be readily modified to meat requirements, or when testing or analygisindicate that modifications ase necessary.

(b) When the need to perform modificatLons it identified afterMilestone I approval, the AS must be updated to refloe; need for modificationand its ripple effect on all system support processes. Changes to an approvedAS must be approved by the same decision auchority that approved the originalstrategy. Such changes normally require additional tailoring of the acquisitionprocess to implement the new AS,

e. Army requirements may bt satisfied by forming a new system assembledfrom existing and proven components or from a combination of proven componentsand modified/R&D components. This type of NDI saves the Army from a "scratch"research and development effort. However, due to the amount of R&D effortnormally required for systems integration, this type of NDI acquisition effortis closest to that of the developmental type item. Logistics support analysiswill usually have to be done on any newly developed components and thehardware/softwore integration areas. Feasibility testing is required in amilitary environment, as well &6 preproduction resting on the complete system.Also, hardware/ADP software integration and user testing is required.

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70-1

f. The consideration of NDI alternatives should draw upon market analysisinformation (see Chapter 8). An AS to support the recommendation to acquire NDIwill be prepared as required by Chapter 5 (in form4 t per Annex F to Appendix C),and will specifically include TLCCS to achieve course of action that is in thebest interests of the Government.

(1) To assist in the identification of available foreign items, allmarket analyses are to be coordinated with the MACOM staff proponent forsecurity assistance, before -initiation. The US Army International MaterielEvaluation (IME) Program is established to review and evaluate foreign freeworld materiel in the late stage of development, or deployed, that appears tomeet US Army requirements. Limited OSD funding is available for the testing andevaluation of foveign materiel.

(2) Consider the use of organic sources (depots/arsenals) for R&Dengineering, design, or integration efforts as required to modify NDI productsor items to a configuration that satisfies the minimum Army requirements.

(3) The prefarred contracting method for NDI acquisition is two-stepsealed bid, however, as an alternative, firm fixed price negotiated methnd ma7be used.

g. Based on the AS developed, tha tailored acquisition process thatimplements the strategy can be established. If no R&D engineering, design,integration, ILS, test, or evaluation effort is necded, the acquisition phasesconcerned with development or proveout can be sVipped or compressed.

(1) Minimize or eliminate Government testing before purchase wheneither of the following apply; Previous test and performance data documentproduct acceptability; and suitability or Market Investigations (see Chapter 8)are considered adequate for -evaluating and determining Military operationaleffectiveness and suitability, and freedom from unwarranted .hazards. Previoustest and performance data from commercial manufacturers, users, and otherservices, agencies, or countries can be used.

(2) Purchase of commercial products to meet user needs is a two-waystreet. The MATDEV must be responsive to legitimate needs, and the userrepresentative must be flexible and realistic in stating and economicallycontrolling needs. MATDEV and user objectives are to obtain systems which meetthe minimum requirements of the Goverument.

7-4. Logistic Support Considerations.

a. When the standard acquisition process is altered, time available toexecute essential components of the program may be reduced. Particular

attention must be given to the effects of compressed processes on the program'sILS component. During development, the MATDEV must identify actions taken toreduce support risks.

b. Because ILS managers are particularly affected, they must ensure thatmateriel items and systems being developed or acquired under a streamlined

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AR 7 041

process are supportable when fielaedo AR 700-127 provides guidance for ILSmanagement in a streamlined acquisition environment.

c. Decision authorities must carefully review AS for ttreamlhiodprograms;, this review vill ensure that adequate logistic support will beprovided 4hen the system is fielded.

d. ILS considerations apply to all acquisition programi, including allcategories of NDI programs.

e. Interim contractor support (ICS) should be considered early as a meansof accommodating accelerated ftieldings. Plans for ICS shall be documented inthe ILS Plan.

7-5. Type Classification for NDI.

a. Basic policy for type classification (TC) is contained in AR 70-61.

b. For Category A NDI (see Chapter 7), TC of a generic system beforesolicitation may be used, based on performance specifications or functionalpurchase description. TC is not complete until the manufacturer's make andmodel number are incorporated into the system's documentation. In some cases,logistics support considerations must be verified, using acceptance .testing ortesting as specified on contract. Results of these tests and all pertinent testdata will be used to determine if the item should be type classified standard.

c. Plans for type classification should be made early and documented inthe Acquisition Strategy (AS). Different TC strategies will have to besupported by different ILS, testing, and production strategies.

7-6. Funding Guidance. Funding of acquisition programs normally is theresponsibility of the MATDEV. Close coordination with MACOM comptrollers isencouraged; this close coordination will ensure the use of the properappropriation during each phase of the program. Basic guidance concerning theproper appropriations for specific activities conducted during the acquisitionprocess are contained in AR 37-100-FY. Questions concerning funding should beresolved through Comptroller channels.

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