Streamlined Procurement of Spare Parts from Overseas Manufacturers

Title

Streamlined Procurement of Spare Parts from Overseas Manufacturers

Description

Organization: NAVSUP, NRCC Naples Detachment London

Team Name: Spares

Related Acquisition Topic(s): Acquisition Practices Streamlining, Direct Vendor Delivery (DVD), Knowledge Management, Partnering

Description:

Using the principles of Acquisition Reform, Naval Regional Contracting Center (NRCC) Detachment London has developed efficient and streamlined acquisition agreements called "Article Price Lists" (APLs). These APLs are a tremendous process improvement compared to previous acquisition methods and have streamlined the procurement of spare parts for the U.S. Navy and the U.S. Marine Corps from overseas manufacturers.

Partnering with several major industrial giants, NRCC Det London has developed these APLs as a means to communicate expected future demand to manufacturers located in the United Kingdom or Europe. During the negotiation process the government begins with a list of spare parts that are sole source to a particular foreign manufacturer. This list will also have anticipated demand quantities for a set period of time (i.e., a year). Working with this common list of spare parts, the government and the manufacturer agree to the estimated demand quantities, prices and delivery schedules. With this anticipated demand, the manufacturer can offer during the negotiations reduced production lead times and price breaks for large quantity purchases.

After the contracting officer performs a cost and price analysis and signs the APL, NRCC Detachment London forwards the APL to major CONUS-based procurement offices who subsequently incorporate the APL into their own Basic Ordering Agreement. The requiring activities place their orders directly with contractors, resulting in significant lead-time reductions. These APLs cover over 35,000 National Stock Numbers (NSNs) and have supported several major U.S. Navy and Marine Corps weapons systems, such as the AV-8B Harrier aircraft, the Navy Air Crew Ejection Seats (NACES), the TF-45 trainer aircraft and other miscellaneous U.S. Navy and U.S. Marine Corps weapon systems. The Navy Inventory Control Points in Mechanicsburg and Philadelphia, the Naval Air Systems Command, several Fleet Industrial Supply Centers (FISC) and the Defense Logistics Agency used these APLs to place over $65 million worth of spare parts orders to such companies as Rolls-Royce, Martin Baker Aircraft, BAE Systems, Messier-Dowty, and Normanlair Garret.

The APL has significantly improved the process of spare parts. The previous process of acquiring spare parts was cumbersome and extremely labor-intensive. CONUS-based inventory control points would submit individual requisitions for spare parts as the need arose. Frequently, these parts were urgently needed and were required to satisfy mission-essential equipment. As the requirements came in, the NRCC Det London buyers would issue an individual purchase order for each requisition. Since the manufacturer was simply reacting to the demand communicated through these individual purchase orders, the manufacturer could not plan its production runs. Consequently, production lead times were long and deliveries often did not accommodate the needs of the customer. There was no planning involved nor was there any consolidation of requirements. In addition, the priority of these individual requisitions and purchase orders changed frequently, and required the attention of supervisors to manage and track the award of the most critical purchase orders.

NRCC Detachment London has used these APLs to save $211,059 for several agencies. In 1999, our buyers saved $139,059 for spare parts supporting the AV-8B. Our buyers also saved $72,000 by consolidating requirements for cooling fans from both the Navy and DLA. After consolidating the requirements, the buyer convinced the manufacturer to reduce the quantity-price discount from 10 each to 8 each, and received a price $8,000 less per cooling fan.

The following chart shows the amount of orders that have used the APL developed by NRCC Detachment London.