[Federal Register Volume 78, Number 68 (Tuesday, April 9, 2013)]
[Notices]
[Pages 21116-21118]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-08190]


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DEPARTMENT OF DEFENSE

Department of the Navy


Superior Supplier Incentive Program

AGENCY: Department of the Navy, DoD.

ACTION: Notice of proposed policy letter.

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SUMMARY: The Deputy Assistant Secretary of the Navy, Acquisition and 
Procurement (DASN (AP)), is soliciting comments that the Department of 
the Navy (DoN) may use in drafting a policy that will establish a 
Superior Supplier Incentive Program (SSIP). Under the SSIP, contractors 
that have demonstrated exemplary performance at the business unit level 
in the areas of cost, schedule, performance, quality, and business 
relations would be granted Superior Supplier Status (SSS). Contractors 
that achieve SSS could receive more favorable contract terms and 
conditions in DoN contracts. In addition to recognition of SSS at the 
business unit level, multi-business unit corporations, that have 
several business units which attain SSS, may receive additional 
recognition by the DoN at the corporate level. This additional 
corporate recognition will not result in the receipt of more favorable 
contract terms and conditions in DoN contracts, but may result in the 
use of more favorable business practices by the DoN in its relations at 
the corporate level. Upon approval of the policy by the Assistant 
Secretary of the Navy for Research, Development and Acquisition, DoN 
will initiate the pilot phase of the SSIP.
    The SSIP pilot is a revision of DoN's previous initiative to 
recognize superior performance. This initiative was known as the 
Preferred Supplier Program (PSP). DoN published a previous notice of 
proposed policy letter on May 14, 2010.

DATES: DoN invites interested parties from both the public and private 
sectors to provide comments to be considered in the formulation of the 
final policy letter. In particular, DoN encourages respondents to offer 
their views as discussed below, in Section C, ``Solicitation of Public 
Comment.'' Interested parties should submit comments, in writing, to 
the address below, on or before May 3, 2013.

[[Page 21117]]


ADDRESSES: Comments may be submitted by any of the following methods:
    Email: [email protected]; Facsimile: 703-614-9394; Mail: DASN (AP), 
Attn: Clarence Belton, 1000 Navy Pentagon, Room BF992, Washington, DC 
20350-1000.
    Instructions: Please submit comments only and cite ``Proposed DoN 
SSIP Policy Letter'' in all correspondence. All comments received will 
be posted, without change or redaction, to https://acquisition.navy.mil/rda/home/acquisition_one_source/business_opportunities/SSIP, so commenters should not include information that 
they do not wish to be posted (for example, personal or business-
confidential).

FOR FURTHER INFORMATION CONTACT: Clarence Belton, 703-693-4006 or 
[email protected].

SUPPLEMENTARY INFORMATION:

A. Background

    Companies in the private sector that have implemented SSIPs have 
significantly improved performance. Cash flow, contract terms and 
conditions, and relief from non-statutory compliance requirements, 
either procedurally or with respect to timing, can reduce contractor 
costs and risk; and, as such, are powerful incentives that can be used 
to motivate contractors to perform at a high level. DoN and its 
contractors negotiate these key components of the business arrangement 
contract by contract. As a result of this decentralized and 
individualized approach, DoN fails to take advantage of an extremely 
important opportunity to motivate industry behavior. This policy would 
establish the SSIP to leverage that opportunity through the use of 
favorable contract terms and conditions and other changes in business 
process that would be available to Superior Suppliers (i.e., suppliers 
that have demonstrated exemplary performance, at the business unit or 
corporate level, in the areas of cost, schedule, performance, quality, 
and business relations).
    The proposed policy has been revised from the original concept of 
the PSP. DoN is again considering comments to capture the public's 
views as it revises the concept of operations for SSIP. After 
consideration of the comments, DoN may publish a draft proposed policy 
letter for additional public comments.

B. Proposed Policy Letter Concepts

    The general outline of the pilot phase of the SSIP, to be 
established under the proposed policy letter, is set forth below.
    Assessment of contractors for designation as Superior Suppliers 
will be conducted by teams consisting of members from the DoN's Echelon 
II contracting activities. These contracting activities are identified 
in Defense Federal Acquisition Regulation Supplement 202.101. 
Contracting activities may be assigned as evaluation team leads, based 
on the volume of contracting activity between a contractor under 
evaluation and a particular contracting activity. DASN (AP) will 
oversee the assessment of contractors under the SSIP. DASN (AP) will 
make recommendations to a panel of senior DoN leaders as to which 
companies should be designated as Superior Suppliers. The panel will 
include the Assistant Secretary of the Navy for Research, Development 
and Acquisition and may include the Vice Chief of Naval Operations; the 
Assistant Commandant of the Marine Corps; and Commander, Fleet Forces 
Command; or their representatives.
    DoN will use the Contractor Performance Assessment Reporting System 
(CPARS) as the baseline data during the pilot phase of the SSIP. In the 
course of the pilot phase, DoN may also identify other sources of data, 
including information available to DoN program offices and government 
contract administration organizations that the DoN may use to 
supplement CPARS data in implementing the SSIP. During the pilot phase, 
contractors will be assessed in the following CPARS areas:
     Technical (Quality of Product).
     Schedule.
     Cost Control.
     Management Responsiveness.
     Management of Key Personnel.
     Utilization of Small Business.
     Other CPARS Factors As Appropriate.
    During the SSIP pilot phase, DoN will use a 5-star rating system 
based upon the 5-color ratings used in CPARS, as follows:

------------------------------------------------------------------------
                                                              Number of
                     CPARS color rating                         stars
------------------------------------------------------------------------
Red........................................................            0
Yellow.....................................................            1
Green......................................................            2
Purple.....................................................            3
Dark Blue..................................................            4
------------------------------------------------------------------------

    DoN will use the CPARS conversion table above, based upon CPARS 
data; and, as appropriate, may use other sources of information and may 
weight evaluation factors. Contractors must achieve at least a 3-Star 
rating to be designated as a Superior Supplier. A 5-Star rating can 
only be achieved if the contractor maintains an active Energy 
Efficiency Program, and otherwise has received a 4-Star rating. Failure 
to demonstrate an active Energy Efficiency Program will not diminish 
the contractor's SSIP rating. If a contractor provides documentation 
sufficient to establish that it has an Energy Efficiency Program, it 
will receive an additional star, up to a maximum rating of 5 Stars.
    For the pilot, DoN intends to evaluate the top 15 DoN contractors 
that supply goods and the top 15 DoN contractors that supply services. 
The top 15 DoN contractors will be determined by the value of contract 
awards for the most recent fiscal year at the business unit level. A 
business unit can only be rated in either the goods or services 
category. In the event a contractor is within the top 15 suppliers of 
both goods and services, it will be evaluated in the category that 
represents the preponderance of sales to the DoN.
    DoN plans to seek policy changes that will allow it to offer more 
favorable terms and conditions to its preferred suppliers. Once 
approved, DoN contracting officers will be authorized to offer some or 
all of the following more favorable contract terms and conditions:
     More favorable progress payments. Adjustments may be made 
to progress payment percentages or retention percentages.
     Priority for adjudication of final labor and indirect cost 
rates.
     Increase in the intervals between business system reviews.

C. Solicitation of Public Comment

    DoN invites interested parties from both the public and private 
sectors to provide comments for consideration in the formulation of a 
policy letter establishing the SSIP. In particular, DoN seeks to better 
understand how to incentivize contractors, to achieve sustained 
superior performance in the areas of cost, schedule, performance, 
quality, and business relations. Accordingly, DoN welcomes feedback 
regarding the following questions.
    1. What clauses are currently being used in government 
subcontracts, and commercial contracts and subcontracts, to incentivize 
superior performance, at the corporate level, in the areas of cost, 
schedule, performance, quality, and business relations?
    2. What solicitation provisions, contract clauses, and performance 
incentives will provide contractors with the greatest motivation to 
achieve SSS?
    3. What contract terms and conditions increase cost or impair 
performance and could be removed from contracts with

[[Page 21118]]

Superior Suppliers without significant risk to the Government?
    4. Energy Efficiency is a critical DoN requirement significantly 
impacting the successful achievement of DoN's missions. How should a 
contractor's use of energy as it relates to the entire life-cycle of a 
product--design, manufacture, use, maintenance, and disposal--be 
considered in the designation of Superior Suppliers?
    5. How long should SSS last?
    6. What criteria, other than CPARS data elements, should DoN use to 
select companies for evaluation as superior suppliers?
    7. Is there any other aspect of the proposed SSIP on which you wish 
to comment?

    Dated: April 1, 2013.
C. K. Chiappetta,
Lieutenant Commander, Office of the Judge Advocate General, U.S. Navy, 
Federal Register Liaison Officer.
[FR Doc. 2013-08190 Filed 4-8-13; 8:45 am]
BILLING CODE 3810-FF-P