Supplier Risk Management. Presented By Bill Gibson, DCMA HQ Date: May 2001

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1 Supplier Risk Management Presented By Bill Gibson, DCMA Q Date: May 2001

2 Agenda Introduction One Book Policy Structure Policy Overview Risk Assessment and Management Program (RAMP) Summary

3 Introduction DCMA s Supplier Risk Management Program Integrates the risk assessment and surveillance planning processes. Promotes a consistent risk management methodology DCMA-wide. Is consistent with DoD Risk Management guidance. Expands risk management to the entire range of DCMA operations.

Promotes a consistent risk management methodology DCMA-wide.

4 Supplier Risk Management

5 One Book Policy Structure Same Approach Operating Principle Risk Management Same Terminology Risk Assessment Services Supplier Risk Management Risk Planning Risk Assessment Risk andling Risk Monitoring Risk Documentation Organizational Support Services Internal Risk Management 18 Chapters Just Different Inputs! Tool Subchapters

Assessment Risk andling Risk Monitoring Risk Documentation Organizational Support

6 One Book Policy Structure Risk Management Supplier Risk Management --Earned Value Management System (EVMS) --Acquisition Logistics Support --Contract Property Management --Contractor Estimating System Reviews --Contractor Purchasing System Reviews --Material Management & Accounting Systems --Systems Planning Research Dev. & Eng. (SPRD&E) --Test & Evaluation Management --Configuration and Technical Data Management --Schedule and Delivery Management --Contract Safety --Progress Payments Based on Costs --Performance Based Payments --Public Vouchers --Supplier Quality Assurance (QA) --Software CAS --Parts Control Program --Packaging Management Program

7 One Book Policy Structure Service Set Alignment Major Program Earned Value Management System (EVMS) Acquisition Logistics Support Delivery Schedule and Delivery Management Contract Safety Business and Financial Systems Contract Property Management Contractor Estimating System Reviews Contractor Purchasing System Reviews Material Management & Accounting Systems Payment & Financial Management Progress Payments Based on Costs Performance Based Payments Public Vouchers Product Performance Systems Planning Research Dev. & Eng. (SPRD&E) Software CAS Test & Evaluation Management Supplier Quality Assurance Configuration and Technical Data Management Packaging Management Program Parts Control Program NOTE: 12 Total Service Sets

Payment & Financial Management Progress Payments Based on Costs Performance Based Payments Public Vouchers Product Performance Systems Planning Research Dev. & Eng.

8 Policy Overview RISK PLANNING Derived from contract/customer requirements. Identification of key system/processes. Inherent risk of process/product is important.

9 Policy Overview RISK ASSESSMENT Performed on all suppliers. Risk Ratings assigned to each system/ key process. Considers performance, schedule, and cost objectives. Risk Ratings based on failure probability and consequence. Probability/likelihood an event will occur...remote likely near certainty? Given the risk is realized, what is the magnitude of impact what is the consequence loss of investment, time, dollars, mission, life?

Risk Ratings based on failure probability and consequence. Probability/likelihood an event will occur.

10 Risk Analysis Process RISK RATING Level Process Variance/ Probability of Occurrence Minimal/Remote Small/Unlikely Acceptable/Likely Large/ighly Likely Significant/Near Certainty LIKELIOOD M L L L M M M L M M L M IG MODERATE 1 L L L L M CONSEQUENCE LOW Level Performance Schedule Cost 1 Minimal or No Impact Minimal or No Impact Minimal or No Impact Acceptable with some reduction in margin Acceptable with significant reduction in margin Acceptable, no remaining margin Unacceptable Additional resources required; able to meet need dates Minor slip in key milestone; not able to meet need dates Major slip in key milestone or critical path impacted Can t achieve key team or major program milestone <5% 5-7% >7-10% >10%

2 3 4 5 Acceptable with some reduction in margin Acceptable with significant reduction in margin Acceptable, no remaining margin Unacceptable Additional resources required; able to meet

11 Policy Overview Con t RISK ANDLING Surveillance/risk mitigation activities based on risk assessment. Efforts commensurate with the level of risk. Tool Kit: Process Proofing, Product Audits, Data Analysis, etc. Activities integrated among all functions: business and technical.

Efforts commensurate with the level of risk.

12 Policy Overview Con t RISK MONITORING Track and evaluate results of supplier performance. Measure the impact of risk handling activities on risk ratings. Risk adjustment--periodic assessments drive increase/decrease surveillance activity at supplier locations. Process improvement efforts focused on high/moderate risk processes.

Risk adjustment--periodic assessments drive increase/decrease surveillance

13 Policy Overview Con t RISK DOCUMENTATION Required for ALL elements of risk...including UPDATES! Method of Communication to all Stakeholders!

14 Risk Assessment & Management Program RAMP Software Application Integrates and automates the Supplier Risk Management effort. Facilitates the collection and documentation of risk information. Resides as a module within our Supplier Information Service. Will be open to our Customers; data integrity needs to be established first! Involves supplier participation prior to input--procas efforts, Integrated Product Teams (IPTs), Management Councils, etc.

Resides as a module within our Supplier Information Service.

15 Summary DCMA s Supplier Risk Management Program Promotes a uniform approach and application to all suppliers under DCMA s cognizance. Is consistent with DoD Risk Management Policy. Will assist DCMA management on where to focus attention. Provides our Customers supplier information in risk-based terms. Is critical to DCMA s Success--Now and in the Future!

Is consistent with DoD Risk Management Policy.

DCMA EVMS COMPLIANCE REPORT I LOCKHEED MARTIN AERONAUTICS CO.

DCMA EVMS COMPLIANCE REPORT I LOCKHEED MARTIN AERONAUTICS CO. POST ACCEPTANCE REVIEW FOR CAUSE COMPLIANCE REPORT FOR THE LOCKHEED MARTIN AERONAUTICS COMPANY FORT WORTH, TEXAS PREPARED BY: DEFENSE CONTRACT MANAGEMENT AGENCY (DCMA) EARNED VALUE MANAGEMENT (EVM) CENTER