Landing Gear PrimeVendor Contract (LGPVC) request for information. The Landing Gear Commodity Council (84 MSUG/OBL), heretofore referred to as - LGCC, is revisiting the pricing arrangement for this proposed effort to consider replacing the previously announced - Prospective Redetermination Provision with an EPA provision. LGCC requests input from Industry with regard to the following approach:Interested parties shall review the Industry Day Papers and other information regarding the Landing Gear Commodity Council, available at: http://www.hill.af.mil/lg2/LandingGear/index.htm RFI submissions shall address: 1. Support for or against the change from a Prospective pricing approach to an EPA provision 2. a) If an EPA provision is proposed as more appropriate, request information with regard to indices - which one(s) are applicable for LGPVC? Both labor and material indices are to be included in the alternative EPA provision being considered. b) Included in support for an EPA, request opinion regarding a potential - composite index - would a composite approach be more appropriate - representing a variety of metals, common to specific landing gear items? c) What other stipulations, other than are outlined in this RFI, would be appropriate? d) Should the LGCC replace the provision for a - prospective approach with the one outlined herein? Why or why not? Responses are due by 5:00 p.m. Mountain Standard Time, 15 SEP 05. PROPOSED (DRAFT) EPA PROVISION: In anticipation of establishing a prime-vendor contract for landing gear parts, the landing gear commodities council recognized the challenge in establishing reasonable pricing for a ten year period at the outset of the contract. Although contractors are only asked to initially propose ceiling prices for years two through ten, we recognize that unusually high increases in raw material costs such as steel, aluminum or titanium are always possible which could render the ceiling prices too low and place the contractor in a loss position. This would be undesirable for both contracting parties. Initially the government devised a plan to solve this problem by including a provision in the contract that would allow contractors to increase their previously established ceiling prices if they could provide data indicating that raw materials were exceeding anticipated levels. However, it has been indicated to us that conditions for an EPA provision may be more favorable than the council originally concluded. In light of this, and in the interest of employing the most suitable pricing methodology, the commodity council is considering the following alternative. Rather than requiring any cost data from the prime vendor to support unusual price increases, we are considering calculating economic ceilings that might exceed a contractors proposed ceiling prices and allow the contractor to increase his firm unit prices to our economic ceilings in the event that they exceed his previously established ceiling prices. The government would calculate its economic ceilings by applying a pre-selected indices to the proposed base year unit price of a contractor. The government is considering selecting a pool of perhaps five material indices and one labor index to use in generating its economic ceilings for each contractor. Then one selected material index and the one labor index would be applied to calculate the government economic ceiling for each item. The pool of material indices the government would employ might include one for steel, titanium, aluminum, and so forth. The government is also considering using one composite index for material that is based upon the average mix of metals in a sample of major landing gear components. In order to make this economic calculation possible, the government would require contractors to supply the mix of labor and material that comprises the unit price for each item, i.e. Part No. 17H52-A is 45% material and 55% labor (with the associated indirect costs and profit applied). For example, let's suppose that a contractor proposed a base year price of $2,000 for an item and a ceiling price of $2,060 for year 2. Then let's suppose that a major component of the item is steel which rises 15% that year. If steel had been the pre-determined major component of the bill of materials for that item, and the item had been price had been determined to be comprised of 60% material and 40% labor, the government would calculate and economic ceiling price for the item as follows: Base year price $2,000 Material portion: $ 1,200 * 1.15 (steel index) = $1,350 Labor portion: $ 800 * 1.03 (labor index) = 824 Government Calculated Economic Ceiling $ 2,174 Hence, for this part, the contractor would be allowed to increase his ceiling price to $2,174 if he chose to do so rather than his previously proposed ceiling of $2,060. A great advantage to this approach is that contractors would not be required to submit any data to support an increase to a ceiling price as would have been the case under the previous scenario. To simplify this process, it is anticipated that we would only apply this methodology to the high-priced items that represent 85% of the historical spend and also the forecast (many of these items overlap). This would mean that the pricing of approximately 100-150 of the total approximate 1500 items would be impacted by this provision. Technical POC: Ann Mary Howe, 84 MSUG/OBL - 801-777-4601
