AFFARS IG5307.104-93

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Informational Guidance

IG5307.104-93
Commodity Council Implementation and Operations

June 2006

TABLE OF CONTENTS

EXECUTIVE SUMMARY 2

1. INTRODUCTION 3

2. PURPOSE 5

3. COMMODITY COUNCIL IMPLEMENTATION PROCESS 6

4. COMMODITY COUNCIL ORGANIZATION STRUCTURE 9

5. COMMODITY COUNCIL ROLES AND RESPONSIBILITIES 12

6. COMMODITY COUNCIL OPERATIONS PROCESS 18

Appendix A - Commodity Council Selection Process 28

Appendix B - Commodity Council Governance Structure 30

Appendix C - Commodity Council Charter 32

Appendix D - Commodity Council Kick Off Session Agenda 33

Appendix E - Commodity Council Communication Plan 34

Appendix F - Commodity Acquisition Management Plan 37

Appendix G - Commodity Council Lessons Learned 40

Appendix H - References 41

EXECUTIVE SUMMARY

1. Case for Change

The Air Force must achieve cost savings and performance improvements by leveraging commodity volumes, in order to:

By implementing the 'Commodity Council' concept within the Air Force, we can:

2. Objectives

The objective of a commodity council is to develop and implement an enterprise-wide commodity procurement strategy (see Figure 1). This includes gathering market intelligence, developing a written sourcing strategy, and selecting suppliers based upon that strategy. Once a strategy is developed and managed, execution may be at a decentralized or local unit level. This concept ensures an approach that maximizes the benefits of centralized management while retaining the flexibility and operational risk mitigation of decentralized execution. Commodity Councils are primarily strategy development organizations and provide input into the procurement process.

Knowledgeable commodity experts should be chosen to lead councils, and cross-functional representatives should be appointed to each council, as required, to ensure full-spectrum customer representation from across the AF. In order to ensure correct strategies are developed at the council level, it is critical that those members chosen to serve on the council are the AF's acknowledged experts in that commodity grouping. Beyond the council level, acquisition executive(s) will be designated to approve the sourcing strategy developed by the council to ensure a point of responsibility and authority.

3. Commodity Council Roles & Responsibilities

The primary purpose of the commodity council is to develop an AF-wide strategy for the procurement of a specific commodity group and to ensure this strategy is executed properly at the appropriate levels. The formulation of this strategy is accomplished by maintaining a close watch on industry trends, supplier performance, and customer requirements via market-savvy and versatile cross-functional council members. However, for commodity councils involving the acquisition of services greater than $100M, coordination with PEO/CM is required to determine if the acquisition will be placed within their portfolio.

Other responsibilities of the council may include:

The council develops strategies that may include:

4. Conclusion

Creating a commodity council approach within the AF is the best way to meet AF Contracting’s strategic sourcing objectives. Implementation decreases unit cost of purchases, decrease lead times, and increase AF purchasing flexibility. Commodity councils are already a proven, cost-effective purchasing method used by commercial firms. For AF Contracting to become a ‘best in class’ purchasing organization, implementation of commodity councils is imperative.

Graphic

Figure 1

1. INTRODUCTION




PURPOSE


3. COMMODITY COUNCIL IMPLEMENTATION PROCESS

Graphic

Figure 2


4. COMMODITY COUNCIL ORGANIZATION STRUCTURE

Graphic

Figure 3



5. COMMODITY COUNCIL ROLES AND RESPONSIBILITIES

Role Description

- Approves the Commodity Acquisition Management Plan (CAMP)
- Addresses organizational barriers
- Directs the use of strategic agreements
- Ensures adequate representation on the Council
- Participates in review sessions

Recommended Qualifications

- Acquisition Level III Certified
- Program Executive Officer
- Flag Officer equivalent from functional area or Acquisition

Role Description

- Assumes accountability for the Council’s operations
- Facilitates selection of Council members
- Oversees development of the recommended Commodity Acquisition Management Plan (CAMP)
- Ensures execution and compliance of the approved CAMP

Recommended Qualifications

- Contracting Level III Certified
- Commodity Council methodology knowledge
- Commodity marketplace experience

Role Description

- Directs the day-to-day activities of the core members
- Prioritizes objectives and tracks timelines/deliverables
- Facilitates the development of the CAMP
- Resolves tactical issues
- Identifies Advisor position candidates

Recommended Qualifications

- Acquisition Level III Certified OR Contracting Level III Certified
- Commodity Project Management
- Commodity Council methodology knowledge
- Commodity marketplace experience

Role Description

- Manages strategy development for one or more commodity groups
- Enlists commodity experts to advise the core members during strategy development
- Manages strategy schedule

Recommended Qualifications

- Acquisition Level III Certified
- Commodity Project Manager
- Commodity marketplace knowledge

Role Description

- Represent stakeholders during commodity council operations
- Survey functional areas to determine what capabilities require the commodity
- Primary communication link to other functional stakeholders at MAJCOMs
- Primary communication link to base level functionals under the MAJCOM
- Could also serve as Project Manager, Commodity Expert, or Business Requirements Analyst

Recommended Qualifications

- Business requirements analysis
- Business process analysis
- Commodity group knowledge
- Technical knowledge
- Commodity Project Management
- Commodity marketplace experience
- Commodity expertise

Role Description

- Provides technical expertise and sourcing knowledge for the commodity group
- Understands the industry’s economics, technologies, and trends

Recommended Qualifications

- Commodity expertise

Role Description

- Collects, coordinates, and analyzes internal commodity requirements from users
- Documents, analyzes, redesigns, and implements effective and efficient business processes

Recommended Qualifications

- Commodity group knowledge
- Business requirements analysis
- Business process analysis

Role Description

- Researches and analyzes the industry that produces the commodity, its economics, technologies, and its trends
- Analyzes risk in the supply chain from origin to delivery
- Analyzes the capacity of supplier to meet probable demand patterns

Recommended Qualifications

- Business operations
- Commodity expertise
- Market research analysis
- Commodity marketplace experience

Role Description

- Provides guidance to the Council on the Small Business procedures and recommended strategies regarding small business suppliers
- Develops and coordinates an effective and efficient use of socio-economic programs in the CAMP

Recommended Qualifications

- Acquisition Level III Certified OR Contracting Level II Certified
- Small Business Program knowledge

Role Description

- Documents approvals for competition exceptions
- Advises Council regarding centralized vs decentralized buying strategy
- Facilitates adoption of the CAMP through appropriate contracting instruments
- Monitors new supplier transition
- Assists Commodity Project Manager regarding tax exemption, closing out/terminating contracts and orders, root cause analysis
- Performs actions related to property administration for specified contracts and/or commodities
- Manages Freedom of Information program

NOTE: Depending on the needs of the council, contract execution may reside inside or outside of council responsibilities.

Recommended Qualifications

- Contracting Level III Certified
- Warrant Authority
- Procurement analysis

Role Description

- Provides technical expertise and sourcing knowledge for a commodity group

Recommended Qualifications

- Industry representative
- Commodity expertise

Role Description

- Ensures strategies align with current architectures and standards

Recommended Qualifications

- Commercial standards knowledge
- C41SR knowledge
- System engineering experience
- JTA/ITRM knowledge
- EAP knowledge

Role Description

- Collects, coordinates and analyzes internal commodity processes from all MAJCOM and functionals

Recommended Qualifications

- Business requirements analysis
- Business process analysis
- Commodity group knowledge

Role Description

- Ensures strategies align with current policies and regulations

Recommended Qualifications

- Acquisition Corps Member
- Acquisition Level III Certified
- Contracting Level III Certified
- Commodity regulatory expertise

Role Description

- Validates use of regulations and policy in purchase strategy definitions
- Inform GCQ of additional support requirements, if necessary

Recommended Qualifications

- Acquisition Attorney

Role Description

- Monitors and measures financial savings and performance
- Performs business case analysis and calculates ROIs as related to commodity
- Obtains data to determine prospective suppliers’ capability
- Assists in developing performance metrics and targets for suppliers
- Identifies each cost component’s proportion of total commodity cost

Recommended Qualifications

- Cost analysis experience
- Financial analysis experience
- Data system knowledge

Role Description

- Creates demand forecast

Recommended Qualifications

- Data system knowledge
- Economic analysis experience
- Small Business program knowledge

Role Description

- Manages the change management process for the Council
- Develops and manages the execution of the communication plan for each strategy
- Assists with identification of key stakeholders
- Facilitates review sessions with major users and suppliers as well as other stakeholder groups, as necessary

Recommended Qualifications

- Public affairs knowledge
- Marketing expertise
- Change management expertise
- Human resource expertise
- Organizational design experience

Role Description

- Determines training needs for major users and suppliers as well as other stakeholder groups, as necessary
- Selects or develops appropriate training materials
- Conducts required training/education sessions

Recommended Qualifications

- Training design and development expertise
- Training implementation expertise

Graphic

Figure 4


6. COMMODITY COUNCIL OPERATIONS PROCESS

The Commodity Council process flow is outlined below (see Figure 5). The eight steps are not intended to be sequential but may be performed with some overlap (see figure below). This is specifically true for Review Current Strategy, Evaluate and Assess Current Strategy, and Forecast Future Demand since these three process steps require continuous coordination. Also, the process is a continuous improvement cycle and lessons learned should be adapted on an ongoing basis. If a Commodity Council develops multiple strategies, this process may be followed concurrently for each strategy. See Figure 4 for roles and responsibilities associated with each process step.

Graphic

Figure 5


Appendix A - Commodity Council Selection Process

The following (see Figure 6) outlines the evaluation process that AQC conducts on a regular, ongoing basis. Once a commodity group is identified and approved, the Commodity Council implementation process is followed.

Graphic

Figure 6

1. Collect Air Force spend data from available sources:

2. Segment AF spend into logical buying groups based on % of total Air Force Spend (or by % of Goods and Services spend). These groups may be driven by Federal Supply Classification (FSC) codes but groups may also include all commodities that are related by type of user and/or type of buyer. Also, consider qualitative factors that influence the need for a commodity grouping (user group has expressed an interest, a large contract is expiring, etc.)

3. Document the following statistics for each commodity group:

4. Evaluate selection criteria (High, Medium, Low) for each commodity group:

5. Document other relevant information for each commodity group, such as:

6. Submit CC recommendations for review and approval.

7. Implement approved Commodity Councils (see Commodity Council Implementation Process).

Appendix B - Commodity Council Governance Structure

The following (see Figure 7) illustrates the Commodity Council governance structure.

Graphic

Figure 7


1. Board of Councils

2. Directors Board
 

3. Implementation Support Team


Appendix C - Commodity Council Charter

Refer to AFFARS 5307.104-93 for mandatory Charter content. The following is a recommended outline for a Commodity Council Charter. The Charter will be developed for each Council according to its specific goals and needs. Once developed by the Director, Deputy Director and Core Team, the Charter will be signed by the Deputy Assistant Secretary (Contracting) and the Commodity Strategy Official.

Appendix D - Commodity Council Kick Off Session Agenda

The following is an outline that can be modified as necessary for a Commodity Council Kick Off Agenda:

A. Welcome/Introductions

B. CC Overview

C. CC Organization

D. MAJCOM Participation

Appendix E - Commodity Council Communication Plan

1. The following is a high level outline for the contents of a CC Communication Plan. A Communication Plan may be developed for each strategy created by a commodity council. Each plan reflects the specific stakeholders relevant for that specific strategy. An initial Communication Plan can be drafted during the commodity council implementation kick off but may be refined as the council creates new commodity strategies.

2. The following is an example of a Communication Plan Executive Summary:

Appendix F - Commodity Acquisition Management Plan

1. Refer to AFFARS 5307.104-91 for additional guidance. The following is an outline for an overarching CC CAMP. Each commodity spiral requires an Annex to the overarching CAMP. The contents of the Annex depend on the individual commodity strategy. CAMP Annexes are subject to the same approval process as the overarching CAMP.

2. The following is an overview of a CAMP:

A. What is a CAMP?

A CAMP is an acquisition planning document that provides the strategic plan to acquire and manage all products under the responsibility of a commodity council. The plan formally documents the approach to fill the need, optimize resources, and satisfy policy requirements for a proposed acquisition. It answers the "who-what-when-where-why-how" of the acquisition strategy planning process.

If a CAMP applies to a range of products, an overarching document outlines the overall council process and addendums are prepared for each acquisition as each acquisition strategy is developed. The plan need not be lengthy, but should be thorough. A concise, clear statement of the facts and rationale supporting the technical and business judgments is all that is necessary. The CAMP and Addendums may be prepared in briefing format.

A CAMP should be general enough to allow some detailed program management flexibility, but be specific enough to give coordinating and approving officials adequate information on the technical and business aspects of the acquisition upon which to base their decisions. Toward this end, the plan clearly demonstrates that those responsible for an acquisition have ensured the following key elements:

The Government gets what it needs, when it is needed, within established cost objectives:

Sufficient and appropriate funds are available/obtainable;
A sound and equitable business arrangement is planned;
Risks due to concurrent development/production are managed;
The national goals of competition and small business utilization are supported, and
The systems/equipment are supportable when fielded.

B. When is a CAMP required?

CAMPs are required to fulfill written acquisition plan requirements for all Commodity Council Acquisitions. A program level CAMP may be written with annexes for each acquisition, or a CAMP may be prepared for each individual acquisition.

C. Who writes the CAMP?

The Director has primary responsibility for preparation of the CAMP. The Director relies on the expertise and input from the various functional activities involved in the acquisition process for assistance in the preparation of the plan. In this regard, close coordination with the assigned contracting officer is particularly important in developing an appropriate contracting strategy and business approach. The council team also seeks input from other key advisors from the Judge Advocate Office (JA), Small and Disadvantaged Business Utilization Office (SADBU), Defense Contract Management Agency (DCMA), and others as appropriate. If the plan proposes other than full and open competition, the Competition Advocate also coordinates.

The most effective plans are the result of a true team-effort process of planning. Poor plans are produced when planning is the by-product of the necessity of having to prepare a written plan. In other words, the key to success is to plan first, then document the plan. The process of planning involves lots of dialogue with the user, the supporter, and the various functional experts assigned to the program management office and center staff organizations. In addition to using the team of specialists within the program office, use the experts assigned to the Acquisition Strategy Panel (ASP), when required, as a forum to discuss and refine all planning issues. The requirement for an ASP is delineated in AFFARS 5307.104-90.

A CAMP serves to generate commitment by all stakeholders to support execution of the plan. The best way to achieve this commitment by all stakeholders is to have them participate actively and early in the planning process. In order for the Government to successfully meet its overall program objectives, everyone involved in planning and executing the program need to feel some ownership.

An Acquisition Strategy Panel (ASP), if appropriate, is held in accordance with AFFARS 5307.104-90. Much of the CAMP can be drafted prior to the ASP. However, it is not possible to finalize the document until after receiving the input of the ASP. If an ASP is held, attach meeting minutes to the CAMP. Ensure the CAMP is consistent with the discussions and recommendations of the ASP. Where appropriate, the plan documents the disposition of ASP recommendations. Differences between the approach recommended by the ASP and the approach described in the plan is explained.

D. Checklist for CAMP Development:

Appendix G - Commodity Council Lessons Learned

1. Implementation

2. Organization/Roles

3. Experience/Training

4. Overall

Appendix H - References

1 Atkinson, William. “Riding Out Global Challenges, “ Purchasing. Issue 14: (18 Sep 2003).

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