COST ASSESSMENT DATA ENTERPRISEContractor Business Data Report

1921-3

Bottom Line Up FrontImproving the 1921-3 Contractor Business Data Report

What is the 1921-3?• A source of data from defense

contractors that cost estimators use to analyze overhead rates

• Policy first established in 1973

• A cost and hour report for an entire business unit

• Standardized direct/indirect categories

• Capacity measure• Accounting & Organizational Changes

What is going on with the 1921-3?• Current 1921-3 is not aligned with

analytical needs, is difficult to interpret, and is rarely used • Standardized in form, but not in fact• Numerous inconsistencies• May lead to cost estimating errors

• We are updating the 1921-3 as part of a larger data collection modernization effort

• We recommend that the 1921-3 be updated to “Contractor unique” format• Aligns with today’s business practices

• Proposals, negotiations, FPRs, etc.

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Background: How We Got HereImproving the 1921-3 Contractor Business Data Report

1973

1994-1999

2009

2013 2017

2015

1921-3 introduced as the “Plant-Wide Data Report”- Part of the Contractor Cost

Data Report (CCDR)- Evolved out of the Cost and Economic Information System

(CEIS) starting in 1959

1921-3 discontinued around 1994; formally deleted in 1999 - Replaced with FPR data submitted

to the DCARC by DCMA

1921-3 Government team and focus

groups start

1921-3 reintroduced as the “Contractor

Business Data Report”

DODCAS 2015 presentation conclusions

- Report dollars and hours in terms of contractors’ own pools

- Drill down into the rate structure including more breakout for fringe, business development, and other

categories

1921-3 update is part of broader modernization to data collection

- FlexFile and Quantity reports to replace 1921, -1, -2, -5, and CWBS Dict.

- Updated CARD Requirements - Updated SRDR (Dev., Maint., ERP)

- New Technical report - New Maintenance & Repair report

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Background: 1921-3 in Law and PolicyImproving the 1921-3 Contractor Business Data Report

Updates to WSARA

CSDR Plan

CDRLs

DID

DD Form

Overarching regulation for all acquisition that

requires cost data collection

Policies for management of all

acquisition programsRequirements for

programs with CSDRsCSDR implementation

documents

DFARS

Clauses 252.234-7003 and 7004

Mandates CSDR Policy

DoDI5000.02

DoDI5000.732017 NDAA

Summarize CSDR reporting thresholds and

program applicability

DoDM5000.04-M-1

Guidance for the CSDR process

DoDD5105.84

WSARAWeapon System Acquisition

Reform Act of 2009

Assigns the responsibilities of the DCAPE

Established the office of OSD CAPE

Policy above refers to the Cost and Software Data Report (CSDR), which is the umbrella reporting system that includes the 1921-3

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1921-3 Intent and UsesImproving the 1921-3 Contractor Business Data Report

• The “CCDR” was implemented in 1973 and included 1921-3 as one of four forms• 1921, -1, and -2 provide detailed data related Direct cost expenditures on major system contracts

• Assists in cost estimating the next contract or next system• Overhead applied as a factor/rate with no additional insight

• The 1921-3 was intended for insight into Overhead rates• Assists in cost estimating the effects of changes to the business base, such as production rates, • Insight into changes to organizational and accounting practices

• Original intention for all CCDR forms to have a standardized set of Government functional categories:• “By use of the standard definitions and common data base of CCDR, it will be possible to evaluate contractor

performance consistent with proposal data both in terms of a contractor’s own performance or proposed activity and against the activity of other contractors. This is especially true in the area of overhead costs which now account for over half of contract costs…. CCDR provides a basis for assessment of a contractor’s overhead cost status… in the context of the overall incurrence posture rather than just expressed as a non-specific rate of some base.”

• The CCDR has had no significant changes since 1973 until today• FlexFile as the update to 1921, -1, -2• Current effort seeks to update the 1921-3

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Theory and Reality of Today’s 1921-3Improving the 1921-3 Contractor Business Data Report

THEORY• If both proposal and actual costs for

contracts are provided in 1921-1 format, then the 1921-3 allows for consistent analyses of the business base and effects on overhead rates

• Standard gov’t functional categories in 1921-1 and 1921-3 allows for cross-contractor comparisons

• Aids in source selection, performance measurement, and so forth

REALITY• Contract proposal data are not generally analyzed in

1921-1 Government categories• More often in contractor categories that align with

Forward Pricing Rates (FPRs)• Contractor categories do not have a simple cross-walk

to 1921-1 Gov’t categories• Challenging to normalize

• Each contractor defines direct/indirect differently and interprets the binning to Gov’t categories differently

• Even today, cross-contractor comparisons are not valid without a deep dive into how the data were binned

• For example, using disclosure statements• Cost analysts have expressed a preference for

contractor categories that align with FPRs• 1921-3 Gov’t categories can obfuscate important

business base info• For example, the 1921-3 aggregates over separate

bases/pools representing different locations

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ImpactImproving the 1921-3 Contractor Business Data Report

• Today’s 1921-3 can lead to errors in cost estimates• Inconsistencies between contractors• Inconsistencies within a contractor over time

• Individual analyst interpretation• Accounting and organizational changes

• Government format creates a disconnect between the 1921-3 and the broader acquisition practices performed in contractor format

• Does not line up with proposals, negotiations, and Forward Pricing Rates, and so forth

• Limited use of 1921-3 by cost analysts• Does not mean business base data is not valuable

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Format Comparison: 1921-1 vs. 1921-3Improving the 1921-3 Contractor Business Data Report

Materials

Program Name

aA/F

Contract Number

b

Equivalent Units

c

Buyerd

Workerse

Dollarsf

Hoursg

Workersh

Dollarsi

Hoursj

Dollarsk

Workersl

Dollarsm

Hoursn

6.7.8.9.10.11. Other DoD Effort12. Other Government Effort13. Commercial Effort14. Total Direct Cost and Hours Base a. Total Direct Workers

Materials

Workerso

Dollarsp

Hoursq

Workersr

Dollarss

Hourst

Dollarsu

Workersv

Dollarsw

Hoursx

Dollarsy

Hoursz

30. G&A Rate/(Direct + Indirect)

24. Future Business25. Other Miscellaneous26. Credits27. Total Indirect Cost and Hours28. Total G&A Cost and Hours29. Indirect/Direct Cost Rate

23. Administration

SECTION B

INDIRECT COST CATEGORY

INDIRECT: COST / HOURS / MANPOWER

Engineering Manufacturing Operations Other G&A

15. Indirect Labor16. Employee Benefits17. Payroll Taxes18. Employment19. Communication/Travel20. Production Related21. Facilities-Building/Land22. Facilities-Furniture/Equipment

SECTION A

DIRECT COST BY PROGRAMDIRECT: COST / HOURS / MANPOWER

Engineering Manufacturing Operations Other

ENGINEERING (1) DIRECT ENGINEERING LABOR HOURS (2) DIRECT ENGINEERING LABOR DOLLARS (3) ENGINEERING OVERHEAD DOLLARS (4) TOTAL ENGINEERING DOLLARSMANUFACTURING OPERATIONS (5) DIRECT TOOLING LABOR HOURS (6) DIRECT TOOLING LABOR DOLLARS (7) DIRECT TOOLING & EQUIPMENT DOLLARS (8) DIRECT QUALITY CONTROL LABOR HOURS (9) DIRECT QUALITY CONTROL LABOR DOLLARS (10) DIRECT MANUFACTURING LABOR HOURS (11) DIRECT MANUFACTURING LABOR DOLLARS (12) MANUFACTURING OPERATIONS OVERHEAD DOLLARS (Including Tooling and Quality Control) (13) TOTAL MANUFACTURING OPERATIONS DOLLARS (Sum of rows 6, 7, 9, 11, and 12)MATERIALS (14) RAW MATERIAL DOLLARS (15) PURCHASED PARTS DOLLARS (16) PURCHASED EQUIPMENT DOLLARS (17) MATERIAL HANDLING/OVERHEAD DOLLARS (18) TOTAL DIRECT-REPORTING SUBCONTRACTOR DOLLARS (19) TOTAL MATERIAL DOLLARSOTHER COSTS (20) OTHER COSTS NOT SHOWN ELSEWHERE (Specify in Remarks)SUMMARY (21) TOTAL COST (Direct and Overhead)

F.TOTALFUNCTIONAL DATA ELEMENTS

COSTS AND HOURS INCURRED TO DATE COSTS AND HOURS INCURRED AT COMPLETION

A. NONRECURRING B. RECURRING C. TOTAL D. NONRECURRING E. RECURRING

The 1921-3 functional categories (right) are intended to align with the 1921-1 categories (below)• Engineering; Manufacturing Ops; Materials; Other

Potential inconsistencies of relating 1921-1 to 1921-3:• A program reflected in 1921-1 is manufactured at Location X,

but the 1921-3 Manufacturing (mfg.) functional category aggregates over separate bases/pools for different locations

• For 1921-1, engineers supporting mfg. may be manually tagged to mfg., but 1921-3 data will not be manually segregated in the same way

Current 1921-1

Current 1921-3

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• 1921-3 includes work scope not captured by 1921-1, and if significantly different in content or location, it may misalign

• Report as of dates may not align, and is especially hard to relate without time-phasing of cost/hours

Engr Mfg 1 Mfg 2 Mfg 3 MM Mat'l ODC G&ADirect costBy program/contractTotal Direct BaseTotal G&A Base

Indirect CostIndirect LaborIndirect FringeTravel, Taxes, & Insurance Depreciation & AmortizationNew Business FundsCorporate OfficeFacilities CostAdmininstrative ServicesComputingOther

TL Indirect Cost and Hrs Indirect/Direct Cost Rate FPR OH Rates

hrs and $

Engr Mfg Prog Supt Mat'l Other G&ADirect costBy program/contractTotal Direct BaseTotal G&A Base

Indirect CostIndirect LaborIndirect FringeInternal Categories..Home OfficeShared Service GroupsEO&T

TL Indirect Cost and Hrs Indirect/Direct Cost Rate

hrs and $Separate OH for each Location

FPR OH Rates

Format Comparison: 1921-3 vs. Contractor Format (FPRR/FPRP/FPRA)Improving the 1921-3 Contractor Business Data Report

Engr Mfg Ops Mat'l Other G&ADirect costBy program/contractTotal Direct BaseTotal G&A Base

Indirect Cost15. Indirect Labor16. Employee Benefits17. Payroll Taxes18. Employment19. Communication/Travel20. Production Related21. Facilities-Building/Land22. Facilities-Furniture/Equip23. Administration24. Future Business25. Other Miscellaneous26. Credits27. TL Indirect Cost and Hrs29. Indirect/Direct Cost Rate

hrs and $

May or may not = FPR rates

Gov’t 1921-3 Format Example Contractor A Example Contractor B

Problem: bucketing to gov’t categories ambiguous and different for each contractor;

probably cannot be used to compare to FlexFile.

Engr Supt (AAF, IDX, PSD), Mechanical , Design (PPO, PPK, PPN…)

Touch (TEC, TRE, TWD, TSD, TPS, TPC, TPV,…)

Program support

Product Engr, Customer Supt

Mfg and Field Ops, Plant Engr, Mod and Test, QA, Mat'l Inventory Control

Matl Mgt BuyersProgram Office, Services, Admin

Benefit: insight into business base by location

Problem: one CTR’s direct is another’s

indirect (e.g., foremen at CTR A are indirect)

Benefit: direct mapping from contractor categories;

1921-3 may provide mappings for FlexFile

Benefit: lines up with FPRs so gov’t cost analyst is talking the contractor’s language

Problem: rates from gov’t categories may not line up with FPRs – cannot be

applied to pricing proposals

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Potential inconsistencies of using the Government 1921-3 Format: 1) 1921-3 categories may aggregate over several different bases/pools; 2) may not have consistent mappings to gov’t standard over time due to ambiguous categories such as SEPM and material buyers; 3) illusion of comparability –difficult to compare across contractor without detailed accounting disclosure statements and extensive normalization

FlexFile

FlexFile TouchpointsImproving the 1921-3 Contractor Business Data Report

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1921-1

FPRR/FPRP/FPRA 1921-3

Contractor Format Std. Government Format

Functional Cost Breakout on a Contract

Overhead Pools/Rates for a Business Unit

The FlexFile provides both contractor and government functional categories,

allowing us to update the 1921-3 to contractor format without losing the cross-

walk with detailed FlexFile contract data

The FlexFile provides both contractor and government

functional categories, allowing us to utilize and update legacy

parametric models

Major inconsistencies may result from relating contract-level

and/or business unit-level costs using the government format

Ultimate Goal: Integrate cost and contract processesImproving the 1921-3 Contractor Business Data Report

• 1921-3 is part of a broader effort seeking to tie the cost and contracting communities

• The CCDR was initially required for all contract proposals as well as actuals

• Never found acceptance as basis of negotiating contract proposals

• The first among Cost Accounting Standards (CAS) started in 1970 is “Consistency in Estimating, Accumulating and Reporting Costs”

• Nearly 50 year later, we still cannot readily trace line items in the proposal to line items in actual cost reports (in either CSDR or EVMS)

• FlexFile and 1921-3 together will tie cost actuals to the contracting process

• FlexFile (for direct cost analysis) will include CLIN as well as rates structures consistent with FPR

• 1921-3 (for overhead cost analysis) will include be based on those same rate structures consistent with the FPR

• Bottom line: This update will not only improve cost estimating, but the entire defense acquisition process 11

PRICING RATESDCMA negotiates rates/factors for

contract proposals according to audited bases/pools for each

major contractor

SOURCE SELECTIONContracting officers solicit and receive proposals by CLIN

consistent with DCMA rates/factors

COST ANALYSISEVMS and CSDR actual costs reports are often not reported by CLIN,

and they do not report accruals to the DCMA negotiated categories

AUDITINGDCAA audits Cost

Accounting Standards as part of overall

surveillance of contractor accounting practices and DCMA audits EVMS, but not

CSDR

Current 1921-3 only supports cost analysis

Updated 1921-3 is consistent with the full

business life-cycle

DiscussionImproving the 1921-3 Contractor Business Data Report

• Support from contracting community is critical• Submission per FPRA – DCARC will not know when these occur, may be irregular• DCMA representative ensures that FlexFile contractor functional categories have consistent

traceability to FPR categories reflected in FPR/1921-3• DCAA enforcing compliance through audits

• Types of supplemental information that may be required• Existing requirements

• Narrative of accounting and organizational changes and other remarks• Time-phased Direct and Indirect rates• Capacity• Quantity assumptions by program

• New requirements• Cross-walk from FPR categories to CAGE codes• Accounting disclosure statement (regularly submitted with EVMS)• Cross-walk from FPR categories to FlexFile contractor functional categories• Rate application methodology (particularly materials)

• Business process for 1921-3 submissions• Excel template form (e.g., as shown on last slide)• Electronic exchange (e.g., JSON like FlexFile)

• NDAA issues relative to ability to collect commercial data• Should we keep 1921-3 in gov’t format until fully switched over to FlexFiles? 13

DRAFT 1921-3 Submissions for 2018Improving the 1921-3 Contractor Business Data Report

• Contractors with the 1921-3 requirement will be allowed to submit to the DRAFT 1921-3 requirements• Waiver memo signed by Deputy Director, Cost Assessment• No structured format to fill out

• “Sample Format” is available• Must report required information outlined in the DRAFT 1921-3 Data Item Description (DID)• See webpage below for additional details for reporting to the DRAFT 1921-3

• http://www.cade.osd.mil/policy/1921-3

• Contractors may elect to report to the existing 1921-3• Must report in the DD FORM 1921-3 format• Must follow existing 1921-3 DID requirements• See webpage below for additional details for reporting to the existing 1921-3

• http://www.cade.osd.mil/policy/DIDs

• Contractors are encouraged to:• Evaluate submitting to the DRAFT 1921-3, according to contractor’s own rate structure and own format• Reach out to the Defense Cost and Resources Center (DCARC) if any questions of difficulties arise• Inform their points of contract at the Defense Contract Management Agency, particularly the Divisional

Administrative Contracting Officer (DACO), of their 1921-3 requirements and reports

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Points of ContactImproving the 1921-3 Contractor Business Data Report

1921-3 Working Group Leads:Marvin Charles, Air Force Cost Analysis Agency (AFCAA)

Michael Biver, OSD Cost Assessment & Program Evaluation (CAPE)

1921-3 Support :Eric Lofgren, Cost Assessment Data Enterprise (CADE)

eric.m.lofgren.ctr@mail.mil(571) 256-9972

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