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How to Conduct a Supplier Risk Assessment

Pat Jacklets, CPPM CF

Pam McFarland, CPPM CF

“Risky Business”

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Objectives

• Share ILP for Supplier Risk Assessments

• Develop the risk assessment questions

• Place values on the risk assessment questions

• Complete the risk assessment tool

• Identify limited and full surveys

• Prepare Schedule

 

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What Do You Know?Who your suppliers are?

Where they are located?Are they common to other sites/entities in your company?

The number of line items and the dollar value of that property?

What contracts are involved?

What agencies? DoD? NASA? DHS? DOT?

Any delegations?

History of Supplier:Responsiveness? Losses? Inventory Results?

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What is the Requirement?

FAR 52.245(f)(i)(v) Subcontractor control. (A) The Contractor shall award subcontracts that clearly identify assets to be provided and shall ensure appropriate flow down of contract terms and conditions (e.g., extent of liability for loss, damage, destruction or theft of Government property). (B) The Contractor shall assure its subcontracts are properly administered and reviews are periodically performed to determine the adequacy of the subcontractor’s property management system.

What Risks Do You Want to Address?

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Develop the Risk Assessment Questions•Does the subcontractor have documented evidence of an adequate Government Property System? If so, has the system received an adequate rating within the last 2 years?

•Is the supplier responsive to requests for reports, and are the reports deemed accurate?

•Is the value of government property reported on the previous years report in excess of $500,000 and 50 items?

•Has the subcontractor subcontracted with a lower tier supplier and provided assigned government-owned property? If so, is the subcontractor ensuring the lower tier subcontractor is complying with contractual requirements?

•During the previous year, has the subcontractor reported ANY Losses?

•Did the subcontractor respond to a request for a limited desk survey?

•Is the supplier reporting excess property in a timely manner? Are the disposition instructions completed in a timely manner?

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How Do I Assign Values?

Determine which questions are the riskiest!

For instance: If supplier does not have an adequate Property Management System or if they have never had a Government contract, they would represent a high risk. Assign the highest points to that situation

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Assign Points to Risk Assessment Questions

•Does the subcontractor have documented evidence of an adequate Government Property System? If so, has the system received an adequate rating within the last 2 years?

(1) Yes (2)Yes/CA (3) No

•Is the supplier responsive to requests for reports, and are the reports deemed accurate?(1) Yes (2)Yes/CA (3) No

•Is the value of government property reported on the previous years report in excess of $500,000 and 50 items?

(2) Yes (0) No

•Has the subcontractor subcontracted with a lower tier supplier and provided assigned government-owned property? If so, is the subcontractor ensuring the lower tier subk is complying with contractual requirements?

(1) Yes/Yes (3)Yes/No (0) No (2) unknown

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Assign Points to Risk Assessment Questions

•During the previous year, has the subcontractor reported ANY losses?Assign 0, or 1 point (non significant); 3 points fairly significant; 5 points alarming problem

•Did the subcontractor respond to a request for a limited desk survey?(0) Yes (1) Yes with "Go Backs" (3) No

•Is the supplier reporting excess property in a timely manner? Are the disposition instructions completed in a timely manner?

(0) Yes/Yes (1)Yes/No (3) No/No

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EXAMPLE of DoD Risk Assessment QuestionsWeight Risk Criterion Definition

Positive Response

Negative Response

6 Adequate Gov't Property Sys.

Does the subcontractor have documented evidence of an adequate Government Property System?  If so, has the system received an adequate rating within the last 2 years?

0 6

5 UID Compliant Is the subcontractor UID compliant, if applicable? 0 5

4 Value of Government Property

Is the value of government property reported on the previous years financial report in excess of $1,000,000?

4 0

3 Lower Tier Subcontractors

Has the subcontractor subcontracted with a lower tier subcontractor and provided assigned government-owned property?  If so, is the subcontractor ensuring the lower tier subk is complying with contractual requirements?

1 3

2 Loss, Damage, Destroyed or Theft Reports

During the previous year, has the subk reported ANY LDDT? (Assign 1 point per report for possible total of 5)

0 1-5

1 Desk Surveillance Assessment Responses

Did the subcontractor respond to a request for a limited desk survey? 0 1

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Weight Risk Criterion DefinitionPositive

ResponseNegative Response

Understanding the Columns

Weight: The factor applied to a risk criterion – the higher the number, the more important the risk

Risk Criterion/Definition: The risks you have identified and what it means

Positive Response: Points assigned for a positive response

Negative Response: Points assigned for a negative response

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EXAMPLE of NASA Risk Assessment QuestionsWeight Risk Criterion Definition

Positive Response

Negative Response

6 Adequate Gov't Property Sys.Does the subcontractor have documented evidence of an adequate Government Property System?  If so, has the system received an adequate rating within the last 2 years?

0 6

5 NFS 1845.7101-3 Compliance

Is the subcontractor reflecting unit acquisition costs to include all costs incurred to bring the property to a form and location suitable for its intended use?  Adding fee?

0 5

4 Value of Government PropertyIs the value of government property reported on the previous years financial report in excess of $1,000,000?

4 0

3 Lower Tier Subcontractors

Has the subcontractor subcontracted with a lower tier subcontractor and provided assigned government-owned property?  If so, is the subcontractor ensuring the lower tier subk is complying with contractual requirements?

1 3

2 Loss, Damage, Destroyed or Theft Reports

During the previous year, has the subk reported ANY LDDT? (Assign 1 point per report for possible total of 5)

0 1-5

1 Desk Surveillance Assessment Responses

Did the subcontractor respond to a request for a limited desk survey? 0 1

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Prepare Subcontractor List

Owning Div

Proposed Auditors

Del PAPO/ POSupplier

CodeSupplier Name Address City State Zip Total L/I TOTAL $

Division A     2734382 459448Company A PO Box 123 Any City KY 40066 2 $12,015

Division B       869942Company B PO Box 124 Any City NY 11757 21 $11,930

Division B     7600002798 90008074Company C PO Box 125 Any City NY 11552 651 $330,739

Division A     726552 90011295Company E PO Box 126 Any City CA 95838-1701 55 $1,197,445

Division A     477035 90011316Company F PO Box 127 Any City FL 33777 79 $681,418

Division A   D 74243 90024430Company G PO Box 128 Any City NC 27896 83 $512,818

Division A       90056619Company H PO Box 129 Any City CA 91016 6 $24,989

Division B     74190, 288077 90021975Company I PO Box 130 Any City CA 90245-3507 1622 $94,617,665

Division C     7600003819 90022028Company J PO Box 131 Any City CA 90278 14 $147,794

Division A   D7600003315, 7600003118 90013817Company K PO Box 132 Any City CO 80301 1886 $40,080,279

Division C     2699674 90024605Company L PO Box 133 Any City NY 11716 744 $257,545

Division A   D 74199 90027816Company M PO Box 134 Any City CO 80127-1762 95 $3,318,052

Division C   D7600003129, 7600003306 90027944Company N PO Box 135 Any City CA 90245 1443 $25,700,088

Division C   D7600002744, 7600004432 90027944Company O PO Box 136 Any City CO 80011 1536 $37,787,527

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Supplier Risk Assessment

Sample Supplier Risk Assessment

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Metrics

Subcontract Management Metrics

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ILPs for Subcontract Property Control

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How Do I Access the AIA Website?

http://www.aia-aerospace.org/resource_center/resources/property_management_etools/

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QUESTIONS?