Page images
PDF
EPUB

Location

TABLE 7. COST FOR STATION SUPPORT TO VEHICLE MAINTENANCE USERS

[blocks in formation]
[blocks in formation]

Source: Appendix F, table F-7.

activities result from the favorable support characteristics of the COPARS and other functional support contracts (discussed in Chapter 4).

Facility Maintenance

For five using locations, we estimated the cost of providing support to civil engineer or facility maintenance activities. The systems and procedures varied between activities. The five cost estimates 12 are summarized in table 8.

Table 8 shows that:

• There appears to be no consistent relationship of value of parts used to support cost. The average costs of station support to facility maintenance users ranged from $10 to $63 per $100 of products used.

• The cost of meeting user needs is substantial. The average cost for station support of facility maintenance users was $48 per $100 of product used.

12 Ibid.

• The lowest cost station support program for facility maintenance was $10 per $100 used. This program was a 100-percent contractor operated civil engineer supply store (COCESS) support activity that operates on a concept similar to COPARS. Its favorable cost is due to the desirable support characteristics previously discussed for COPARS.

In facility maintenance support, the delivery of requirements through a Government source was more costly than delivery through local vendors. The lower cost of local vendor support is due primarily to the fact that the products obtained were not stocked by the using activity. Facility maintenance is an excellent example of a program that can be supported in several different ways. The best method of support could be selected by item or by families of items forming a logical product group. The economies of various combinations must be evaluated. These vary from 100-percent dependence on local vendors to 100-percent dependence on mandatory Government sources. The decisions for structuring a support program must be tailored to the using activity being supported.

TABLE 8. COST FOR STATION SUPPORT TO FACILITY MAINTENANCE USERS

[blocks in formation]

Commissary Operations

We estimated the cost 13 of support for commissary operations in six locations. This included support for nonperishable subsistence items to six food service or mess hall operations and two resale stores. The cost analyses did not include costs of food service or store personnel involved in receipt or requirements development. Commissary resale operations often were specially organized and did not use regular supply operations. Also, the resale operations personnel were authorized to place orders with vendors against indefinite delivery contracts. The cost analyses of these support activities are presented in table 9.

The estimated cost of using-activity support for food service operations ranged from $8 to $31 per $100 of food handled, and the average cost was $16. These costs are considerably higher than those incurred at station level in ordering and handling food for resale. Lower support costs for resale operations are mainly due to higher volume procurement.

GSA Retail Stores

The GSA retail stores provided by FSS in major Federal office building complexes offer direct retail services to using activities. In these self-service stores, users select their needs from stocked shelves. A credit card is used to

13 Ibid.

Food service location

1

2

3

4

5

6

identify authorized requisitioners and to bill using activities.

Personnel from outlying offices, some a hundred or more miles away, also obtain supplies from these stores. It is difficult to ascertain how many trips are made just to pick up supplies because many people periodically visit agency offices in Federal centers and pick up supplies at that time.

The cost of the GSA self-service stores is $14 per $100 of support as shown in Appendix F, table F-2. This cost does not include space costs or any costs associated with the requiring activity. The cost of acquiring office supplies through the use of GSA retail stores should be considered in determining the most cost-effective method of office supply support.

Station Support Characteristics

Many activities are large enough to have specialized procurement and supply functions while in others these functions are part of the duties of user activities. Station support costs for product lines analyzed varied widely but typically are in the range of $10 to $63 for each $100 purchased.

The development of interagency and agency support systems over a period of years is impressive. Computerized systems and other management tools have been developed and implemented; automatic processing and transmission systems have reduced the cost of

[blocks in formation]

Total

Resale store

location

1

$5,059,000

$152,000

$3

[blocks in formation]

individual transactions and provided capability for national inventory control; and new systems currently are being implemented to automate operations under such systems as the DSA managed programs and the standard military logistics data systems.14

In contrast, the development of systems for station-level support have received far less emphasis. We found no station-level inventory control system that has been programmed to produce delivery orders under national or local requirements contracts.15 Exceptions are the systems at the station that interact with agency and interagency support systems.

Station-level support provided directly from nongovernment sources involves procurement from vendors, while interagency support involves internal Government operations only. System development for interagency-level transactions is therefore simpler because the restrictions in procurement from vendors are excluded. Prescribed supply and procurement concepts at this level have inhibited the development of responsive, efficient station-level systems. As a result, local acquisition costs have been higher than necessary in many instances.

The cost of station-level support varies. The characteristics of the using activities, the different organizations and techniques used, and the functional activities and product groups involved contribute to this variance.

The cost of the station-level support component is comparable to interagency support costs.

There has been a lack of emphasis in developing more efficient and cost-effective station-level support systems. This appears to be an unexploited opportunity for cost reduction.

LANDED COST

Landed cost, as previously defined, is the total cost to provide an item to its user. Landed cost includes the purchase price plus support system costs. These two cost elements generally have an inverse relationship. Consolidation of requirements in the interagency and agency stock support systems permits more favorable prices, but it also increases the costs of providing the product to the user.

[merged small][merged small][merged small][merged small][merged small][merged small][merged small][ocr errors][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small]

Vehicle Fleet Maintenance Costs

The support portion of landed cost for vehicle fleet maintenance shown in figure 2 is based on the data previously presented. In each case shown, the purchase price equals $100 worth of supplies.

The sample data in figure 2 show that the most costly systems are those that use elements of interagency support. The lowest cost system, the contractor operated parts store (COPARS), eliminates both the supply and procurement functions for item-by-item actions.

We priced a number of requirements taken from work orders of one installation. The sample totaled 122 items that were procured locally, primarily on a competitive, small purchase basis. The same or equivalent items were priced under a COPARS contract and under the Federal Supply Schedules and regional term contracts (RTC) used to support the Army in Region 10 of the Federal Supply Service (FSS) procurement office. It was not

[blocks in formation]

possible to identify each item procured to an equivalent item under the FSS program. The results are in table 10 (prices are stated in terms of an index, with the small purchase prices being 100).

Compared with competitive small purchase prices for the same or equivalent vehicle parts: • On 122 items, COPARS prices were 13 percent lower even though the COPARS operation included two full-time contractor personnel to run and manage the "store" at the base.

• On 48 items, FSS regional term contract prices were 23 percent lower and COPARS prices were 15 percent lower.

• On 20 items, Federal Supply Schedule prices were 30 percent lower and COPARS prices were 6 percent lower.

The price savings of interagency schedule and term contracts are significant. However, the COPARS and local vendor support systems we examined were more responsive, and the price savings of the interagency contracts would not have offset other support-system costs. In addition, costs associated with workforce productivity and vehicle availability ultimately must be considered.

Federal Supply Schedule contracts that provide for shipment from manufacturers' warehouses to the user cause problems involving timeliness, correct identification, and communiIcation of the need. These problems are minimized when Federal Supply Schedule contracts provide for local delivery through a dealer distribution system. Under these circumstances, daily delivery or pickup usually is possible and the user can order the item needed from the supplier by telephone. While unit prices paid to dealers may be higher than those paid directly to the manufacturer, landed costs are usually more favorable and local small businesses can participate.

To summarize, with the various fleet-maintenance requirements and using-activity support programs, there is no one best acquisition system to meet everyone's needs. Exploring alternatives and weighing cost-benefit possibilities will provide a basis for structuring an economical, effective support program to fit specific needs.

[graphic]

Facility Maintenance Costs

Using data developed in a manner similar to that used in the vehicle maintenance analysis, figure 3 shows the relationship of support cost

[blocks in formation]

to purchase price ($100) under various procurement systems.

Support costs are usually higher when items are obtained from interagency stocks than when they are obtained from a local vendor or contractor operated civil engineering supply store (COCESS). This is because of the high cost of maintaining Government stocks. In the case of the COCESS, supply and procurement (by item) are bypassed, and stock support is provided directly by the vendor.

The discount from retail prices, at one of the military installations we visited where a functional support contract was being used, varied from 10 to 30 percent.16 This discount depends on the scope of the contract and the number of items excluded due to mandatory sources of supply. Excluded items are generally of high volume and quick turnover. When fastmoving items are furnished by a mandatory supply system, local vendors are left to supply slowmoving items and therefore must increase their prices. Split supply sources also require costly manual screening of all items as requirements are generated.

The pattern of cost relationships for facility maintenance as shown in figure 3 is similar to that shown for vehicle maintenance in figure 2.

16 Procurement Division, Castle Air Force Base, Merced, California. Contract FO 4604-71-C-0166, Aug. 18, 1970.

SUPPORT COSTS

FACILITY MAINTENANCE

(PER $100 WORTH OF SUPPLIES)

Food Procurement

We used a different approach to determine the landed cost of food products acquired for military dining halls. The estimated cost of the acquisition process was determined by taking the purchase price for a product, adding the cost of rail transportation to first destination based on Government rates, and applying the cumulative amounts of separate markup factors of interagency and usingactivity support costs as developed from the data in Appendix F. All cost factors were adjusted so that the same basis was used throughout. The interagency factor was adjusted to remove first destination transportation charges. Items used were selected from the 50 highest dollar volume products.

The six activities selected did not obtain a significant portion of their standard nonperishable subsistence from local vendors. To develop a local vendor alternative, we contacted vendors and obtained prices on the basis of delivery to the kitchen storeroom. Vendor prices were based on specifications for the same set of standard institutional food items for which estimates of Government landed cost were developed. The results are summarized in table 11, based on an index set at 100 for the FOB origin price.

[blocks in formation]

$155

Location

[blocks in formation]
[blocks in formation]
[graphic]

В

150

118

157

124

E

F

163

124

[blocks in formation]

SUPPORT SYSTEM COSTS

Calculated from data presented in Appendix F, Tables F-2, 4, 5, and 8; based on cost per $100 sold with obsolescence.

Figure 3

Source: Study Group 13A, Final Report, vol. II, table 4, p. 766.

The average difference between the estimated Government and commercial landed costs is $28 per $100 in favor of commercial vendor delivery. We were told that the Government's pricing advantage in nonperishable subsistence was not extensive and that the institutional food distribution industry will serve volume customers on a delivered basis regularly on a margin of from 12 to 14 percent.

« PreviousContinue »