“Risky Business”

How to Conduct a Supplier Risk

Assessment

Pat Jacklets, CPPM CF

Pam McFarland, CPPM CF

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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 Questions

Positive Negative
Weight Risk Criterion Definition Response Response

Does the subcontractor have documented evidence

Adequate Gov't Property
6 of an adequate Government Property System? If 0 6
Sys.
so, has the system received an adequate rating
within the last 2 years?

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

Is the value of government property reported on

Value of Government
4 the previous years financial report in excess of 4 0
Property
$1,000,000?
Has the subcontractor subcontracted with a lower
tier subcontractor and provided assigned
3 Lower Tier Subcontractors government-owned property? If so, is the 1 3
subcontractor ensuring the lower tier subk is
complying with contractual requirements?
During the previous year, has the subk reported
Loss, Damage, Destroyed or
2 ANY LDDT? (Assign 1 point per report for possible 0 1-5
Theft Reports
total of 5)
Desk Surveillance Did the subcontractor respond to a request for a
1 0 1
Assessment Responses limited desk survey?

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 Understanding the Columns
Positive Negative
Weight Risk Criterion Definition Response Response

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 Questions

Weight Risk Criterion
6 Adequate Gov't Property Sys.
5 NFS 1845.7101-3 Compliance
4 Value of Government Property
3 Lower Tier Subcontractors
Loss, Damage, Destroyed or
2 ANY LDDT? (Assign 1 point per report for possible
Theft Reports
Desk Surveillance Assessment
1 0
Responses
Positive Negative
Definition Response Response
Does the subcontractor have documented
evidence of an adequate Government Property 0 6
System? If so, has the system received an
adequate rating within the last 2 years?
Is the subcontractor reflecting unit acquisition
costs to include all costs incurred to bring the
0 5
property to a form and location suitable for its
intended use? Adding fee?
Is the value of government property reported on
the previous years financial report in excess of 4 0
$1,000,000?
Has the subcontractor subcontracted with a lower
tier subcontractor and provided assigned
government-owned property? If so, is the 1 3
subcontractor ensuring the lower tier subk is
complying with contractual requirements?
During the previous year, has the subk reported
0 1-5
total of 5)
Did the subcontractor respond to a request for a
1
limited desk survey?

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 Prepare Subcontractor List

Owning Proposed Supplier

Del PAPO/ PO Supplier Name Address City State Zip Total L/I TOTAL $
Div Auditors Code

Division A     2734382 459448 Company A PO Box 123 Any City KY 40066 2 $12,015
Division B       869942 Company B PO Box 124 Any City NY 11757 21 $11,930
Division B     7600002798 90008074 Company C PO Box 125 Any City NY 11552 651 $330,739
Division A     726552 90011295 Company E PO Box 126 Any City CA 95838-1701 55 $1,197,445
Division A     477035 90011316 Company F PO Box 127 Any City FL 33777 79 $681,418
Division A   D 74243 90024430 Company G PO Box 128 Any City NC 27896 83 $512,818
Division A       90056619 Company H PO Box 129 Any City CA 91016 6 $24,989
Division B     74190, 288077 90021975 Company I PO Box 130 Any City CA 90245-3507 1622 $94,617,665
Division C     7600003819 90022028 Company J PO Box 131 Any City CA 90278 14 $147,794
7600003315,
Division A   D 7600003118 90013817 Company K PO Box 132 Any City CO 80301 1886 $40,080,279
Division C     2699674 90024605 Company L PO Box 133 Any City NY 11716 744 $257,545
Division A   D 74199 90027816 Company M PO Box 134 Any City CO 80127-1762 95 $3,318,052
7600003129,
Division C   D 7600003306 90027944 Company N PO Box 135 Any City CA 90245 1443 $25,700,088
7600002744,
Division C   D 7600004432 90027944 Company 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?

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