**Office of Federal Procurement Policy**

**Pamphlet Number 4**

**Supplement No. 2 to OMB Circular No. A-76**

**A Guide for Writing and Administering Performance Statements of Work
for Service Contracts**

### Chapter 1  General and Introduction

#### 

#### 1-1. \-- New Role of Contractors.

Each year the government contracts for a large part of its mission
support. As a result, civilian contractors have assumed a major role in
day-to-day operations in the area of services. Contractors do such work
as transportation, refuse collection, food services, and janitorial
services. At some places they provide an entire support function,
including engineering and supply.

a\. Whenever the government contracts out a job, it is entitled to
receive quality service. So that the government can define and measure
quality, this document presents a method of identifying and stating
requirements in such a way that the statement of work (SOW) will state
accurately our minimum requirements. It also explains how to assure that
the contractor has actually performed the services required.

b\. This document is also designed to show non-contracting personnel how
to write a SOW and a Quality Assurance (QA) surveillance plan for
service contracts. It explains how contract administration personnel
should take action based on surveillance results. (The example used is a
service contract for vehicle operations and maintenance but, the method
can be used for other service contracts, including total support
contracts.

#### 1-2. \-- Terms Explained.

Following are terms used frequently in this document.

a\. **Acceptable Quality Level***.* The maximum percent defective, the
maximum number of defects per hundred units, or the number of defects in
a lot that can be considered satisfactory on the average. The allowable
leeway or variance from a standard before the government will reject the
specific service. And AQL does not say that the contractor may knowingly
offer defective service. It implies that the government recognizes that
defective performance sometimes happens unintentionally. As long as the
percent of defective performance does not exceed the AQL, the service
will not be rejected by the government. The contractor, however, must
reperform the defective service when possible.

b\. **Acceptable Sampling***.* A form of sampling used to determine a
course of action. A procedure that gives a specified risk of accepting
lots of given quality.

c\. **Activity***.* Another name for a work process. (An activity uses
inputs and generates outputs).

d\. **Administer***.* That stage of the contracting cycle in which the
contracting officer insures that the total contract is being followed,
makes necessary changes to the contract, and insures progress toward
contract completion.

e\. **Analyst***.* A non-Contracting person charged with developing a
SOW and a QA surveillance plan; also, the person who analyzes a function
to develop the required documents.

f\. **Attribute***.* The property a unit has of being either bad or
good. That is, the quality characteristic of a unit is either within the
specified requirement or it is not.

g\. **Attribute Sampling***.* A form of acceptance sampling that grades
a service as defective or non-defective.

h\. **Buy***.* That stage of the contracting cycle in which the customer
state what he or she wants contracted. This stage includes funding the
requirement, writing the SOW and writing the surveillance plan.

i\. **Define***.* That stage of the contracting cycle in which the
customer states what he or she wants contracted. This stage includes
funding the requirement, writing the SOW and writing the surveillance
plan.

j\. **Input***.* Anything put into a system or process or expended in
its operation to achieve a result or output.

k\. **Interface***.* A common boundary between two organizations or
activities.

l\. **Job Analysis***.* The act of looking at a job as it is being done
in-house or a contractor to determine what actually results. Job
analysis looks at organization, workload, performance values, and
resources.

m\. **Lot***.* A collection of service outputs from which a sample is to
be drawn and inspected to determine conformance with the standard.

n\. **Lot Size***.* The number of service outputs in a lot.

o\. **Organizational Analysis***.* The act of looking at an organization
to determine what kind of services it provides.

p\. **Output***.* The amount of something produced by a system or
process during a given span of time.

q\. **Percent of Sample Found Defective***.* Determined by dividing the
number of defects by the sample size when the reject number has been
equaled or exceeded. The resulting number is used to make an equitable
deduction from the contract price for non-performance by the contractor.

r\. **Performance Indicator***.* A characteristic of an output of a work
process that can be measured.

s\. **Performance Value***.* A composite of a standard and an acceptable
quality level which describes the quality of an output of a work
process.

t\. **Qualify***.* That stage of the contracting cycle in which one
determines that the contractor's work satisfies the requirements of the
SOW.

u\. **Quality Assurance***.* Those actions taken by the government to
check goods or services to determine that they meet the requirements of
the SOW.

v\. **Quality Assurance Evaluator (QAE).** That person responsible for
checking contractor performance.

w\. **Quality Control***.* Those actions taken by a contractor to
control the production of goods or services so that they will meet the
requirements of the SOW.

x\. **Random Number Table***.* A table of numbers arranged in a random
fashion. A table used to make random samples.

y\. **Random Sample***.* A sampling method whereby each service output
in a lot

z\. **Random Sampling***.* A method of looking at a few individual items
in a lot to determine the quality of that lot against a standard.

aa. **Release***.* That stage of the contracting cycle in which goods
and services are accepted as meeting contract requirements and payment
is made to the contractor.

ab. **Reliable Service***.* A service that is dependable and is provided
when required.

ac. **Sample***.* A sample consists of one or more service outputs drawn
from a lot, the outputs being chosen at random. The number of outputs in
the sample is the sample size.

ad. **Sampling Guide***.* The part of the surveillance plan which
contains all the information needed to perform a random sample.

ae. **Sampling Plan***.* A plan which indicates that AQL, the number of
units from each lot which are to be inspected (sample size) and the
criteria for determining the acceptability of the lot (acceptance and
rejection numbers). Used to develop the sampling guide.

af. **Service.** A job performed to the standard and within the
acceptable quality level. The contractor must do the specific job, and
meet the standard, and meet the acceptable quality level before one can
say that performance has been acceptable and that he/she should be paid.

ag. **Source***.* That stage of the contracting cycle in which the
contracting office prepares the bid package, finds potential contractors
to do the work, and accepts bids from proposed contractors.

ah. **Standard***.* An acknowledged measure of comparison.

ai. **Statement of Work***.* A document that describes accurately the
essential and technical requirements for items, materials, or services
including the standards used to determine whether the requirements have
been met.

aj. **Surveillance Plan**. An organized written document used for
quality assurance surveillance. The document contains sampling guides,
checklists, and decision tables.

ak. **System**. A group of interacting, interrelated, or interdependent
elements forming a collective entity.

al. **Tree Diagram**. A visual representation of the major functions
performed by a system which shows logical parts and subparts.

am. **Uniform Service**. A service that is, within defined limits,
always the same.

an. **Work**. A series of actions, changes, or functions that bring
about an end result.

Figure 1-1. \-- Contractor Operated System.

![](media/image1.png){width="6.5in" height="4.427083333333333in"}

Figure 1-2. \-- Transportation (Partial)

![](media/image2.png){width="6.5in" height="6.322916666666667in"}

#### 1-3. \-- Government Policy.

The government policy in service contracting is as follows:

a\. The performance oriented statement of work (SOW) for a service
contract includes the standards of performance and acceptable quality
levels.

b\. Standards must be measurable.

c\. Quality control is a contractor responsibility.

d\. A performance oriented SOW must not contain detailed procedures
unless absolutely necessary. Rely on a statement of the required service
as an end product.

e\. References to directives in the SOW should be held to a minimum.

f\. The surveillance plans described in this document are an acceptable
way of performing quality assurance.

g\. The most qualified persons available must write the SOW and the
surveillance plan. Standardized government documents, when available,
will provide valuable basic information.

#### 1-4. \-- A Systems Approach.

The design of a SOW and the surveillance plan is based on a systematic
analysis of the function to be put under contract or already under
contract. The procedure for deriving these two products is called job
analysis. The procedure consists of a step-by-step review of the
requirement to arrive at the specific output services and associated
standards.

a\. ***Jobs as Systems**.* The analysis assumes that an operation is a
system. An operation can be called a system because it consists of a job
or a combination of jobs carried out by people, and sometimes, machines
for a certain purpose. The parts of a system are usually called input,
work, output, and control loops. These parts are shown in figure 1-1.

\(1\) From a contractor's view, the system consists of taking people,
facilities, material, and the SOW and inputting it into a work process.
The result of this work is a contract output.

\(2\) Two major control loops are at work in this system. Both loops use
standards as the basis for determining acceptability.

\(3\) The contractor quality loop feeds back information from the output
into the work process so that the contractor can adjust performance to
meet the standard specified.

\(4\) On the other hand, government quality assurance looks at the
output and determines its acceptability. This information then becomes
an input for contractor management to adjust the quality control
function.

b\. ***Parts and Subparts**.* Every service contract operation can be
viewed as a system. Further, each major system can be broken into small
parts or subsystems. For example, the system portrayed in figure 1-1
were called transportation, the major system could be broken into small
parts called vehicle operations, vehicle maintenance, and traffic
management. Further, each of these parts could be broken down into the
smaller parts or subparts that make up that part, as shown in figure
1-2.

\(1\) Note that the transportation work area leads to vehicle
operations, which leads to vehicle dispatch, which leads to taxi
dispatch and U-drive dispatch. Each work area has its own set of inputs
and outputs. This chart does not contain all of the work areas
associated with transportation. Rather, it only shows an example of how
a system can be broken into its parts.

\(2\) The chart looks a great deal like a standard organizational chart,
except that this chart shows each thing that happens rather than who
performs the task. Further, by showing an input, it shows what must be
there for something to take place. It shows that each job must have an
output that can be measured in some way.

c\. ***Results of the Systems Approach**.* A proposed contract effort
must be viewed in a systematic way to arrive at an output or
performance-oriented SOW and a means of measuring the service. Thus, a
systematic approach to analysis will result in an enforceable, clear
SOW. It will also produce a quality assurance surveillance plan that
tells the government if the service is provided as specified. Further,
the systems approach permits the analyst to identify outputs and
separate them from the specific procedures required to create the
outputs.

\(1\) When the government specifies a given procedure, it assumes
responsibility for insuring that the design or procedure will result in
the desire output. On the other hand if it specifies the output
performance and its quality standard, the contractor must then use the
best management to achieve that level of performance,

\(2\) Last, systematic analysis gives a clear picture of what input is
needed to get the job done. This data is most useful in analyzing a
contract bid price, conducting a preaward survey, creating a list of
government furnished property, and making payment deductions in case of
non-performance.

#### 1-5. \-- Team Approach.

The development of a quality SOW is a result of team effort. The leading
members of the team are the functional office, the local contracting
office, and the manpower/management engineering office. The latter can
provide previous manpower studies to assist in determining jobs
performed.

a\. ***Responsibilities.*** During the contracting cycle,
responsibilities are assigned as shown in figure 1-3. This chart shows
which major functions occur during the contracting cycle and which
important actions take place during each function. The columns on the
right show who is responsible at each stage of the purchase cycle.

\(1\) The functional area chief should be considered the team leader
exercising authority and responsibility for the function that will be
under contract. Functional persons state the service that will be
delivered, measure the quality of service, and accept the service.

\(2\) The contracting office is the means of getting a contract and
enforcing its provisions.

\(3\) The contracting office also provides the necessary authority and
technical experience in contracting to make the contract a workable
document.

\(4\) The manpower/management engineering office performs cost studies
required by OMB Circular A-76.

b\. ***Relationship in Contracting Out.*** The lines of authority and
responsibility that exist when a function is contracted out, are shown
in figure 1-4.

\(1\) When a given function is performed in-house, with government
personnel, the line of authority flows from the agency chief, to the
functional area chief, and then to the function. However, when authority
is delegated in the contract environment, the contracting office (and
especially, the contracting officer) become a part of the authority
line.

\(2\) By law, only a contracting officer may make a contract and may
direct a contractor. Hence, the functional area chief must act through
the contracting officer to obtain and manage a service contract.

\(3\) In a contract function, responsibility does not follow the line of
authority. Rather, the functional area chief has overall responsibility
to see that the service is provided but works through the contracting
officer's authority. Two major tools for that use are a well-defined
quality SOW and a surveillance plan.

Figure 1-3. \-- Responsibilities

  -------------------------------- ---------------------- ----------------- -----------------
  Functions & Actions              Functional\            Manpower/\        Contracting\
                                   Area\                  Management\       Office
                                   Chief                  Engineer          

  ***[Define]{.underline}***                                                

  Prepare SOW                      Responsible            Assist            Assist

  Prepare Surveillance Plan        Responsible            Assist            Assist

  Perform Cost Study               Assist                 Responsible       Assist

  ***[Source]{.underline}***                                                

  Develop Sources                  Assist                                   Responsible

  Prepare Solicitation             Assist                                   Responsible

  Conduct Prebid Conference        Assist                                   Responsible

  ***[Buy]{.underline}***                                                   

  Analyze Bids                     Assist                 Assist            Responsible

  Conduct Preaward Survey          Assist                                   Responsible

  Award Contract [ ]{.underline}   Assis[t]{.underline}                     Responsible

  *[**Qualif**y]{.underline}*                                               

  Surveillance of SOW              Responsible            Assist            Assist

  Request Modifications            Responsible                              Assist

  ***[Administer]{.underline}***                                            

  Make Modifications               Assist                                   Responsible

  Non-SOW Surveillance             Assist                                   Responsible

  Conduct Progress Meetings        Assist                                   Responsible

  ***[Release]{.underline}***                                               

  Inspection                       Responsible                              Assist

  Acceptance                       Responsible                              Assist
  -------------------------------- ---------------------- ----------------- -----------------

Figure 1-4. \-- Relationships in Contracting

![](media/image3.png){width="6.5in" height="5.46875in"}

#### 1-6. \-- Overview of the Method for Developing a Performance SOW and Surveillance Plan.

The method and the relationship of the tasks are shown in figure 1-5 and
described below. Succeeding chapters explain in detail how to accomplish
each step or task in the method.

a\. ***Job Analysis**.* In this phase, the analyst starts with
information on how the job is being done and ends with the performance
that will be required of a contractor. The analysis consists of these
steps:

\(1\) ***Do Organizational Analysis**.* First, the analyst reviews the
current organization and identifies the services it provides.

\(2\) ***Prepare Tree Diagram**.* A tree diagram breaks a job into
smaller and smaller parts. Each part brings about a final result or
service.

\(3\) ***Do Work Analysis**.* Take each part of the tree diagram and
break it into input, work, and output. Input is what is needed to do the
job, work is what steps are needed to do the job, output is what the
work produces. During this step the analyst decides, with management,
what outputs the contractor will provide and what work will remain
in-house.

\(4\) ***Gather Data**.* After the analyst has picked the services on
the tree diagram that are to be contractor supplied, data can be
gathered. In this step, the analyst collects data on how much input is
required to do the job, and how often the output is provided.

\(5\) ***Do Performance Analysis**.* Each service proposed for contract
has a performance value assigned. The analyst decides how the service
can be measured. With management, the analyst determines what standards
apply. With management, an acceptable quality level is applied.

\(6\) ***Analyze Directives**.* During this step the analyst decides
what directives, if any, apply to the service to be provided. Directives
are classified as mandatory or advisory. They must be held to a minimum.

\(7\) ***Deduct Analysis**.* During this step the analyst works with the
manpower/management engineering office to prepare the estimated
contractor cost of each specific service. These costs are stated in the
SOW as a percentage of total contract cost, for a formally advertised
procurement. These costs are used as the basis for deductions for
non-performance; in a negotiated procurement, they are used to evaluate
contractor proposals. Actual negotiated costs re included in the SOW.

Figure 1-5. \-- Overview of Analysis Steps

![](media/image4.png){width="6.25in" height="4.166666666666667in"}

b\. ***Write the SOW**.* The previous steps in job analysis are carried
out for the dual purpose of writing a SOW and a surveillance plan.

\(1\) If job analysis has been done properly, the concurrent writing
task should be relatively easy. Concurrently means that neither task is
truly independent; what is written into the SOW influences what is put
into the surveillance plan. Likewise, the surveillance plan will force
the writer to make sure that outputs and procedures in the SOW are
measurable.

\(2\) Writing the SOW consists of:

\(a\) Expressing the contract-desire output in clear, simple, concise,
and legally enforceable terms. In determining what level of detail to
include in the SOW, the analyst must consider whether to quote from a
mandatory regulation or to refer to it.

\(b\) Using a format that presents the specified tasks in an easily
understood manner. (See explanation in Chapter 3).

\(c\) Determining what exhibits will help convey to the contractor the
job that needs to be done.

c\. ***Writing a Surveillance Plan**.* The surveillance plan is a
document used to make sure that systematic quality assurance methods are
used. It assumes that the contractor is responsible for managing and
controlling the output of service. The government plan seeks to
determine if contractor-provided service meets the quantity and quality
standards. The development of the plan involves these major steps:

\(1\) ***Identifying Key Performance Indicators**.* The job analysis
phase identified many performance indicators. Not all of these
indicators are critical to the service being provided. During this step
the analyst must decide which indicators to include in the plan, using
as criteria, the criticality of the process and its output, the
availability of quality assurance manpower, and the adaptability of each
indicator to overlap and check many kinds of outputs.

\(2\) ***Identify Information Sources**.* Each plan uses many sources of
information (for example, existing management information systems,
customer complaints, and random sampling).

\(3\) ***Develop Tools**.* The writer of the surveillance plan has many
tools. These tools are:

\(a\) ***The Sampling Guide**.* The sampling guide is a written
procedure which states what will be checked, the standard of
performance, and how the checking will be done. (For a sample guide, see
Chapter 4). The sampling guides used in this regulation are based on
statistical techniques called for in Military Standard 105D, *Sampling
Procedures and Tables for inspection by Attributes.* By sampling a small
part of the total service in a random fashion, the QAE can accept or
reject the service, based on the standard.

\(b\) ***Decision Tables**.* When a service is rejected, a decision must
be made as to who is at fault (the contractor or the government). A
decision table is used for this purpose. The decision table identifies
different kinds of unsatisfactory performance, probable cause factors,
and the things from which these factors could result.

\(c\) ***Checklist**.* The last tool is the checklist. Checklists as
used to record what has been checked by a sampling guide and to record
information on contract items not covered by sampling.

\(d\) ***Do Surveillance**.* The final step is doing surveillance, that
is, taking the written surveillance plan and using it on a daily basis.
In this step, random samples are drawn and schedules of quality
assurance inspections made. Contractor discrepancies are documented and
corrective action taken. If appropriate, money is deducted from a
contractor's payment by the contracting officer.

### Chapter 2

### Job Analysis

#### 

#### 2-1. \-- Advantages of Job Analysis.

The previous chapter outlined the steps involved in developing a
statement of work (SOW) and a quality assurance surveillance plan. This
chapter explains job analysis in greater detail. This process enables
the analyst to pull together all of the essential information needed to
write a performance-oriented SOW. It also helps to build a foundation
that will help the government determine the quality of the contractor's
output service. The steps in job analysis are described below.

#### 2-2. \-- Organization.

The starting point in looking at a service function is to see how it is
organized and what kind of service it provides. This is not to say that
the SOW will require that a contractor adopt the government style of
organization. Rather, organizational analysis will provide a framework
for determining what is done by the organization.

a\. To capture this data, use an organizational analysis sheet as shown
in figure 2-1. The data gathered and placed on the analysis sheet will
show a complete picture of the organization. Of particular importance is
the choice of services performed.

b\. These services or outputs become the basis for writing the SOW,
development of standards, defining performance indicators, and
identifying acceptable quality levels of performance. Be as specific as
possible when making the entries.

Figure 2-1. \-- Organizational Analysis

  ------------------ -------------------- -----------------------------------
  **Name or          **Transportation**   
  Organization**                          

  **Mission          Provide vehicle      
  Statement**        maintenance, on base 
                     vehicular\           
                     transportation       
                     shipment of          
                     household goods,     
                     etc.                 

  **Organizational   Traffic Management   
  Elements**:        Office\              
                     Vehicle Maintenance\ 
                     Vehicle Operations\  
                     Reports and Analysis 

  **Services         **Normal**           Taxi Service, U-Drive Service,\
  Performed**:                            Emergency Maintenance, Outbound
                                          Personal Property Service \-- etc.

                     **Contingent**       Vehicle Support for disaster
                                          control exercises \-- etc.
  ------------------ -------------------- -----------------------------------

 

Figure 2-2. \-- Tree Diagram

![](media/image5.jpeg){width="6.5in" height="5.770833333333333in"}

#### 2-3. \-- Tree Diagram.

After doing the organizational analysis to find out what kind of
services the organization provides, the analyst must now link the
services together in a logical flow of activities. The major tool used
is the tree diagram.

a\. An example of a tree diagram for vehicle operations is shown in
figure 2-2. As shown in the figure, the top box states the overall
function (in this case, to operate and manage vehicles). Each of the
following levels breaks the job into parts and subparts, to develop a
chart that fully describes the job in terms of these parts.

b\. The boxes are numbered to show the relationship of the parts back to
the higher level part. For example, test is numbered "3.1", because it
relates to train and qualify vehicle operators which is numbered, "3".
These numbers and part boxes provide the start for further analysis.

#### 2-4. \-- Activity Analysis.

Prepare a separate activity analysis for each numbered box in the tree
diagram. These sheets are used to define the outputs of the process. An
example of an activity analysis for dispatching taxis is shown in figure
2-3.

a\. The analysis consists of three major sections: input, work and
output.

\(1\) The steps in the work section that are required to perform the
work are numbered in sequence.

\(2\) The input section lists those things that are needed to perform
the work steps.

\(3\) The output section contains those things produced by the work
(that is, items or services that the work provides).

b\. In the example, the taxi dispatch begins with the input of a request
for taxi service, and with documenting the service. The output of the
process is a documented form and the movement of the passenger to the
desired location.

c\. The analyst must complete the analysis in as much detail as is
possible. If the tree diagram has been branched out in enough detail
(that is, as many sub-parts as possible) the task will be very easy. The
analysis does nothing more than state what starts a job, what takes
place when a job is done, and the results of the job \-- that is, input,
work, output. The analysis merely puts this thinking down on paper in a
step-by-step fashion.

#### 2-5. \-- Classification.

By building the tree diagram and the activity analysis, the analyst
knows a great deal about the job. The analyst must now work with
management to decide what jobs will be targeted for inclusion in the
SOW. For example, the government may decide to retain responsibility for
the analysis section in a transportation contract. No further job
analysis need be done to jobs not targeted for contract. Decisions
reached in this step are recorded on the activity analysis sheets (see
figure 2-3). Record the decision for each entry in the output block.

#### 2-6. \-- Data Gathering.

After the analyst has identified the services to be provided under
contract, workload and resource data must be gathered. The procedure for
this is simple.

Figure 2-3. \-- Activity Analysis

+-------------------+-------------------+-------------------+----+----+
| Activity:         |                   |                   |    |    |
| Dispatch\         |                   |                   |    |    |
| Service Number 5  |                   |                   |    |    |
+-------------------+-------------------+-------------------+----+----+
|                   |                   |                   | I  |    |
|                   |                   |                   | nc |    |
|                   |                   |                   | lu |    |
|                   |                   |                   | de |    |
|                   |                   |                   | in |    |
|                   |                   |                   | C  |    |
|                   |                   |                   | on |    |
|                   |                   |                   | tr |    |
|                   |                   |                   | ac |    |
|                   |                   |                   | t? |    |
+-------------------+-------------------+-------------------+----+----+
| Input             | Work              | Output            | Y  | No |
|                   |                   |                   | es |    |
+-------------------+-------------------+-------------------+----+----+
| Taxi Service      | 1.  Determine     | Form:  Request    |    |    |
| Request           | Request Validity. | for Vehicle       |    |    |
|                   |                   | Services Pending  |    |    |
| Telephone         | 2.  Document Taxi |                   |    |    |
|                   | Request.          | Form: In-work     |    |    |
| Walk-in           |                   |                   |    |    |
|                   | 3.  Update Taxi   | Passenger         |    |    |
| Written           | Request.          | Movement          |    |    |
|                   |                   |                   |    |    |
|                   | 4.  Dispatch      | Filled Form       |    |    |
|                   | Taxi.             |                   |    |    |
|                   |                   |                   |    |    |
|                   | 5.  Pickup        |                   |    |    |
|                   | Passenger.        |                   |    |    |
|                   |                   |                   |    |    |
|                   | 6.  Deliver       |                   |    |    |
|                   | Passenger.        |                   |    |    |
|                   |                   |                   |    |    |
|                   | 7.  Complete Form |                   |    |    |
|                   | \"Request for     |                   |    |    |
|                   | Motor Vehicle     |                   |    |    |
|                   | Services\"        |                   |    |    |
+-------------------+-------------------+-------------------+----+----+

a\. ***Workload***. As used here, "workload" refers to the result of the
data gathering task which gets information on how often output services
are provided. After the jobs and output services are analyzed, it should
be much easier to gather the required data. As a rule, this information
is available from existing management information systems, but it may
need to be restructured, so that it is accumulated by a specific output.

\(1\) The analyst must find out how often a service will be provided
during the proposed contract period. Use historical information plus
projected changes, to estimate the service frequency. To gather this
data, put it on a sheet as shown in figure 2-4. This sheet shows what
service will be provided, and helps in estimating future requirements to
be used in sizing the contract effort.

\(2\) This data will have eventual use in structuring the government
estimate and in analyzing the proposed contractor's bid price. This
frequency information is also given to bidders so that they understand
the true requirements that will have to be met under the contract.
Further, workload data is used in building the surveillance plan.

b\. ***Resources***. To provide a service, a job requires the use of
physical resources (assets and personnel).

\(1\) ***Physical Assets**:* To write a SOW, gather data about the
physical assets required to perform a contract. Gather data concerning
physical assets at the specific service output level. (For example,
gather data on what physical assets are needed to perform emergency
repair service). Sheets as shown in figures 2-5, 2-6, and 2-7 should be
used to gather data on the facilities, materiel, and equipment that will
be provided to the contractor. Since the SOW must list the assets the
government provides, take care to avoid listing items that will not be
available for the contractor's use. The list must show any assets that
will be added or deleted during the life of the contract.

\(2\) ***Personnel**.* Data on personnel must also be gathered. For
example, a sheet as shown in figure 2-8 can be used for this purpose.
Data for this sheet are available from manpower documents on the
organization, but the data may need to be restructured to break it out
for the specific services provided. For example, a manpower document
might show how many people and what skill levels are authorized to
operate a vehicle, but not how many people are allocated to perform the
vehicle dispatch service. The analyst must extract this data to complete
the data analysis (that is, how many government persons would be
required if the service remained in-house).

Figure 2-4. \-- Workload Analysis

  ----------------- ----------------- ----------------- -----------------
  Workload                                              

  Service           Historical        Known Change      Estimated
                    Workload                            Workload

  Taxi              1200/month        -10%              1090/month

  U-Drive           50/month          +20%              60/month
  ----------------- ----------------- ----------------- -----------------

######### Figure 2-5. \-- Facility Analysis

  ----------------------- ----------------------- ------------------------
  Service:  Vehicle                               
  Repair                                          

  Facility                                        

  Facility                Square Feet             Location

  Bldg. 209               2000                    Maxwell AFB

  Bldg 1024               1500                    Gunter AFS
  ----------------------- ----------------------- ------------------------

Figure 2-6. \-- Material Analysis

  ----------------------- ----------------------- ------------------------
  Service:  Vehicle                               
  Repair                                          

  Material                                        

  Name                    Stock Number            Quantity

  Name Supplied to                                 
  Contractor                                      
  ----------------------- ----------------------- ------------------------

Figure 2-7. \-- Equipment Worksheet

  --------------- ------------------ --------------- --------------- ----------
  Service:                                                           
  Vehicle Repair                                                     

  Equipment                                                          

  Name            Stock Number       Serial Number   Location        Quantity

  Flat Top Desk   7100-00-270-9840                   Vehicle         2
                                                     Operations      

  Training Aid    6930-00-526-3639   MF270598        Driver Training 1
  Driver                                                             
  --------------- ------------------ --------------- --------------- ----------

Figure 2-8. \-- Personnel Analysis

  ----------------- ----------------- ----------------- -----------------
  Personnel                                             

  Service           Authorized Grade  Number            Security
                                                        Clearance
                                                        Required

  Vehicle Dispatch  WG-5              1                 No

                    WB-4              1                 No

                    WB-3              4                 No

  Taxi Service      WB-5              1                 No

                    WB-3              6                 No
  ----------------- ----------------- ----------------- -----------------

#### 2-7. \-- Performance Value.

When the government performs a service for itself, it not only generates
an output, but it produces that output to meet standards to some
acceptable quality level.

a\. ***Example**.* Let us assume that a taxi pickup is to be provided
within four (4) minutes of an agreed upon pickup time ninety percent
(90%) of the time (10% error rate). Taxi pickup is the service, four
minutes is the standard, and 10 percent is the acceptable quality level.

b\. ***Minimum Requirements**.* By law, the SOW must present the actual
minimum requirements of the government. Hence, the analyst must avoid
demanding more of a contractor than the government would provide if it
were performing the service.

c\. ***Performance Output**.* Performance values enable the analyst to
place realistic demands on contractor performance. By the same token,
performance values permit the writing of a performance-oriented SOW and
eases the development of a quality assurance surveillance plan, for
example, see the performance value analysis in figure 2-9. In doing the
analysis, the analyst must include each of the output services
identified for inclusion in the contract during classification.

d\. ***Standards**.* In the appropriate box, show the standards that
pertain to the services. These standards can be derived from the
directives regulating the service, from agency standards, or from work
location standards.

e\. ***Measuring Quality**.* Finally, each service must have an
acceptable quality level. This entry can be based on historical records,
a poll of managerial desires, or agency imposed acceptable quality
levels. An acceptable quality level should rarely be 0 percent, for this
indicates perfect performance which is very expensive and nearly
impossible to achieve. Acceptable quality levels must equal but not
exceed the standards met when the government provides the services
in-house, that is, how well the government did the job. However, it must
be recognized that some quality levels are purely judgmental, such as
appearance, taste, etc.

f\. ***Assigning Values**.* Performance values need not be assigned for
outputs that relate strictly to internal contractor management. For
example, work scheduling is required to get the job done; however, the
government is interested only in getting the job done, and is not
generally concerned with how. The stress is on performance, not
procedures. Hence, there is normally no need to assign a performance
value to work scheduling. The meaning of each entry is described below.

Figure 2-9. \-- Performance Value Analysis

  ----------------------- ----------------------- ------------------------
  Activity:  Taxi                                 
  Operations                                      

  Performance Indicator   Standard                Acceptable Quality Level

  Response Time           4 minutes               5%

  Accidents Per Mile      0                       0%

  Operational Cost Per    \$0.14                  20%
  Mile                                            

  Taxi In-Commission Rate 80%                     10%
  ----------------------- ----------------------- ------------------------

g\. ***Performance Indicator**.* A performance indicator is a
characteristic of an output that can be measured. It may measure
quantity a well as quality. By using a performance indicator and its
associated standard, one can know if a process is producing a quality
output. (For example, the major output of taxi operations is passenger
movement).

\(1\) The question must be asked as to what will allow one to measure
how well the process generates that output. To do this the analyst must
review each previously identified job to see what measures can be
associated with it.

\(2\) The measures are usually stated as rates (that is, a means of
expressing something as it relates to a fixed amount of something else).
For example, a rate for taxi service is the cost to run the fleet per
mile. The performance indicators that relate to taxi operation are shown
in figure 2-9. All of these indicators are rates, except average
response time. However, response time is something that can be measured.

\(3\) In many cases, agency directives specify the performance
indicators that will be used to evaluate the process. If the indicators
are not prescribed, the analyst must work with management to decide what
indicators would help to measure the process. Rates in terms of time and
distance and accuracy are particularly useful for this purpose.

\(4\) The analyst must be careful to choose performance indicators that
are realistic. The grams of dust per square centimeter on a vehicle may
be a measurable performance indicator for vehicle condition, but it is
not a realistic indicator for general use. The analyst may have to use a
less satisfactory indicator (such as times washed per month). Or one may
have to resort to an even less satisfactory measure (such as
cleanliness) which calls for an individual judgment on the part of the
person measuring performance.

\(5\) Whenever possible, however, one must choose a performance
indicator that measures the service by a number (that is, quantifies
it).

h\. ***Using Standards**.* A standard is something against which another
thing can be measured. Nearly everyone is familiar with standards of
some sort. For example, the standard operating speed for automobiles on
highways is 55 miles per hour. In this case the number 55 is the
standard, while miles per hour is the performance indicator.

\(1\) In looking at the processes and the performance indicators chose,
non must ask what kind of yardstick will be used to measure the process.
In some cases the yardstick or standard is provided by agency
authorities.

\(a\) The standard for average taxi response time of 4 minutes is an
example. However, there is no standard for bus service.

\(b\) In this case, the analyst, with management's help, will have to
find a reasonable standard that bears some relation to the criticality
of the service to be provided and how well the government does the job
in-house.

\(2\) A standard for bus service could be stated in terms of timeliness
of arrival at a bus stop. Thus, the standard for bus service would be
stated: Depart the stop no earlier than scheduled time nor later than
scheduled time plus five minutes. An example of the taxi service job and
the standard for the performance indicator is shown in figure 2-9.

i\. ***Acceptable Quality Level**.* The acceptable quality level of a
standard tells what variation from the standard (that is, error rate) is
allowed. It is used to measure the reliability of the output generating
process.

\(1\) An acceptable quality level is generally used in referring to a
production line that produces a tangible object. These products can then
be measured to see if they meet the standard within an acceptable
quality level.

\(2\) Service contracts also produce measurable services (even though
they are not always tangible) and one can determine how often they meet
the standard.

\(3\) An acceptable quality level is expressed in terms of a percentage
of allowable error in a time period. Using the performance indicator
with its associated standard, the analyst determines what error rate
should be allowed, based on agency directives, historical records of how
well the government provided the service, or they can be established by
management decision.

\(4\) Whatever the source of the entry, the analyst must question
whether the acceptable quality level is realistic and represents how
well the service must be provided under contract. The example of
acceptable quality levels shown in figure 2-9 summarizes all the
performance information that is generated by job analysis. Charts like
this are critical for all further decisions about the SOW and the
surveillance plan.

\(5\) After these charts are filed in, the analyst must cross out the
indicators that apply to contractor internal management. What remains
will be the performance indicators, standards, and tolerances
(acceptable quality level) that tell how well the contractor must
provide the output service. In the example in figure 2-9 all values
would be eliminated except average response time. All other times under
a firm fixed price vehicle operations and maintenance contract relate
strictly to internal contractor management indicators.

### 2-8. \-- Governing Directives.

For each of the services to be provided under contract, the following
steps are done:

a\. ***Catalogue**.* The analyst needs to catalogue all the manuals,
regulations, and other higher government agency and local level guidance
that pertain to the services. (These documents often refer to other
regulations, manuals or technical orders which must also be listed). The
list that results should be arranged similar to figure 2-10. List the
title and the date of publication. If only parts of the directive apply,
Note these parts in the directive column. If the directive has been
mentioned in a document previously listed, cite that document in the
"*Referenced In*" column. This data will be needed later in deciding
whether a directive or part of a directive applies to the proposed
contract effort.

b\. ***Applicability**.* Each service ordinarily has its basis in some
governing directive that tells how the job is to be done, in varying
degrees of detail, when it is performed in-house. In other words,
directives often specify procedures.

\(1\) At this point, the analyst must decide whether those procedures
are to be mandatory on the contractor (that way the government would do
it). To do this, the analyst reviews the list of directives and checks
the proper box on the sheet to show whether each directive will be
mandatory or advisory upon the contractor.

\(2\) When only parts of directives appear to be mandatory, the analyst
must decide either to reference that part of the directive, or extract
the information and place it in the SOW as a procedure. If there is no
clear directive, the analyst must decide if a procedure is require for
if simply stating the activity and its performance value is sufficient.

\(3\) As a rule, procedures and directives must not be specified.
Reliance must be placed on stating the desired output with a performance
value. If a regulation is mandatory, reference it only when it is too
bulky to extract and include in the SOW in full text.

Figure 2-10. \-- Governing Directives Analysis

  -------------- ---------------- -------------- -------------- ------------ -----
  Governing                                                                  
  Directives                                                                 

                                                                Mandatory?   

  Directives     Title            Date           Referenced In  Yes          No

  AFM 77-310     Motor Vehicle    20 Jul 78                                   
                 Management                                                  

  T.O. 00-208-5  Vehicle and Base 14 Mar 74      AFM 77-310,                  
                 Support                         Vol II                      
                 Equipment                                                   
                 Inspection and                                              
                 Administration                                              
  -------------- ---------------- -------------- -------------- ------------ -----

#### 

#### 2-9. \-- Deduct Analysis.

Standard clauses in service contracts allow the government to deduct
payment in case of non-performance. In short, if the government doesn't
receive the service, the contractor does not get paid. The hard question
is how much to deduct.

a\. ***Methodology.*** The amount deducted must represent as nearly as
possible the cost of the service foregone.

\(1\) The information is used to arrive at a figure for each service
which tells what percentage it is of the whole service.

\(2\) The source of information is the personnel data and the specific
service outputs derived during job analysis. How to determine the
percent value of a specific service is explained below.

\(3\) Note that other resources and overhead have not been used to
determine costs. Since the contractor automatically spreads these costs
in a bid, there is no need to use them in these figures.

b\. ***Finding the Specific Service**.* To obtain a list of services
refer to the tree diagram. When the tree diagram was made, the overall
job was broken into smaller and smaller parts. For example,
transportation has as parts vehicle operations, vehicle maintenance,
analysis and traffic management. Vehicle operations, in turn, breaks
into many smaller parts, as illustrated in figure 2-2. The information
on the tree diagram is used to begin making the deduct analysis (see
figure 2-11).

c\. ***Personnel**.* The next step in filling out the deduct sheet is
personnel. The personnel analysis made during data gathering for
resources has the data on how many people are required to provide a
specific service.

Figure 2-11. \-- Deduct Analysis

  ------------------ ----------------- ----------------- -----------------
  **Job: Vehicle     **Personnel Cost\ **Payroll Total** **% Of**
  Operations**       Per Month**                         

  ***Operate                                             
  Vehicles***                                            

  Operate Taxi       5                 \$5000            19.2%

  Operate Scheduled  4                 \$4000            15.4%
  Bus                                                    

  Operate            1                 \$1000            3.8%
  Unscheduled Bus                                        

  ***Train/Qualify                                       
  Vehicle                                                
  Operators***                                           

  **Test**                                               

  Check Physical     1                 \$1000            3.8%
  Condition                                              

  Give Written Test  1                 \$1000            3.8%

  Conduct Road Test  1                 \$1000            3.8%

  **Document**                                           

  Issue SF 46        3\.               \$360             1.4%

  Add to DD Form     3                 \$360             1.4%
  1360                                                   

  Provide Unit       1                 \$100             0.4%
  Notice                                                 

  ***Manage Credit                                       
  Card Issuance                                          
  Use***                                                 

  Issue Cards        2                 \$240             0.9%

  Process Receipts   2                 \$240             0.9%

  ***Dispatch        1                 \$1000            3.8%
  Vehicles***                                            

  ***Tota**l*        28                \$26,000          100%
  ------------------ ----------------- ----------------- -----------------

\(1\) The analyst must adjust this data to reflect decisions made about
standards and acceptable quality levels.

\(2\) The personnel data may have to be adjusted upwards or downwards,
since standards and acceptable quality levels directly affect the number
of persons required to do the job. Further, since this data represents
the in-house cost of performing the services in the SOW, the analyst
must also adjust the data to show what staff the contractor would
probably use to perform the service.

\(3\) This data can not be used for making the deduct analysis. Note
that no entry is made on the line of a service that has subparts.
Entries are only made for the subparts, since there are specific
services. (For example, no entry is made for "operate vehicles' since
this service is made up f the specific services of operate taxi, operate
scheduled buses, operate unscheduled buses.

d\. ***Payroll Cost Per Month**.* Payroll cost per month is the basis
for deciding how much each specific service costs in reference to the
total job. One need not use exact payroll costs. Rather, use the service
contract wage rates appropriate to the service. Again, do not include
costs for the services that have subparts. These are noted by X's on
figure 2-11.

e\. ***Percent Of Total**.* The percent of total column on the deduct
sheet tells how much each specific service or part represents in terms
of the service contract. To arrive at this percentage, add all the
payroll costs to get a total and divide each specific service payroll
cost by the total cost. Enter each resulting percentage in the percent
of total column.

f\. ***Negotiated Contracts**.* The cost figures created for deduct
analysis can be used to evaluate contractor proposals. The contractor
should be asked to make a proposal for each specific service. Once these
costs are negotiated, they can be used to adjust the original deduct
estimates.

### Chapter 3

### Writing the Statement of Work

#### 

#### 3-1. \-- Statements of Work.

Job analysis makes writing a statement of work (SOW) relatively easy.
Once data has been gathered and analyzed, only two things remain to be
done. The first task consists of actually writing a SOW that states what
is required. The second task entails writing a QA surveillance plan that
complements the SOW. This chapter addresses the first task.

#### 3-2. \-- Writing the SOW.

Considering all the data gathering, analysis, and decisions that have
been done to this point, writing the SOW should be easy. All that
remains is to use a format or outline the compose words that will be
used to express the requirement. Each of these tasks is described below.
A note of caution: do not repeat material in the SOW that is already
included in other parts of the contract, for example, General
Provisions, Special Provisions, etc.

#### 3-3. \-- Service Contract Format.

Prior to beginning writing the SOW, an outline must be developed to
provide structure for the document. The following major sections provide
the basis for an outline and are in Section F in most service contracts.
The standard numbering scheme for service contracts is numeric (for
example, 1, 1.1, 1.1.1).

a\. ***General (Section F-1).*** This section provides a broad overview
to the SOW. It contains a part describing the scope of work. Personnel
related matters come under this heading. Most importantly, this section
contains a part that states clearly the contractor's specific
responsibility for quality control. (This quality control part is in
addition to what may be in the standard clauses in the general
provisions of a given contract). This part of the SOW tells the
contractor what specific kind of quality control is required for the
contract.

b\. ***Definitions (Section F-2).*** A definitions section includes all
special terms and phrases used in the SOW. The definitions must clearly
establish what is meant so that disinterested parties will fully
understand them.

c\. ***Government-Furnished Property and Services (Section F-3).*** If
the Air Force will provide any of these for the contractor's use in
providing the required services, use this section to describe what will
be given. If the list(s) is fairly extensive, make it into a technical
exhibit(s) and include at the end of the SOW, rather than in the main
body. Use the data gathered concerning facilities, equipment, and
material as the basis for these lists.

d\. ***Contractor-Furnished Items (Section F-4).*** In this section the
analyst describes material and equipment that the contractor must
provide. As with government furnished property, if the lists are
lengthy, they are made a technical exhibit and referenced in this
section.

e\. ***Specific Tasks (Section F-5).*** Specific tasks are the heart of
the SOW. All of the work done under job analysis will find its way into
this section. To write this section, go back to the tree diagrams and
activity analysis sheets which were made in chapter 2.

\(1\) After the activities that were selected for contracting have been
grouped and arranged as they appear in the tree diagram, writing this
section is simply a matter of putting the activities down in a logical
sequence.

\(2\) At the same time this is being done, group the performance
indicators, standards and acceptable quality levels together in the same
logical way for inclusion on a Performance Requirements Summary. Include
them as a technical exhibit to the SOW. (See figure 3-1 for an example
of this technical exhibit). At this time, all of the columns can be
filled in except the method of surveillance, which is not filled in
until the surveillance plan has been developed. The other entries come
from performance analysis and the deduct analysis (figures 2-9 and
2-11).

f\. ***Applicable Technical Orders, Specifications, Regulations, and
Manuals (Section F-6).*** During job analysis, the analyst produced a
list of applicable directives. Include the list in this section; include
the dates of the directives. Tell what happens when a directive changes
during the life of the contract. Also, state whether each directive is
mandatory or advisory on the contractor.

g\. ***Technical Exhibits**.* Some items are too bulky to include in the
main body of the SOW. Also, the analyst may want to include information
helpful to the contractor. Technical exhibits are used for both these
purposes.

#### 3-4. \-- Composition.

The SOW becomes a part of the contract and is a contractually binding
document on both the contractor and the Government. Since the written
words translate into cost and profit, every word will be scrutinized,
and, if each requirement so that the contractor's advantage does not
become the government's disadvantage.

Figure 3-1. \-- Vehicle Operations

  --------------- ------------------ -------------- ---------------- --------------
  **Vehicle                                                          
  Operations**                                                       

  **Required\     **Standard**       **Maximum      **Method of      **Deduction\
  Service**                          Allowable      Surveillance**   from Con-tract
                                     Degree of                       Price for
                                     Deviation from                  xceeding the
                                     Requirement                     AQL**
                                     (AQL)**                         

  **Operate       Customer must\     5%                              19.2%
  Taxi**          be picked up\                                      
                  within 4 minutes                                   
                  of the agreed upon                                 
                  time.                                              

  **Operate**     Bus must not       4%                              15.4%
                  arrive\                                            
                  at the stop later                                  
                  than scheduled                                     
                  time or depart                                     
                  earlier than                                       
                  schedule time +5                                   
                  min.                                               

  **Operate       Bus must arrive    5%                              3.8%
  Unscheduled**   not later than 4                                   
                  minutes from                                       
                  agreed upon time                                   
                  between customer                                   
                  and dispatcher.                                    
  --------------- ------------------ -------------- ---------------- --------------

a\. ***Style**.* Style may be described as the mode of construction or
development which a person uses to achieve an end product. In
particular, the analyst's style refers to a method of expressing ideas
in phrases, sentences, and paragraphs. Technical style is the way the
analyst assembles the technical information into an exact statement of
facts. SOW style revolves around the necessity for technical accuracy.
The analyst must strive to include all the essential information in the
simplest presentation.

b\. ***Language**.* The language in a SOW must be exact and concise.
Every effort must be made to use the simplest words, phrases, and
sentences possible, so that anyone who reads it can understand its
meaning, and avoid the risk of misinterpretation.

c\. ***Ambiguity**.* Perhaps one of the biggest causes of disagreement
in a SOW results from the use of indefinite, ambiguous terms, and words
with a double-meaning. If ambiguity is present, a court generally holds
the party that drew up the contract responsible. Since the government
writes its contracts, it is responsible for any ambiguity that may
arise.

d\. ***Misused Words and Phrases**.* Often the analyst inadvertently
changes an intended meaning in the SOW through the misuse of certain
words and phrases. The following are designed to eliminate some of the
misuse.

\(1\) ***Use of "shall" and "will".*** The term "shall" is used to
specify that a provision is binding. The word "will" is used to express
declaration of future action on the part of the purchaser.

\(2\) ***Use the emphatic form of the verb**.* That is, tell the
contractors they must or must not do something. The emphatic form of the
verb will insure that one is giving directions, not suggestions, to the
contractor.

\(3\) ***Do not use "any", "either", "and/or**".* These words imply a
choice that the contractor may take. It is better to avoid them unless a
choice is to be made. The word "both" can often be substituted for those
words.

\(4\) ***Use of Pronouns**.* The use of pronouns is usually regarded as
dangerous in the SOW. It is better to repeat the noun and avoid
misinterpretation.

\(5\) ***Consistent Terminology**.* The same words and phrases must be
used throughout the SOW. This is especially true when referring to
technical terms and items; for example, always refer to a particular
part by the same name.

\(6\) ***Numerals**.* When numerals are used on the drawings and
illustrations, use them in the SOW, rather than spelling out the number.

e\. ***Spelling**.* Most words have only one acceptable spelling;
however, throughout the English language there are words that can be
spelled several ways. To avoid misunderstanding, adopt the standard
spelling.

f\. ***Punctuation.*** To keep the SOW clear, use simple, short, and
concise sentences, so that only the minimum punctuation is needed. A
well-planned word order will require a minimum of punctuation. A rule
for the analyst should be: When extreme punctuation is necessary,
rewrite the sentence.

g\. ***Abbreviations**.* For the analyst, abbreviations serve as a form
of shorthand. Abbreviations can make complex terms easy and precise.
However, many misunderstandings also arise from the use of abbreviations
because the reader is not always familiar with them. The first time an
abbreviation is used in text, show it in parenthesis immediately after
the spelled-out word or phrase. This readily defines the abbreviation
for further use.

h\. ***Sentences.*** Sentences in a SOW are often spiced with legal
phraseology and high sounding words. This type of writing is difficult
to read and understand. Clarity is the analyst's overriding concern. The
analyst must try to construct logical sentences that which are exact and
concise. It is better to eliminate a long and involved sentence by
rearranging it into two or three short, simple sentences limited to a
single idea or thought. Good writing of any type is dependent upon
natural order. The word order of a sentence tells the reader the
function of each word in the sentence. The simple sentences one strives
for in a SOW are based on the traditional order of
subject-verb-complement or object.

i\. ***Paragraphs**.* Use a paragraph to state a single idea and
elaborate on it. Even though it may appear anywhere in the paragraph, it
is best to state the idea (topic sentence) at the beginning, so that the
reader can grasp it immediately. The topic sentence, then, is the
framework to which other sentences are added to develop and support the
original idea. The ideal length of a paragraph will vary; however, it is
generally accepted that the maximum should be from 80 to 100 words.

#### 3-5. \-- Data Submissions.

Service contracts often require the contractor to submit data, forms,
and other reports. These requirements are included as an exhibit to the
statement of work. Use a DD Form 1423, **Contract Data Requirements
List** to list them. Include the description of a data item on DD Form
1664, **Data Item Description** (see examples in figures 3-2 and 3-3).
Other agencies must use their forms that are equivalent to the DD Forms
1423 and 1664.

***Note: Working Copies of DD Form 1423 and DD Form 1664 are included in
the Forms Document, See Hardcopy to view sample forms.***

### Chapter 4

### The Surveillance Plan

#### 

#### 4-1. \-- Basic Approach.

This chapter describes the major contents of a surveillance plan. There
are three key ideas that are the basis for a surveillance plan.

a\. ***Management By Exception**.* Quality assurance relates to the
output service provided by the contractor. As pointed out earlier, the
output service can result either from a contractor-developed procedure
or from a government specified procedure. When the procedure is
specified by the government, compliance with the procedure is the
desired output service.

\(1\) When the output is based on a contractor developed procedure, the
procedures are only looked at on a by-exception basis; that is,
satisfactory performance of the output service as specified in the
contract normally indicates that the contractor is using satisfactory
procedures. The government should be concerned only when services are
not adequately performed.

\(2\) In this case, the inspector looks beyond the level of services
provided only to determine if the problem is caused by the government or
the contractor. If government provided items to the contractor's
operation (such as, parts, equipment, or facilities) are at fault,
action must be taken through government channels to correct the problem.
No action will be required of the contractor. When the problem is the
contractor's fault, the contractor is told to take corrective action.

b\. ***Performance Indicator**.* The level of contractor provided
services is monitored by checking the performance values in the
statement of work (SOW). As described in chapter 2, a performance value
is a feature of the service that can be measured by a number. For
example, two important performance values in vehicle maintenance and
vehicle operations are vehicle out-of-commission (VOC) rate and taxi
response time.

c\. ***Problem Location**.* When performance values show that the
service is not adequately performed, the QAE uses decision tables to
locate the problem. The tables provide a logical sequence to find the
problem cause. Basically, they are a set of pointers which should find
the problem's source in a step-by-step fashion. The construction and use
of decision tables re described in paragraph 4-4b.

#### 4-2. \-- Surveillance Information Sources.

There are four principal sources of information for surveillance:
management information systems, random sampling, checklists, and formal
customer complaints. The following sections describe the information
sources in detail.

a\. ***Management Information Systems**.* In a few instances, an
existing management information system (MIS) may be available as a means
of surveillance. When a MIS is available, as in the case of the Air
Force's vehicle integrated management system (VIMS) in the vehicle
maintenance area, it can collect information on performance values which
can be used instead of random sampling data.

\(1\) Management information systems usually collect information for 100
percent of the activities for a specified period of time. This
information can be compared to a contract standard. On the basis of this
comparison, performance can be judged and performance for the specified
period accepted or rejected.

\(2\) For example, the vehicle out-of-commission (VOC) rate is computed
every month by the VIMS. A simple comparison of the VOC rate with the
maximum acceptable VOC in the SOW explains a great deal about the level
of maintenance service supporting the base vehicles and organizations.

\(3\) By way of caution, however, one must check the data input into a
MIS if the system is maintained by the contractor. If one is going to
use a MIS to check the contractor, make sure the MIS contains reliable
data.

b\. ***Random Sampling**.* The most frequently used way of service
contract surveillance is random sampling. Services are sampled by the
QAE to determine if the contractor's level of performance is acceptable.
Acceptance sampling is done, basically, to determine a course of action:
that is, whether to accept or reject the contractor's level of
performance during a given period of time. If it rejects performance,
certain actions are started. If it accepts performance, no action is
taken.

\(1\) The basis for doing random sampling is MIL-STD-105D, *Sampling
Procedures and Tables for Inspection by Attributes* which is widely
understood and used by both the government and contractors. It is based
on the concept of an attribute. An attribute is a feature of a service
which either does, or does not, match a standard (For example, a taxi is
on time or it is not on time).

\(2\) When sampling by attributes, a certain number of observations will
match the standards and the remaining number will not match. Therefore,
attribute sampling is useful for describing how a job is done, in terms
of defects per hundred observations, or percent defective. Using this
concept, sampling for a performance indicator can be developed by
proceeding through a number of formal steps based on MIL-STD-105D. The
use of these concepts is described in paragraph 4-3, Sampling Plan.

c\. ***Surveillance Checklists**.* Checklists are also used to check
contract performance. They must be used sparingly, however. The use of
the MIS and random sampling are preferred information sources.
Checklists help in surveillance of contract requirements that happen
infrequently. (For example, if a contractor is required to perform a
service once a month, this service would be included on a checklist).
Any service that is not provided on a daily basis should be considered
for inclusion on a checklist unless a MIS can be used to determine the
quality of the service.

d\. ***Formal Customer Complaints**.* Even the best surveillance plan
will not allow the QAE to check all aspects of the contractor's
performance.

\(1\) Formal customer complaints are a means of documenting certain
kinds of service problems. The way to get and document customer
complaints needs to be carefully planned by the persons checking the
service contract.

\(2\) Customer complaints are not truly random. They are seldom used to
reject a service or deduct money from the contractor.

\(3\) When random sampling is the chosen method of surveillance, a
customer complaint cannot be used to satisfy a random observation.
However, it can be used as further evidence of unsatisfactory
performance if random sampling shows that the specific service is
unsatisfactory. These complaints can be used to decide if action other
than a deduction should be taken.

\(a\) ***Getting* *Customer* *Complaints***. An aggressive customer
complaint program, once established, needs to be briefed to every
organization that receives the contractor's services. An operating
instruction should be given to each organization outlining the customer
complaint program, the format and the content of a formal customer
complaint, and the actin which can be expected from those assigned to
watching and managing the service contract.

\(b\) ***Documenting* *the* *Customer* *Complaint***. Normally, each
customer complaint is brought, either in person or by telephone, to the
person checking contract performance. Enter information about the
complaint into a Customer Complaint Record, similar to the sample shown
in figure 4-1. The record contains the following information:

[1]{.underline} Date and time of complaint.\
[2]{.underline} Source of complaint \-- organization and individual.\
[3]{.underline} Nature of complaint (narrative description)\
[4]{.underline} Contract reference of complaint related services.\
[5]{.underline} Valid complaint (Yes or No).\
[6]{.underline} Date contractor informed of complaint.\
[7]{.underline} Action taken by contractor.\
[8]{.underline} Signature of person receiving and validating the
complaint.

#### 4-3. \-- Sampling Plan.

As a rule, a plan contains information on the acceptable quality level,
lot size, sample size, and rejection level. It states the number of
units form each lot to be inspected (that is, the sample size). It also
states the criteria for determining the acceptability of the lot
(acceptance and rejection numbers). This information is used to build
the sampling guide which are the major products in a surveillance plan
for a service contract.

a\. ***Beginning* *the* *Plan***. To begin building a sampling plan, go
to the Performance Requirements Summary developed during the "Write
Statement of Work" step, chapter 3, figure 3-1.

\(1\) This chart contains the required services, the standards, and
acceptable quality levels. At this time decide how the services will be
checked (what information source or method of surveillance will be
used).

\(2\) Show these decisions on the chart. For each service where random
sampling is used, complete the steps described below.

Figure 4-1. \-- Customer Complaint Record

+-----------------------------------------------------------------------+
| Customer Complaint Record                                             |
+-----------------------------------------------------------------------+
| Date and time of Complaint:         21 Jan 1979 /:1005                |
+-----------------------------------------------------------------------+
| Source of Complaint:                                                  |
|                                                                       |
| Organization:  382 Bomb Wing/LGC                                      |
|                                                                       |
| Individual:  Capt. John Murry                                         |
+-----------------------------------------------------------------------+
| Nature of Complaint:  Called wrecker and it did not arrive until 3    |
| hours after the request.                                              |
+-----------------------------------------------------------------------+
| Contract Reference:  F5, para. 5.1.1.2.5 and Performance Requirements |
| Summary                                                               |
+-----------------------------------------------------------------------+
| Validation:  Contract requires a 1 hour response time.  complaint is  |
| valid                                                                 |
+-----------------------------------------------------------------------+
| Date and Time Contractor Informed of Complaint:  21 Jan 79/: 1030     |
+-----------------------------------------------------------------------+
| Action Taken by Contractor:                                           |
|                                                                       |
| Contractor had a person out sick and did not have a back up driver.   |
| He now has not developed a roster of back up drivers who can operate  |
| a wrecker.                                                            |
+-----------------------------------------------------------------------+
| Received and Validated By:  H. Smyth/QAE                              |
+-----------------------------------------------------------------------+

b\. ***Deciding* *on* *the* *Acceptable* *Quality* *Level* (*AQL*).**
The AQL is the highest number of defects per hundred, highest percent
defective or highest number of defects that can be allowed for any
service performance indicator. There are only a limited number of AQLs
listed in MIL-STD-105D but, in virtually all cases, one will be close
enough to control the contractor's level of service.

\(1\) The first step in designing a sampling plan under MIL-STD 105D is
the selection of a realistic AQL. No service can be perfectly performed.
The AWLs placed on the Performance Requirements Summary in figure 3-1,
must be adjusted at this time.

\(2\) Find the closest AQL from figure 4-2 and use it to replace the
original AQL on the Performance Requirement Summary. For example, the
AQL for taxi service might have been 5 percent. This would be changed to
4 percent of 6.5 percent since 5 percent does not appear in the figure.

c\. ***Determining* *the* *Lot* *Size***. To determine the sample size,
the lot size must be known. the lot is how often the contractor provides
the service in a period of time.

\(1\) To determine the lot size, estimate (or count) the frequency of
the service to be sampled, during the period it is to be sampled. Thus,
if scheduled bus service timeliness is the service being sampled, and a
sample is taken each month, the lot size is the number of times that are
available during the month to observe bus timeliness. In this case, it
would be the number of times the buses go around all the routes each
day, multiplied by the number of days in each moth on which the bus
routes operate.

\(2\) In the case of workorders, the monthly lot size can be estimated
from historical information on file. The projected workload data
gathered in chapter 2 is used to help determine lot sizes.

d\. ***Determining* *the* *Sample* *Size***. Use figure 4-3 to identify
an appropriate sample size for a given lot size.

\(1\) Use the normal sample size column u unless there is a limited
number of QAEs or unless the cost of an inspection suggests the use of
the medium or small sample size column.

\(2\) Use the medium or small sample size, if inspections for a
particular service are lengthy or hinder the contractor's ability to
provide service to customers.

Figure 4-2. \-- List of MIL-STD-105D Acceptable Quality Levels

  ----------------------------------- -----------------------------------
  **Allowable Acceptable Quality      
  Levels**                            

  0.010%                              1.0%

  0.015%                              1.5%

  0.025%                              2.5%

  0.040%                              4.0%

  0.065%                              6.5%

  0.10%                               10.%

  0.15%                               15.%

  0.25%                               25.%

  0.40%                               40.%

  0.65%                               65.%
  ----------------------------------- -----------------------------------

 Figure 4-3. \-- Sample Size

  ----------------- ----------------- ----------------- -----------------
  **Lot Size**      **Normal Sample** **Medium Sample** **Small Sample**

  2-8               2                 2                 2

  9-15              3                 2                 2

  16-25             5                 3                 3

  26-50             9                 5                 5

  51-90             13                5                 5

  91-150            20                8                 8

  151-280           32                13                13

  281-500           50                20                13

  501-1.200         80                32                20

  1,201-3,200       125               50                32

  3,201-10,000      200               80                32

  10,001-35,000     315               125               50

  35,001-150,000    500               200               80

  150,000-500,000   800               315               80

  500,000 and over  1250              500               125
  ----------------- ----------------- ----------------- -----------------

e\. ***Selecting* *the* *Rejection* *Level***. Use MIL-STD-105D to
identify the acceptance and rejection level for the sample size (see
figure 4-4. To use the figure, begin with the known values for the AQL
and the sample size.

\(1\) Find the selected sample size (in the sample size column) and read
across that line to the column for the selected AQL. At that point there
will either be two numbers or an arrow pointing up or down.

\(2\) If there is an arrow, follow the direction of the arrow until it
leads to a pair of numbers. Of the two numbers at the intersection or at
the end of the arrow, the number on the left (AC or accept) indicates
the maximum number of defects which can occur in a sample and still
permit the total size of 20, the sample size would become 32.

\(4\) The number on the right (Re or reject) indicates the minimum
number of defects that occur in a sample which causes the total group or
lot to be judged unacceptable. For example, suppose the sample size is
determined to be 32 and the AQL has been set at 6.5 defects per hundred.
Find the number 32 in the sample size column and read across that line
until the AQL column for 6.5 has been reached. The two numbers at that
intersection are 5 and 6.

\(a\) In other words, the number on the left, 5, is the number of
defects which can be found in a sample and still permit acceptance of
the lot.

\(b\) The number 6, to the right of 5, is the smallest number of defects
needed to declare the lot unacceptable and subject to further check,
using the decision tables.

#### 4-4. \-- Developing the Sampling Method.

The final thing to be decided in sampling is how the sample will be
drawn. The objective in the method is to insure that the sample is
random (that is, that all services have an equal chance of being
selected). To achieve random selection, use a random number table, as
explained in the following examples (see attachment 1 for the whole
table). Most items will fall into one of these examples.

Figure 4-4. \-- MIL-STD-105D Acceptance, Rejection Levels for Normal
Inspection

***Note: See Hardcopy for figure 4-4***

Figure 4-5. \-- How to Use a Random Number Table

![](media/image6.png){width="6.498611111111111in"
height="7.498611111111111in"}

a\. ***Use* *of* *the* *Random* *Number* *Table***. The random numbers
in figure 4-5 are arranged in groups of five numbers (51259, 77452, and
so on).

\(1\) To use the table, begin by picking at random a group of numbers on
any page of the table. This is usually done by closing the eyes and
pointing with a pencil or finger to some initial group.

\(2\) To identify additional random numbers, follow a pattern. Go along
a given line to its end and then along the next line to its end and so
on through the table until enough numbers have been selected or until
the table ends.

\(3\) If the table ends and there are still more numbers to select, go
back to the beginning of the table and continue using the same pattern.
Use various patterns alternately; for example, use lines for one sample,
use columns for the next sample, and use a diagonal pattern for the
third sample.

b\. ***How* *to* *use* *the* *Random* *Number* *Table* *to* *Identify*
*a* *Random* *Sample* *of*** ***Consecutively* *Numbered*
*Workorders***. Suppose one has to identify a random sample of 3
workorders for inspection. This can be done at the beginning of the
month (before the workorders are written) or at the end of the month (to
select workorders already on file).

\(1\) If there are, or might be, 200 workorders to select from, then one
begins by listing the lowest workorder number (known or projected). This
could be #001 or possibly #743, for example.

\(a\) List the highest workorder number (known or projected); in this
case, it could be #200 or #943. With these boundaries now enter the
random number table to the first group of numbers. For this example, use
workorders numbered #743 to #943.

\(b\) If the last three digits in the first group of random numbers is
not between 743 and 943, discard that group of numbers and go to the
next group.

\(2\) Again, using figure 4-5, if one starts at the initial 77452,
disregard the two numbers to the left of the three significant digits,
or in this case, 77. The remaining number is 452. Since this is not
between 743 and 943, go to the next group in the same line which is
16308, again, discard the leftmost two numbers, and the number is 308.
This is again too low.

\(3\) Go to the next number, 60756. The last part of this number, 756,
falls within the brackets one is looking for, so workorder 756 is
selected to be sampled. The next random number group is 92144. Since 144
is not within the brackets, move to the next group 49442. Again, 442 is
not within the brackets and therefore is not selected to be sampled.

\(4\) Tlected.his process would be continued until three workorders are
se

c\. ***How* *to* *Use* *The* *Random* *Number* *Table* *to* *Identify*
*Random* *Sample* *From* *a* *List***. If a number of items need to be
sampled that are not consecutively numbered, the simplest solution is to
list the identifiers, for all the items in the lot, in a column, on a
piece of lined paper.

\(1\) Next, number the lines consecutively, beginning with the number
one hundred. Now use the random number table to draw the sample from the
line numbers. A selected line number leads to the identifier located on
that line and that identifier tells which item to sample. For example,
if one chooses to sample a set of workorders with attached sales slips,
one is not going to have to have a set of consecutively numbered
workorders because not every workorder has a sales slip attached.

\(2\) List the workorders with sales slips in a column, number each line
in the column, and randomly select enough line numbers to make up the
sample.

d\. ***How* *To* *Use* *The* *Random* *Number* *Table* *to* *Identify*
*a* *Random* *Sample* *of* *Days*.** Suppose one wants to identify 4
days in the month on which to sample something. The days of the month
can be numbered 01 to 31 (or less, as appropriate). Begin in the random
number table in figure 4-5 at 77452.

\(1\) It is best to use a starting point different from the one used in
the previous example but for the purpose of this example it is being
used again.

\(2\) One can move down the column from random number group to random
number until the first number between 01 and 31 is spotted. In this
case, it is 23216 or, using the rule to discard the numbers to the left
of the number or digits, simply 16. Thus the 16th day of the month is
selected for sampling.

\(3\) Continuing in this fashion, one discovers that 58731, or simply
31, or the 31st, is the next day for sampling. Proceed in this manner
until the four days for sampling have been identified

\(4\) If it is not desirable to sample on weekends, discard those days
selected that happen to fall on a weekend and continue that selection
until the proper number of days has been selected.

e\. ***How* *to* *Use* *the* *Random* *Number* *Table* *to* *Identify*
*a* *Random* *sample* *of* *Times* *of*** ***Day***. If one wants to
select random times of day to sample a service such as taxi or bus
service, use the 24 hour clock.

\(1\) If there are any constraints during each 24-hour period, take them
into consideration. For example, suppose that base bus service operates
between 0700 and 2345. In this case, go through the number table until
one finds a group of four numbers that correspond to an acceptable time
between 0700 and 2345. Again, using figure 4-5, and proceeding across
the line from the initial number, one comes to 60756 or 0756 hrs as the
first random time.

\(2\) The next random number 92144 or 2144 hrs. The number is good and
so one schedules an observation for 2144 hrs.

\(3\) Proceed in this manner until the desired number of sample time
shave been identified.

f\. ***How* *to* *Insure* *Variety* *in* *the* *Use* *of* *the* *Random*
*Number* *Table***. The use of variety in the random table ensures that
detectable patterns do not occur.

\(1\) Besides starting at different random points and alternating the
patterns for finding a string of random numbers, the user may, at some
point in time, wish to use the first significant digits instead of the
last.

\(2\) For instance, in the random number group 77452 one has customarily
used the last three digits (that is, 452) when looking for a random
number with three digits. But there is no reason why one could not for a
period of time use the first three digits, of 774.

\(3\) Success in using the tables requires consistency but also variety.
the above information should ensure that the tables are properly used
and that the sample is randomly drawn.

#### 4-5. \-- Surveillance Plan Products.

Several written documents are included in a surveillance plan:

a\. ***Sampling* *Guides***. A sampling guide is used for surveillance.
It is used in a surveillance plan to present the information needed to
sample the performance of a particular service. Information for the
sampling guide is developed while the sampling information is being
derived for the sampling plan. The steps involved in developing sampling
information are described in paragraph 4-3. As shown in figure 4-6, a
sampling guide has these sections:

\(1\) A statement of the AQL and its meaning in layman's terms.

\(2\) The lot size for sampling.

\(3\) The sample size.

\(4\) A description of the sampling procedure which tells how the
service will be sampled.

\(5\) An explanation of the inspection procedure which tells what will
be checked during the inspection of the sample.

\(6\) Acceptable performance criteria which states the acceptance and
rejection levels.

b\. ***QAE* *Decision* *Tables***. Once a problem has been discovered,
the inspector must turn to a decision table and use the information in
that table to aid him in finding the source of the problem. The decision
table lists the symptoms of the problem and identifies the possible
sources of the problem. Questions are established for each potential
source to determine the contributing factors. A decision logic entry is
worked up for each required service. As soon as it is considered
satisfactory, the information is transferred to the decision table. An
example of a decision logic entry is shown as part of a decision table
in the sample in figure 4-7.

c\. ***Checklists*.** There are two main uses for checklists.

\(1\) ***Tally Checklists.*** Tally checklists are used to document all
sample observations made during a sampling period. Checklists may be
preprinted with any format which contains the following information:

\(a\) Contract requirements \-- a statement of the service being
inspected.

\(b\) Date, time, entry for each observation.

\(c\) Observation identifier of applicable workorder number, bus stop,
or sales slip number, meal period, etc.

\(d\) Result of observation \-- satisfactory or defective.

\(e\) Any pertinent comment for an observation. An example of a
checklist for sampling is shown in figure 4-8.

\(2\) ***Surveillance* *Activity* *Checklists***. When a specific
service or procedure occurs rarely or is not important enough to survey
on a continuing basis, use a Surveillance Activity Checklist. This type
of checklist must be prepared and included in the surveillance plan. An
example of this kind of checklist is shown in figure 4-9.

Figure 4-6. \-- Sampling Guide

VO Sampling Guide #3\
Vehicle Condition Monitoring

**1.** **[*Acceptable* *Quality* *Level* (*AQL*):]{.underline}** TO%

In the long run there must be no more than 10 defects per hundred
vehicles.

**2.** **[*Lot* *Size*]{.underline}**: \_\_\_\_\_ vehicles operated by
the contractor.

**3.** **[*Sample* *Size*]{.underline}**: \_\_\_\_\_ vehicles operated
by the contractor.

**4.** **[*Sampling* *Procedure*]{.underline}**:

At the beginning of the month, list the registration numbers of all
contractor operated vehicles on a sheet of ruled paper. Beginning with
the number 100, number the lines on the paper to correspond with the
vehicle registration numbers. Using the random number table select line
numbers equal to the sample size. The vehicle registration numbers on
these lines indicate the vehicles to be sampled during the month.
Schedule the inspections evenly over the month.

**5.** **[*Inspection* *Procedure*]{.underline}**:

Inspect the vehicles using vehicle/equipment discrepancy and maintenance
report as a guide (see AFM 77-310, Vol II, Chap 6). Record defects per
vehicle for each of the inspected vehicles. Any defects found not
already noted by the contractor shall cause the observation to be
recorded as unsatisfactory.

**6.** **[*Performance* *Criteria*]{.underline}**:

a\. Performance is acceptable when \_\_\_\_\_ or less defective vehicles
are discovered per month.\
b. Performance is unacceptable when \_\_\_\_\_ or more defective
vehicles are discovered during a month.

**7.** **[*Phase*-*In*-*Period*]{.underline}**: During the first two
months of the contract the following AQL's (paragraph 1) and performance
criteria (paragraph 5) apply:

a\. AQL: 15%.\
b. Performance is acceptable if \_\_\_\_\_ or fewer defects are
discovered per month.\
c. Performance is acceptable if \_\_\_\_\_ or more defects are
discovered per month.

Figure 4-7. \-- QAE Decision Table

  --------------- -------------------- --------------- -------------------------
  **If the        **Probable Cause\    **Which Could\  **Suggested Review
  Contractor's\   Factors/Impacting\   Result From:**  Procedures and/or
  Deficiency      Conditions are:**                    Preventive Measures\
  is:**                                                is/are:**

  Vehicle out of  High vehicle down\   Poor control    Review PCNs N310032,
  commission      for maintenance      over work       N310030, or N310031 for
  hours too high  hours (VDM)          documentation   individual vehicles
                                                       reflecting VDM hours in
                                                       excess of the reporting
                                                       period available hours.
                                                       If this condition exists,
                                                       it is usually found that
                                                       two or more work orders
                                                       were in "open" status for
                                                       the same vehicle at the
                                                       same time. Normally
                                                       results from failure to
                                                       ensure "close" of a
                                                       particular work order,
                                                       and not reviewing the PCN
                                                       N310018, Work Order
                                                       Master File Status Report
                                                       Previous to initiating a
                                                       new work order.
                                                       (Frequently noted when
                                                       two or more work orders
                                                       were required to satisfy
                                                       contract maintenance work
                                                       requirements).\
                                                       \
                                                       Are changes from VDM to
                                                       VDP status accomplished
                                                       in a timely manner?

                                       Insufficient    Review PCN N310032 for
                                       manning         individual vehicle data
                                                       reflecting a very low
                                                       ratio of direct labor
                                                       compared to VDM hours
                                                       accrued. One prime
                                                       indicator of this problem
                                                       prevailing is when
                                                       "Estimated Times in
                                                       Commission" (ETIC), is
                                                       constantly slipped. (When
                                                       work is hardly ever
                                                       completed within
                                                       time-frame allotted by
                                                       labor hour estimates.

                                       Improper\       Determine the
                                       control over    appropriateness of
                                       work flow       workflow prioritizing and
                                                       the disruptive effect
                                                       caused by over-reacting
                                                       to unrealistic
                                                       application of
                                                       priorities, such as
                                                       shifting technicians from
                                                       one vehicle to another,
                                                       shuffling vehicles from
                                                       one location to another
                                                       for shop spaces, etc.
  --------------- -------------------- --------------- -------------------------

#### 4-6. \-- Contract Administrators Plan.

The contract administrator has an obligation to see how well the QAE is
doing the job. The contract administrator must also make some
independent checks of contractor performance, preferably by using the
same techniques that go into the design of the QA surveillance plan.
(This plan is completed at the same time as the surveillance plan). As a
minimum this plan must call for a quarterly review of the QAE's use of
sampling guides and an annual review of surveillance activity checklist
items.

Figure 4-8. \-- Sample Tally Checklist

  ----------------- ---------- ----------- ------------------ -------------------- -------------
  **Vehicle                                                                        
  Operations                                                                       
  Sampling Guide                                                                   
  #3**                                                                             

  **Vehicle                                                                        
  Conditioning                                                                     
  Monitoring**                                                                     

  **Registration\   **Date**   **Time**    **Satisfactory**   **Unsatisfactory**   **Remarks**
  Number**                                                                         

  B 7305            2 Oct      1530        X                                        

  B 9763            2 Oct      1540                           X                    Hood latch
                                                                                   KLG

  B 8764            2 Oct      1545        X                                        

  B 0010            5 Oct      0900        X                                        

  B 8764            5 Oct      0915        X                                        

  B 7707            5 Oct      1345        X                                        

  B 7706            5 Oct      1400        X                                        

  B 9654            8 Oct      1000        X                                        

  B 8752            8 Oct      1025                           X                    Door handle
                                                                                   KLG

  B 3103            8 Oct      1045        X                                        

  B2758             8 Oct      1600        X                                        
  ----------------- ---------- ----------- ------------------ -------------------- -------------

Figure 4-9. \-- Surveillance Activity Checklist

  --------------------------- ---------------- ---------------- ---------------- ---------------- ----------------
  **Surveillance Activity                                                                         
  Checklist\                                                                                      
  (To be performed                                                                                
  (Daily)(Weekly)(Monthly),                                                                       
  etc.)**                                                                                         

  **Vehicle Authorization                                                                         
  Utilization Board (VAUB)**                                                                      

  **Contract\                 **Contract\      **Method of\     **Date\          **Where\         **Compliance**
  Requirement**               Paragraphing**   Surveillance**   Accomplished**   Accomplished**   

  The contractor is required  F-5.5.1.2.3      The contractor                                      
  to hold a Vehicle                            should have in                                     
  Authorization Utilization                    his possession a                                   
  Board (VAUB) quarterly.                      copy of the                                        
                                               VAUB\                                              
                                               minutes.\                                          
                                               \                                                  
                                               There is no                                        
                                               specific format                                    
                                               for these                                          
                                               minutes in AFM                                     
                                               77-310 but                                         
                                               should conform                                     
                                               to the standard                                    
                                               format in AFR                                      
                                               10-1. Minutes                                      
                                               should                                             
                                               adequately                                         
                                               describe and                                       
                                               document actions                                   
                                               taken by VAUB.                                     

  The contractor is required  F-5.5.1.2.3.5    Verify approved                                     
  to develop a vehicle                         priority list.                                     
  priority list for VAUB                       It should have                                     
  approval.                                    the board                                          
                                               president's                                        
                                               signature and                                      
                                               date.                                              
  --------------------------- ---------------- ---------------- ---------------- ---------------- ----------------

 

### Chapter 5

### Doing Surveillance

#### 

#### 5-1. \-- Surveillance Methods.

This chapter tells how to do surveillance once the plan is written. It
tells how to build a monthly schedule, how to use the surveillance plan,
and what to do when there is poor contractor performance. This chapter
applies to Quality Assurance Evaluators (QAEs) and contract
administrators.

#### 5-2. \-- Building a Schedule.

A surveillance plan is organized to facilitate use by the QAE. The QAE
is responsible for developing a monthly schedule for activities, based
on the surveillance plan's requirements. Complete the Quality Assurance
Evaluator Schedule by the last workday of the preceding month and send a
copy to the contract administrator and the functional area chief for
their information and review. Each QAE builds a schedule by filling in
the blocks on the schedule. Specific instructions for filling out the
schedule are provided below.

a\. ***Quality* *Assurance* *Evaluator* *Schedule***. An example of a
surveillance schedule is shown in figure 5-1. The left-hand side of the
schedule divides the sheet into days of the week. This example shows
only a 7-day schedule. The QAE must make up enough sheets to include
each day of the moth. Along the top of the schedule, insert the items to
be checked during the month. Along the bottom of the schedule, indicate
the number of observations to be made during the month (that is, how
often a MIS is checked, how many samples will be taken, how often a
surveillance checklist will be used).

b\. ***Filling* *In* *And* *Updating* *the* *Schedule***. To fill in the
inspection schedule, the QAE refers to the sampling guide for each
service being monitored. The sampling guide is used with the random
number table to determine the inspections (observations) to be made
during the month (see chapter 4, paragraph 4-4).

\(1\) Contract surveillance must cover all hours of operation. Random
observations are scheduled at night, on weekends and holidays when
services are performed during these periods. Areas that are monitored on
a set schedule (for example, VIMS standards and analysis reports) are
included in the monthly schedule. This monthly schedule shows where and
what the QAE is monitoring at all times.

\(2\) Post any changes to the schedule weekly and send copies to the
contract administrator and to the functional area chief. Document and
explain the reasons for each change. Actual surveillance activity
recorded on the surveillance checklist must be comparable to the monthly
schedule.

\(3\) As updated, one must be able to conduct a complete audit trail
from the monthly schedule, to observing the QAE perform sampling, to
completion of the surveillance checklist.

\(a\) There must also be a correlation between contractor performance
versus standards, AQLs, checklists and action taken by the contract
administrator. The sample in figure 5-1 shows the schedule for one week.
The QAE completes the blank forms, indicating week of (Monday through
Sunday), and enters the time, observation, and check (if pertaining to a
checklist), in the blocks corresponding to the item and day.

\(b\) After it is completed and filled in, this form is "For Official
Use Only" and [must]{.underline} [not]{.underline} be shown to the
contractor.

Figure 5-1. \-- QAE Surveillance Schedule

  --------------- ---------- ----------- ---------- ---------- ---------- ---------- ---------
  QAE                                                                                
  Surveillance                                                                       
  Schedule                                                                           
  Week of :  1                                                                       
  thru 7 Jan 78                                                                      

  Day             VO         VO Sanpling VO         VM         VM         RA         Check AF
                  Sanpling   Guide #2    Sanpling   Sanpling   Sanpling   Sanpling   Forms 15
                  Guide #1               Guide #3   Guide #1   Guide #2   Guide #2   

  1 Jun                      :2215/9\    B7125\     7320\                             
                             :2345/54    B6704      7340\                            
                                                    7345                             

  2 Jun                      :0715/63\   B4392\     7350\      :0900                  
                             :0815/2     B8763      7370\                            
                                                    7400                             

  3 Jun           Leave                                                              

  4 Jun           :0915\     :0900/4\    B9763\                                       
                  :0956      :0915/59\   B8794\                                      
                             :1002/64\   B1001                                       
                             :1023/83                                                

  5 Jun           :1101                                        :1305                 X

  6 Jun           :0710\                                                              
                  :1022\                                                             
                  :1303                                                              

  7 Jun                                                                               

  Week Total      6          8           7          6          2                      

  Month Total     20         32          32         32         5          50          
  --------------- ---------- ----------- ---------- ---------- ---------- ---------- ---------

#### 5-3. \-- Doing Surveillance.

Doing surveillance involves using the surveillance plan called for in
the monthly schedule. Use the following procedure to record observations
and take action when the contractor's defects exceed the allowable
number.

a\. ***Recording* *Observations***. Monthly tally and surveillance
checklists are used for each sampling guide and less frequently checked
services. They are used to tally information on scheduled observations
and defects noted. Each observation in the sample is recorded on the
checklists, and the documents then become a formal government record for
later reference.

\(1\) When random sampling guides are used, the tally of observations
and defects at the end of each month are compared to the acceptable
number of defects appearing in the sampling guide.

\(2\) The contractor is told each time an error is found during
scheduled observations and asked to initial the observation recorded on
the checklist.

\(3\) Errors found in services not scheduled for observation should be
brought to the contractor's attention but not used to count as a defect
for determining if the AQL has been met.

\(4\) Checks done with a surveillance activity checklist are likewise
recorded.

b\. ***Potential* *Unsatisfactory* *Performance***. If the sampling
guide or surveillance activity checklist indicates that the number of
defects is too high, the QAE goes to the decision table for that service
indicator.

\(1\) The QAE must locate the specific service that is unsatisfactory.
The table will identify the possible causes of the unsatisfactory
performance and list a number of questions which, if answered, will
probably pinpoint the source of the problem.

\(2\) The decision table helps the QAE identify the problem so that,
among other things, a meaningful evaluation can be made of the
contractor's explanation and corrective action. For example, if the
contract specifies a maximum out-of-commission rate for vehicles of 8
percent, and the rate was 10 percent, examination may reveal the excess
was caused by excessive vehicle down for parts (VDP). This could have
been caused by the government's inability to provide timely parts
support.

\(3\) In such a situation, the contractor may not be at fault. If, on
the other hand, the excessive VDP was created because the contractor
ordered the parts on a routine priority rather than priority, it might
be the contractor's fault. The decision tables will assist the QAE in
making such a determination.

c\. ***Documenting* *Unsatisfactory* *Performance***. If performance in
any area is judged unsatisfactory, the contractor is required to respond
to a Contract Discrepancy Report (CDR). See sample in Figure 5-2.

\(1\) The QAE prepares the form and sends it to the contracting officer,
who signs and sends it to the contractor.

\(2\) When completed and signed, the report, along with the tally
checklist or surveillance activity checklist become the documentation
supporting payment, nonpayment, or other necessary action.

#### 5-4. \-- Taking Action.

The QAE may check the contractor's performance and document any
non-compliance, but only the contracting officer may take formal action
against the contractor for unsatisfactory performance.

Figure 5-2. \-- Contract Discrepancy
Report![](media/image7.png){width="6.489583333333333in"
height="8.40625in"}

a\. ***Ground* *Rules***. This section lists the normal steps to be
taken by contract administration when the QAE reports these
deficiencies. The actions listed are not hard-and-fast rules, and are a
minimum. More serious action can be taken sooner.

\(1\) When the contractor's performance is unsatisfactory as defined in
the surveillance plan and a formal action is indicated, the QAE, the
functional area chief, and the contract administrator meet to determine
what action is appropriate for the specific circumstances.

\(2\) If a decision is reached not to take a monetary deduction, the
reasons are documented. The contracting officer must indicate agreement
with the decision by signing the contract discrepancy report or other
decision documentation.

b\. ***Actions***. Following are the actions normally taken when poor
performance is found.

\(1\) As a rule, the QAE tells the contractor's site manager, in person,
when discrepancies occur and asks the contractor to correct the problem.
The QAE makes a notation on the tally or surveillance checklist, of the
date and time the deficiency was discovered, and has a contractor
representative initial the entry on the checklist.

\(2\) If the number of discrepancies found exceeds the level for
satisfactory performance, the QAE uses the decision tables in the
surveillance plan to determine the cause(s).

\(a\) If the government created any of the discrepancies, these are not
to be counted against the contractor's performance.

\(b\) When the government has caused the contractor to perform in an
unsatisfactory manner. the QAE prepares a letter to be sent to the
responsible organization requesting corrective action be taken. The QAE
sends it to the organization through the contracting officer.

\(3\) When the contractor is responsible for exceeding the limits of
satisfactory performance, the contracting officer issues a contract
discrepancy report (CDR) to the contractor (see paragraph 5-3c). If the
failure is serious enough, issue the CDR at the time of the
unsatisfactory performance, rather than at the end of the month.

\(4\) When a CDR is issued for a specific service the contracting office
deducts from the month's payment, an amount up to the percentage
indicated in the Performance Requirement Summary exhibit of the
contract. Do not delay the deduction until the contractor responds to
the CDR. If surveillance was done right and the decision tables used,
the unsatisfactory performance is clearly the fault of the contractor.
For a specific example of a deduction, see paragraph 5-5.

\(5\) If the contractor does not achieve satisfactory performance in
that specific service by the end of the next month, the contracting
officer issues another CDR and deducts the appropriate amount from the
contractor's payment.

\(6\) If a third CDR must be issued, consider issuing a cure notice.
(However, a cure notice can be issued sooner, if necessary).

\(7\) Depending on the contractor's overall performance, the government
may issue a Show Cause letter if the reply to a cure notice is
unsatisfactory; next consider terminating the contract.

Figure 5-3. \-- Deducting for Non-Performance

  ----------------- ------------------------ ---- -----------------------
  ***Deduct*                                      
  *Formula*                                       
  (*Example*)**                                   

  If:\              Quality of completed          
  and:\             work is unsatisfactory        
  and:\             (AQL of 6.5% exceeded)\       
  and:\             Contract Price is             
  and:              \$100,000 per month\          
                    Quality of completed          
                    work deduct percentage        
                    is 10%\                       
                    Sample size is 50\            
                    Number of defects in the      
                    sample is 10 (Reject          
                    number is 8)                  

  Then:             Deduction from the            
                    current month's invoice       
                    is:                           

                    Contract price\          =\   \$100,000\
                    X Deduct Percentage\     =\   [         
                    X Percent of sample      \    .10]{.underline}\
                    defective\               \    \$10,000\
                    Deduction                =    [          .20\
                                                  ]{.underline}\$2,000
  ----------------- ------------------------ ---- -----------------------

#### 5-5. \-- Deductions For Non-Performance.

Through the Inspection of Services clause, the government can deduct
from a contractor's payment an amount equal to the services not
provided.

a\. To do this, the contract administrator must know the major cost
categories in the contract and the percentage of cost each service
output represents. The percentage cost of each service is found in
deduct analysis; see chapter 2, paragraph 2-9. An example of how the
deduct formula works is shown in figure 5-3.

b\. Suppose the bid schedule showed the monthly contract price for
vehicle operations, maintenance, and analysis as shown. The percentage
cost of the service output is then found by looking at the Performance
Requirements Summary Technical Exhibit in the contract statement of
work. In the example, the percentage cost of quality of completed work
is 10 percent. This is then multiplied by \$100,000 to obtain the
maximum amount of deduct.

c\. If completed work was unsatisfactory during the month (that is, did
not meet performance values) and the percent of the sample found bad was
20 percent, \$2000 would be deducted from the payment normally due the
contractor.

d\. This amount for quality of completed work is deducted because the
contractor failed to provide reliable, uniform services within the
assigned performance values. Although some completed work may have met
the standard during the month, the acceptable quality level was not met
and at least 20 percent of the observations were defective. Hence, the
total quality performance requirement has not been achieved. As a
consequence, the service output is unsatisfactory.

#### 5-6. \-- Good Performance.

When a contractor's quality control program works, good performance
results. If the result of a QAE's surveillance shows consistently good
performance, the amount of surveillance can be decreased.

a\. ***Reduced* *Inspection***. Inspection can be reduced when the
following conditions have been met for a sampling guide.

\(1\) The preceding 4 lots (that is, the last 4 months) have all been
acceptable.

\(2\) The number of defects in each of the preceding 4 lots is less than
one half of the acceptance number. For example, with an AQL of 6.5
percent and a sample size of 32, the acceptance number is 5. If two or
less defects ere found in each of the last 4 lots, reduced inspection
could be used.

\(3\) The normal sample size is being used.

\(4\) The functional area chief and the contract administrator agree to
use reduced inspection.

b\. ***Reduced* *Sample* *Size* *and* *Acceptance* *or* *Rejection*
*Numbers***. Reduced inspection decreases the sample size as shown in
figure 5-4. In addition, the acceptance and rejection numbers change as
shown in figure 5-5. To make the changes to the existing sampling guide,
take the following steps.

\(1\) Make sure that the original sampling guide was using the normal
sample size. To determine this, see Chapter 4, figure 4-3 and compare
the lot size with the sample size in the sampling guide.

\(2\) Find the new sample size by using figure 5-4. Take the lot size
and find the new reduced sample size.

\(3\) Using the AQL in the sampling guide and the new reduced sample
size, see figure 5-5 for the new acceptance and rejection numbers. Note
that there is a gap between the acceptance and rejection numbers (for
example, sample size 32 and AQL 6.5 percent, accept is 5 and reject is
8). This means that the lot would not be rejected unless 8 defects were
found and would be accepted if 5 or less defects were found. However, a
number of defects greater than five will be cause for returning to
normal inspection (that is, return to the sample size and acceptance and
rejection numbers used in the original sampling guide).

c\. ***Returning* *to* *Normal* *Inspection***. When reduced inspection
is in effect return to normal inspection the next month under the
following conditions.

\(1\) When the number of defects exceeds the acceptance number under
reduced sampling or,

\(2\) The functional area chief and the contract administrator deem it
necessary to return to normal inspection.

d\. ***Returning to Reduced Inspection.*** If during the first month of
the return to normal inspection, the number of defects found is again
less than 50 percent of the reject level, a return to reduced inspection
may be done the next month. If the number of defects found is over 50
percent, then normal sampling must be accomplished until 4 months of
less than 50 percent of reject level defects are found.

Figure 5-4. \-- Reduced Sample Size

  ----------------------- ----------------------- ------------------------
  **Lot Size**            **Normal Sample Size**  **Reduced Sample Size**

  2-8                     2                       2

  9-15                    3                       2

  16-25                   5                       2

  26-50                   8                       3

  51-90                   13                      5

  91-150                  20                      8

  151-280                 32                      13

  281-500                 50                      20

  501-1,200               80                      32

  1,201-3,200             125                     50

  3,201-10,000            200                     80

  10,001-35,000           315                     125

  35,001-150,000          500                     200

  150,001-500,000         800                     315

  500,001 and over        1250                    500
  ----------------------- ----------------------- ------------------------

######### Figure 5-5. \-- MIL-STD-105D Acceptance Rejection Levels for Reduced Inspection

***Note: See Hardcopy for MIL-STD-105D Acceptance Rejection Levels for
Reduced Inspection***

#### 5-7. \-- Documentation.

During the course of the contract the QAE retains a copy of all
inspection schedules, tally checklists, and surveillance activity
checklists. At the end of the contract period, the QAE forwards these
records for inclusion in the contract file. However, when a specific
service becomes unsatisfactory during a surveillance period, the
inspection documentation supporting the contract discrepancy report is
forwarded to the contracting officer no later than 5 days after the end
of the previous performance period.

### Chapter 6

### Quality Control and Preaward Surveys

#### 

#### 6-1. \-- Quality Control Clause.

Each standard SOW contains a contractor quality control clause. This
clause provides specific implementation of the standard Inspection of
Services clause normally present in service contracts.

a\. Contracting officers must pay particular attention to this
requirement during the preaward survey and must make sure that the
contractor provides a written quality control program prior to the
contract start date.

b\. To aid contractors in developing a quality control program, the
contracting officer must provide the government Quality Assurance (QA)
Surveillance plan along with the Invitation for Bids or Request for
Proposal.

c\. Make sure to mark the QA surveillance plan with the following
statement: "For Information Purposes Only. This Quality Assurance
surveillance plan is not part of the Request for Proposal or Invitation
for Bids not will it be made part of any resulting contract." Use this
statement since the government must retain the right to change or modify
inspections methods.

d\. An example of a clause is as follows:

**[Quality Control]{.underline}**

a\. ***Quality* *Control***. The contractor shall establish a complete
quality control program to assure the requirements of the contract are
provided as specified. One copy of the contractor's basic quality
control program shall be provided to the Contracting Officer at the
preaward survey conference or not later than at the pre-performance
conference if a preaward survey is not conducted. An updated copy must
be provided the Contracting Officer on contract start date and as
changes occur. The program will include, but not be limited to the
following:

\(1\) An inspection system covering all the services stated in the
Performance Requirements Summary of the Statement of Work. It must
specify areas to be inspected on either a scheduled or unscheduled basis
and the individuals who will do the inspection.

\(2\) A method of identifying deficiencies in the quality of services
performed before the level of performance is unacceptable.

\(3\) A file of all inspections conducted by the Contractor and the
corrective action taken. This documentation shall be made available to
the Government during the term of the contract.

b\. ***Quality* *Assurance***. The Government shall monitor the
Contractor's performance under this contract using the quality assurance
procedures specified in the Performance Requirements Summary of the
Statement of Work.

#### 6-2. \-- Preaward Survey (PAS).

A SOW and a sound quality assurance surveillance plan go a long way
toward making sure that quality results come from a contract. The other
essential ingredient is a good contractor. The preaward survey helps the
government insure that it awards the contract to a qualified bidder. In
other words, the contractor must be responsible as well as having the
lowest price (or lowest evaluated price) before the government makes
award. The preaward survey is a method to determine responsibility.

#### 6-3. \-- Preaward Survey Clause.

Include a clause like the following, but adapted to the specified SOW:

***Financial* *and* *Technical* *Ability*.**

a\. If a bid submitted in response to this solicitation is favorably
considered, a two part preaward survey may be conducted to determine the
bidder's ability to perform. *[Part One]{.underline}* will be conducted
by (*[Insert name of office]{.underline}*) who may contact you to
determine your financial capability to perform. Current financial
statements and pertinent data should be available at that time. *[Part
Two]{.underline}* of the survey will be conducted at
(*[Name/Location]{.underline}*) shortly after bid opening by government
personnel.

b\. If a preaward survey is conducted, you will be requested to have
management officials, of the appropriate level, represent your firm. In
addition, your proposed project manager should be available to respond
to questions raised during the preaward survey. You should also be
prepared to present a briefing regarding the manner in which you intend
to accomplish your contractual obligations. As a minimum, you should
address the following items of information in your presentation (a
written copy of the presentation with the backup data below must be
submitted to the contracting officer 5 work days before the
presentation):

\(1\) Startup and phase-in schedule.

\(2\) Key personnel letters of intent and resumes.

\(3\) Availability of labor force, plan for recruiting, type and extent
of training.

\(4\) The role of the project manager and the extent of his/her
authority.

\(5\) Organizational and functional charts reflecting line of management
responsibility.

\(6\) Manning charts in a format requested by the contracting officer
(only to be used to ensure that you understand the workload).

\(7\) Plans and management procedures for logistical administrative
support of all functions; that is, contractor furnished supplies and
equipment and procedures for timely payment of personnel.

\(8\) Procedures to be used to ensure contract requirements are met
(quality control program).

\(9\) Corporate experience, as evidenced by past and present contracts.

\(10\) Other purchases for which you have bid and for which you are
apparent low bidder.

Some negotiated and two-step forms of contracting use technical
proposals to determine how well someone understands the statement of
work. Adapt the clause above and include it as evaluation factors in the
solicitation.

#### 6-4. \-- Preaward Survey Method.

The contracting officer makes the decision to conduct a preaward survey
based on knowledge of the bidder's past performance. When the
contracting officer decides to conduct a preaward survey the guidelines
in paragraphs 6-5 to 6-8 apply. These guidelines are not hard and fast
procedures and the contracting officer must adapt them to the specific
survey requirements.

#### 6-5. \-- Preaward Survey Team.

This team can be composed of either acquiring activity or outside office
support such as the Defense Contract Administration Service (DCAS) in
the Department of Defense or both. The PAS has two parts; that is,
financial and technical. The acquiring activity or the outside office
can run the technical part, the acquiring activity should supplement the
team with appropriate persons, such as the buyer, functional experts,
etc.

#### 6-6. \-- Outside Office and the Acquiring Activity Perform the PAS.

The buyer takes the following actions as soon after bid opening as
possible when an outside office performs the financial PAS and the
acquiring activity performs the technical PAS:

a\. Request the outside office to perform that part of the PAS that is
to be done by them (financial).

b\. Request information required by Financial and Technical Ability
clauses from the bidder. See paragraph 6-3 above.

c\. Send blank manning charts to the bidder for submission during the
PAS.

d\. Emphasize to the bidder the importance of having a detailed quality
control program for presentation at the PAS.

e\. Remind the functional person to have estimated manning charts
available for the PAS. These charts must estimate what contractor
manning would be required to perform the requirement. They may not
estimate what it would take government personnel to accomplish the
tasks.

f\. Coordinate the date of the PAS with the technical PAS team chief and
the contractor. Notify the contractor of the finalized date and location
of the PAS.

g\. Perform the PAS. Do all tasks in paragraph 6-7a thru d6-7g.

#### 6-7. \-- Technical Evaluation.

Perform the following tasks.

a\. Evaluate the adequacy of the financial PAS performed by the outside
office. Check the bidder's financial statements if they are submitted.

b\. Thoroughly analyze manning charts submitted by the bidder. The
following procedures apply:

\(1\) First, validate the government prepared contractor manning
estimates. Make sure the government did not overestimate.

\(2\) Next, compare the bidder's charts to the government estimate.
Insure that:

\(a\) Bidder's total manning is comparable to the estimate. A variance
of more than twenty percent should be considered suspect.

\(b\) The bidder has the right classes of employees on duty at the
appropriate times.

\(c\) The bidder has sufficient personnel on duty during peak or key
workload periods.

\(3\) Next, analyze the contractor's net bid to see if it will support
the level of manning proposed. Use the following procedures.

\(a\) Compute total man-hours for each labor category in the wage
determination.

\(b\) Use a format similar to the following to compute the estimate of
the contract price:

+-------------+----------------+---+-------------------+---+-----------+
| **Labor     | **Total        |   | **Hourly Rate **  |   | **[       |
| Category**  | Hours**        |   |                   |   | Personnel |
|             |                | * | **\$ \-\-\--\     | * | C         |
|             |                | * | \$ \-\-\--\       | * | ost]{.und |
|             |                | x | \$ \-\-\--**      | = | erline}** |
|             |                | \ |                   | \ |           |
|             |                | x |                   | = | **\$      |
|             |                | \ |                   | \ | \-\-\--\  |
|             |                | x |                   | = | \$        |
|             |                | * |                   | * | \-\-\--\  |
|             |                | * |                   | * | \$        |
|             |                |   |                   |   | \-\-\--** |
+-------------+----------------+---+-------------------+---+-----------+
| Supervisory | Total Direct   |   |                   |   | \$        |
| Costs\      | Labor Cost\    |   |                   |   | \-\-\--\  |
| Leave Costs | \              |   |                   |   | \$        |
|             | \              |   |                   |   | \-\-\--\  |
|             | \              |   |                   |   | \$        |
|             | Total Labor    |   |                   |   | \-\-\--[\ |
|             | Cost           |   |                   |   |           |
|             |                |   |                   |   |     ]{.un |
|             |                |   |                   |   | derline}\ |
|             |                |   |                   |   | \$        |
|             |                |   |                   |   | \-\-\--   |
+-------------+----------------+---+-------------------+---+-----------+
| Payroll Tax |                |   |                   |   | \$        |
| &           |                |   |                   |   | \-\-\--\  |
| Insurance\  |                |   |                   |   | \$        |
| Health &    |                |   |                   |   | \-\-\--\  |
| Welfare     |                |   |                   |   | \$        |
| (Hours      |                |   |                   |   | \-\-\--\  |
| times       |                |   |                   |   | \_\_\_    |
| dollar      |                |   |                   |   | \_\_\_\_\ |
| rate)\      |                |   |                   |   | \$        |
| Material,   |                |   |                   |   | \-\-\--\  |
| Supplies &  |                |   |                   |   | \         |
| Equipment\  |                |   |                   |   | \$        |
| \           |                |   |                   |   | \-\-\--\  |
| Total       |                |   |                   |   | \$        |
| Direct      |                |   |                   |   | \-\-\--\  |
| Costs\      |                |   |                   |   | \         |
| \           |                |   |                   |   | \_\_\     |
| Overhead\   |                |   |                   |   | _\_\_\_\_ |
| General &   |                |   |                   |   |           |
| Adm         |                |   |                   |   |           |
| inistrative |                |   |                   |   |           |
| Costs       |                |   |                   |   |           |
+-------------+----------------+---+-------------------+---+-----------+
| Profit      | Total Costs\   |   |                   |   | \$        |
|             | \              |   |                   |   | \-\-\--\  |
|             | \              |   |                   |   | \         |
|             | \              |   |                   |   | \$        |
|             | *Total*        |   |                   |   | \-\-\--\  |
|             | *Estimated*    |   |                   |   | \_\_\_    |
|             | *Price*        |   |                   |   | \_\_\_\_\ |
|             |                |   |                   |   | \$        |
|             |                |   |                   |   | \-\-\--   |
+-------------+----------------+---+-------------------+---+-----------+

\(4\) The bid price frequently may not support the total number of
direct labor hours proposed by bidder on the manning charts. Ask to see
the bidder's bid preparation sheets. The bidder doesn't have to show
them but usually will if one explains the data is needed to verify that
direct costs (labor, material, etc.) are not underestimated. Once this
information has been provided, retain it. It may be helpful in the event
of future negotiations.

c\. Make sure to have the latest supply consumption data if the bidder
is going to furnish the supplies. Compare this with bidder's information
(when provided) to insure that the bidder has not underestimated
supplies.

d\. A serious underestimation of total costs, or a serious
misapplication of the man-hours proposed, indicates a lack of
understanding of contract requirements. This is where the technical
representative goes to work. Interview the bidder and find out whether
or not the bidder understands the job.

e\. Besides the total estimate, financial PAS and general evidence of
competence, the next most important factor is the bidder's proposed
quality control plan. This plan should be detailed enough for the PAS
team to evaluate and determine that the bidder actually knows what to
do.

f\. The bidder's performance history is also a very important subject to
be thoroughly covered by the PAS team. Establish complete and thorough
documentation if a determination of nonresponsibility is going to be
based upon lack of tenacity, perseverance or integrity.

g\. PAS reports must state the facts, draw a conclusion based upon those
facts and end with a recommendation to the contracting officer.

#### 6-8. \-- Outside Office Performs the PAS.

If an outside office such as DCAS is going to perform the financial and
technical PAS, the buyer does the following:

a\. Ask the office to perform the PAS. Indicate which particular
acquiring activity will assist in the PAS. Name the personnel in the
request; for example, buyer, food services officer, etc.

b\. Provide all acquiring activity team members written guidance as to
duties and responsibilities. Provide it in enough time for members to
study and fully understand their responsibilities.

c\. Insure that acquiring activity team members realize that the outside
office is running the PAS, and that they understand that they have a
very important input (the outside office may be lacking in a particular
area of expertise that the acquiring activity provides).