$ FIGURE 3
Te product manager should consider contract vehicles that create incentives for the contractor to reduce costs in pro- duction, such as a fixed-price-incentive, firm contract that shares savings with the contractor. A clean-sheet review during LRIP enables the government to address potential cost savings as early as possible, once the final product design is estab- lished and in production.
Clean-sheeting should be considered a best practice to understand and control costs in production. It would be a mis- take, however, to conclude that it can be done repeatedly or effectively without a significant organizational commitment.
It is not a rebranding of the existing cost- estimating techniques. Rather, it is a true bottom-up approach that
requires in-
depth knowledge not only of the product, but also of world-class manufacturing processes, from raw materials to the end product, along with detailed accounting knowledge to properly understand indi- rect costs throughout the supply chain. Te government has most of the subject- matter expertise to do this analysis in the research and development centers, acqui- sition centers and PEOs. But bringing this capability together in a coordinated, repeatable way is a significant challenge for a PM.
To conduct an accurate clean-sheet, PEOs must be prepared to maintain a dedicated team that will identify, gather, analyze and review the required data from government and contractor records. Tis team must have the resources and leadership emphasis to work thoroughly and quickly in support of program mile- stones. Weekly in-process reviews and frequent updates to organization lead- ership should be conducted to keep the project on track.
COMPARING ACCURACY With PGK, projectiles fired from a howitzer land closer to the target more frequently. So it’s highly valuable—but a clean-sheet helps answer just how valuable, and at what cost. (SOURCE: Robert Steere, PM CAS)
A NEGOTIATING TOOL One of the benefits clean-sheeting pro- vides the government is that it identifies areas of opportunity for cost-saving initia- tives and can be used to develop strategies for future procurements. Clean-sheeting provides insight into the best possible could-cost for a given design, which can serve as a cost target for the government- contractor team to work toward. Another benefit is the ability to modify assump- tions within the model and explore the effects of different production scenarios.
Armed with the clean-sheet analysis, Product Manager GPM2S is preparing for the next negotiation with the prime
contractor. By sharing the component clean-sheets with the contractor, Prod- uct Manager GPM2S is confident that the cost of sub-vendor component parts can be lowered and that the negotia- tions should yield cost savings. Looking further in the future, PEO Ammunition is discussing whether to continue work- ing with a contractor who specializes in clean-sheeting or bring the capability in house.
CONCLUSION Upon the completion of a clean-sheet, the government is armed with most of the data required to identify the specific should-cost or could-cost. Although it
ASC.ARMY.MIL 109
BBP 3.0
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