DEFENSE SECURITY COOPERATION AGENCY |
11/12/1998 | |
MEMORANDUM FOR :
Deputy Under Secretary of the Army SUBJECT : Logistics Support Charge (LSC) Assessment for Nonstandard Requisitioning System Transactions REFERENCE :
References (a) through (c) request waivers to the LSC currently being assessed against requisitions processed through each Military Department's nonstandard requisitioning system. The issue papers cited in reference (d) also request elimination of the LSC assessment for the new Commercial Buying Service (CBS) concept being proposed under the DSAMS project. The LSC is applicable to non-major defense equipment other than Defense Working Capital Fund (formerly DBOF) items. DoD 7000.14-R, Volume 15, paragraph 072204 provides a list of specific generic codes which are eligible for the charge. LSC is an integral part of the price of these items. Since we are required by law to recover full costs, we have no authority to waive this charge. In reviewing the referenced memoranda, however, it would appear that what is actually being requested is a determination that the LSC does not apply to items processed through the Service nonstandard requisitioning systems. Therefore, we have reviewed your requests as applicability questions rather than waivers and provide the following information. The Air Force system (Parts and Repair Ordering System (PROS)) is a follow-on to the Non-Standard Item Parts Acquisition and Repair System (NIPARS). We provided guidance in 1994 that the LSC should not be applied to NIPARS orders based on justification provided by the Air Force. In reviewing the documentation provided for PROS, we find the same rationale supports not applying LSC to PROS orders as well. All logistics support functions for items processed through PROS are performed by the contractor and all operating costs are included within the price and the fill fee. Based on the information provided, we concur that items filled using PROS should not be assessed the LSC. The Navy system (FMS Acquisition Service Team Line (FASTLINE)) also relies on a contractor to provide logistics support services and incorporates all fees for these services within the price charged. While requisitions do pass through the Navy Management Information System for International Logistics (MISIL), it appears this is for routing only and that the commercial vendor is responsible for all logistics actions. This is very similar to the way the Air Force systems, both NIPARS and PROS, operate and indicates that applying the LSC for these functions would not be appropriate. Based on the information provided, we concur that items filled using FASTLINE should not be assessed the LSC. According to reference (b), the Army system (Simplified Nonstandard Acquisition Procedures (SNAP)) is used to process requisitions for nonstandard items and these requisitions do not go through the TACOM supply system. More detailed discussions during requirements meetings of the Defense Security Assistance Management System (DSAMS) teams (documented in reference (d)), however, indicate that "The Army provides hands-on acquisition and administrative support at the requisition level by a team of acquisition center professionals to acquire FMS standard/nonstandard items." This would indicate a fairly high involvement of US Government logistics systems and personnel in processing these orders, unlike the Air Force and Navy processes. Based on this important difference, orders filled using SNAP should be assessed the LSC to ensure all costs associated with the US logistics system are recovered. We understand that the Army is reevaluating its nonstandard item support and may be implementing a new system in the near future which more closely resembles PROS and FASTLINE. When that system is implemented, we recommend the Army submit a new request for LSC applicability determination and we will reevaluate our position. Reference (d) indicates that DSAMS will include a CBS capability for all three Services and requests a waiver of Contract Administration Services (CAS) and LSC for orders filled from this system.
Please note that the determinations above regarding PROS and FASTLINE are effective for processing of future orders only and are not retroactive. LSC that has already been applied to these orders should not be reversed. If you have further questions or need additional information, please contact Beth Baker, DSCA/COMPT-FM, (703) 601-3737 or e-mail: beth.baker@osd.pentagon.mil. James A. McQuality |