Performance Based Management

Self-Assessment Report

October 2003

Procurement

Introduction/Background

SLAC Purchasing is organized as depicted in the Organization Chart (see Exhibit I). Changes that occurred within the Purchasing Department during FY03 are as follows:

1. In  June 2003, the Associate Purchasing Officer was reassigned as the Deputy Associate Purchasing Officer/Materials Manager on a temporary basis. The purpose for this reassignment was to address how to streamline processes and procedures for General and Metal Stores.

2. In June 2003, Purchasing added a temporary Buyer to help out with small dollar purchases.

3. The Purchasing Department hired four (4) summer students to perform various tasks as warranted throughout the Department. The summer students began their assignments in June 2003. One (1) student worked through August 21^st, two (2) worked through September 12^th and the fourth student working in General Stores will work through October 31^st. This additional support provided Purchasing with four (4) months worth of additional assistance in the areas of filing, closing out files and performing special projects and five (5) months of additional assistance in General Stores.

Training of personnel in FY03 continued to be aided by Stanford University’s educational allowance of $1,200 per year. This assistance helps defray the costs of training, conferences, workshops or seminars for every employee in order to further their education. In FY03 Purchasing introduced a more robust training program department-wide with the help of Stanford’s allowance. The areas of training are as follows:

a. Buyer Training

During this fiscal year a series of in-house classes were presented to SLAC Buyers and Contract Administrators by the National Seminars Group, Padgett-Thompson, and Federal Publications Seminars, LLC on the following topics:

The following procurement related classes were arranged for the Buyers and Contract Administrators to attend on-site:

1. How to be a "Tough-As-Nails" Negotiator - January 15, 2003

2. "How to be a Better Buyer" - February 5, 2003

3. "Basic Government Contracting" - March 19, 2003

4. "Professionalism in the Workplace" - April 9, 2003

These training sessions gave the Buyers and Subcontract Administrators a comprehensive overview of the respective topics and included case studies that helped to facilitate a good exchange of information. The courses also provided good reference materials to the attendees to use in their day-to-day activities as procurement professionals.

In December 2002, the Associate Purchasing Officer/Material Manager completed her certificate training in the Management Certificate Program offered by the University of the Pacific, Eberhardt School of Business. This certificate

program provided practical points of management to be utilized in each participant’s workplace and immediately implemented. The program required each student to attend nine (9) different classes ranging from Presentation Skills, Team Building, Developing Effective Leadership, Legal Issues in Employee Relations, Increasing Customer Satisfaction, Financial Analysis and Decision Making, Managing Projects for Success, Quality Productivity Management, and Strategic Management. Since receiving this training the Associate Purchasing Officer has incorporated several of the principles and practices learned into her everyday work environment.

In March of 2003, the Purchasing Department conducted a training session to introduce an updated revision of the policies and procedure for the use of SLAC’s Purchase Card to all Cardholders and Approving Officials. The elements discussed were the primary additions to our Purchase Card Manual entitled "PROCEDURES FOR USE OF THE PURCHASE CARD FOR CARDHOLDERS AND APPROVING OFFICIALS".

The annual Purchasing Ethics Training session was held on July 23, 2003. This was a mandatory training session for all department professionals involved in the purchasing function. In addition to reminding buyers of the various University procedures covering code of conduct, a videotape entitled "Ethics Inquiry" produced by the U. S. Office of Government Ethics was shown to the group. A total of thirteen (13) Buyers and Contract Administrators and other departmental staff attended the session.

All Purchasing personnel attended training sessions on Safeguards and Security on September 22, 2003.

The principal data generation source for the Four Perspectives was from the Business Information System (BIS). System data was collected from the period October 1, 2002 through September 30, 2003. All other data was obtained through the use of checklists and questionnaires as discussed later on in this report.

The four perspectives discussed below were measured as part of the self-assessment process. Each measurement was rated using the Balanced Score Card Summary Sheet format.

CUSTOMER: This perspective captures the ability of the organization to provide quality goods and services, effective delivery, and overall customer satisfaction.

INTERNAL: This perspective provides data regarding the internal business results against measures that lead to financial success and satisfied customers.

FINANCIAL: How effectively and efficiently SLAC meets the needs of its constituencies. This perspective captures cost efficiency, delivering maximum value to the customer for each dollar spent.

LEARNING AND GROWTH: This perspective captures the ability of employees, information systems, and organizational alignment to manage the business and adapt to change.

SLAC obtained its measurement of this perspective from its internal customers

(Requestors). A Transactional Customer Satisfaction Survey was initiated via telephone and in-person interviews in September 2003 to fifty (50) customers. Out of the fifty (50) people selected, forty-six (46) individuals responded. Each participant was asked to respond to a series of statements (see Exhibit II) pertaining to specific purchase orders. The statements were based upon the suggested core and optional questions of the "DOE Balanced Score Card for the Business Systems Performance Measurement and Management Program" guidebook. Areas assessed were timeliness, quality, communications, schedule, best value, overall satisfaction, and performance. Recently

awarded purchase orders, randomly selected from the BIS data report, were used for the survey.

Core Elements: Timeliness - Extent of customer satisfaction with timeliness of procurement processing, planning activities, and on-going communications.

Quality - Extent of customer satisfaction with the quality of  Procurement services.

Communications - Extent to which Purchasing communicates accurate information, which impacts the work of the organization.

Optional Elements: Schedule - Extent to which Purchasing is supportive of schedule requirements.

Best Value - Extent to which Purchasing strives to obtain the best price.

Performance - Extent to which Purchasing is committed to certain standards.

Overall Satisfaction - Extent of overall customer satisfaction with Purchasing.

Target: 92% customer satisfaction (10 Total Points Possible)

Results: A rating of 93.5% (10 points - BSC Measured Rating) was assigned based upon an analysis of the internal customer questionnaire responses. There were forty-six (46) respondents to the survey whose satisfaction level was calculated as follows:

1. The transactional survey had seventeen (17) statements the customer was asked to respond to with each response assigned a mathematical identity as follows:

5 points Strongly Agree

4 points Mostly Agree

3 points Agree (deemed as the Satisfactory level for the survey)

2 points Somewhat Disagree

1 point Strongly Disagree

0 points for No Opinion; and

2. The number of points for each statement for every respondent was added up; and

3. We calculated the average rating by dividing the total points by the number of questions responded to by that respondent; and

4. We counted the number of satisfied respondents (average rating of 3 or above) and divided by the total number of respondents to arrive at the percentage gradient

 

(43) Number. Of Satisfied Customers = (93.5%) Satisfaction Rating

(46) Number Of Customers Surveyed

2.1.2 Customer Service Satisfaction – Operators Purchase Requisitions

This measure was established to determine the level of customer satisfaction concerning the Purchasing Department’s level of service to the Operators who are responsible for on-line entry of the purchase requisition. This review is to be performed bi-annually by the completion of a satisfaction survey by our customers. This survey as shown in Exhibit III was sent out to the fifty-nine (59) Purchase Requisition Operators in May 2003. Out of the fifty-nine (59) surveys sent out, only twenty-two (22) recipients responded. In the survey, the Operator was asked to rate their level of satisfaction, on a scale from 1 to 5, with 1 representing a response of "strongly disagree" to 5 representing a response of "strongly agree". A simple set of questions was devised and the Operators were asked to rate their level of satisfaction on the five (5) different elements of their job identified below.

When dealing with your PeopleSoft Purchasing software, the Purchasing personnel respond to your questions and/or problems in a timely manner.

Your questions are thoroughly answered and clearly explained when dealing with Purchasing personnel on the PeopleSoft software.

1. You believe you are sufficiently trained to efficiently perform your Operators duties.
2. You are treated with respect when dealing with Purchasing personnel on PeopleSoft software concerns.
3. Overall, in dealing with Purchasing personnel on PeopleSoft matters, you are satisfied with the customer service provided.

Target: 87% Operator satisfaction (5 Total Points Possible)

(22) Number. Of Satisfied Operators = (100%) Satisfaction Rating

(22) Number Of Operators Surveyed

Results: A rating of 100% (5 points - BSC Measured Rating) was assigned based upon an analysis of the Operator questionnaire responses. The average rating received by the Operators on each question are:

1. 4.0

2. 4.1

3. 4.0

4. 4.2

5. 4.2

As demonstrated above, all questions identified in the survey received a rating of 4 or greater thereby stating that the Operators "agree" or are satisfied that the Purchasing Department is providing good customer service in these areas. This high level of satisfaction as identified by our Operators is due to a departmental decision that was implemented at the end of last fiscal year which changed the assignment of the Operator training program to another individual within the Purchasing Department who is more customer service oriented and computer literate.

2.2 INTERNAL BUSINESS PROCESS PERSPECTIVE

This perspective assures that customer requirements and expectations are understood and that appropriate procurement processes are in place to support customer needs. The self-assessment is the principal data generation or gathering source for this perspective. The core objectives and measures listed below were used by Purchasing to monitor its business processes and for the establishment of a baseline against which future performance will be compared.

2.2.1 Effective Internal Controls

To ensure compliance with applicable laws, regulations, prime contract terms and conditions, and SLAC policies and procedures, Purchasing conducted its annual review of procurement transactions during the period of August 4, 2003 through August 15, 2003. The files reviewed consisted of 350 purchase orders randomly selected via the PeopleSoft system from the period June 1, 2002 through June 30, 2003. The team reviewed the following files using the Self-Assessment Checklists (See Exhibits IV and IVa):

Fifty-Nine (59) files from $0 -10,000; and

One Hundred (100) from $10,000 - $25,000; and

One Hundred Ninety One (191) files from $25,000 and over.

These 350 purchase orders represented $10,847,347.26, or 38.6% of the total value of $28,061,720 for all purchase orders awarded during this period. The calculation is as follows:

A. SELECTED SAMPLE

	$0 - $10,000	$10,000 - $25,000	$25,000 and over
Total number of actions including modifications	59	100	191
Total Value	$10,847,373

B. UNIVERSE

Total Number of actions in the review sample period was 6,987.

Total Value of actions in the review sample period was $28,061,720.

C. PERCENTAGE (sample/universe)

Total Number 350/6,987 = 5%

Total Value $10,847,373/$28,061,720 = 38.6%

The following areas were designated as a focus for the FY2003 self-assessment review process:

• Purchase Requisition processed timely.
• Discount for Prompt Payment.
• Pre-Work Hazard Analysis obtained.
• Adequacy of sole source justification documentation.
• Price Analysis adequacy.
• Proposal accepted as proposed.
• EEO certification properly completed.
• Representations and Certifications properly completed.
• Appropriate use of DOE ICPT Agreements and other BOA’s.
• Accuracy of Conflict of Interest listing citation.
• Correct Debarred Listing Citation.
• Determination of financial and technical responsibility.
• Buy American Waiver completed.
• Non-excessive verbiage in purchase order.
• Correct Optional Clause (s) used.
• Overall adequacy of file documentation.

Objective: Effective Internal Controls

Measure: % of systems in full compliance with stakeholder requirements (e.g. applicable laws, regulations, procedures, terms and conditions of contracts, ethics, etc.) based on self-assessment.

Target: 90% compliance (30 Total Points Possible)

Results: Of the Purchasing System actions reviewed for compliance with applicable laws, procurement regulations, SLAC Purchasing procedures, prime contract terms and conditions, and Government/University ethical provisions, an average of 86.9% (24 points - BSC Measured Rating) were found to be compliant.

Narrative

The findings are as follows:

Review Topic	Total Found Compliant	Per Cent Compliant
1. Purchasing Requisition processed timely	300 out of 323	92%
2. Discount taken	30 out of 48	63%
3. PWHA obtained	58 out of 83	70%
4. Sole Source Justification	105 out of 135	78%
5. Price Analysis	281 out of 344	82%
6. Proposal accepted as proposed	283 out of 290	100%*
7. EEO Certification properly completed	79 out of 96	82%
8. Representations & Certifications complete	153 out of 194	79%
9. Use of DOE ICPT Agreements	27 out of 31	87%
10. Accuracy of COI citation	337 out of 349	97%
11. Debarred Listing citation	338 out of 350	97%
12. Financial/Technical Responsibility	250 out of 290	86%
13. Buy American Waiver	8 out of 9	89%
14. Non-excessive verbiage	59 out of 59	100%
15. Correct Optional Clauses (s) used	95 out of 100	95%
16. Overall Adequacy of File Documentation	326 out of 350	93%
Total		1390%
Total Average of Actions Reviewed Found Compliant (1390/16)		86.9%

* Review Topic No. 6 is intended to indicate the percentage of orders not negotiated by the buyer i.e., they were accepted as proposed. Of the 290 files reviewed, 7 (2%) were negotiated. This data is presented for informational purposes only.

Issues and Corrective Action

(For those actions found to be less than 95% compliant).

Important to note is that the low performance characteristics in the individual elements can be somewhat attributed to the FY 2003 SLAC budget deficit that required severe measures so as to avoid staff layoffs. Some of the measures employees were asked to contend with consisted of taking four days off without pay in July, no staff salary increases for FY 2003, and the requirement that all staff were mandated to take as much vacation time as they earned for the fiscal year. In addition, a senior buyer retired in February, but due to the budget deficit, his position was not allowed to be filled for the remainder of the fiscal year. All of these factors contributed to the down turn in SLAC’s performance for the fiscal year.

1. Purchase Requisition Processed Timely

Corrective Action: (92% compliant) Root cause has been attributed to the increased workload of all buyers due to the retirement of one senior buyer in February 2003, which was not authorized for re-filling, and his workload being dispersed amongst the remaining buyers. Increased management attention on a monthly basis for monitoring buyer progress on placement of awards is warranted. Managers will generate monthly award reports and discuss the results in their monthly meetings with all buyers.

Target Completion Date: October 31, 2003.

2. Discount Taken

Corrective Action: (63% compliant) Buyers failed to take advantage of the discount offered by the vendor for prompt payment in many cases. Reinforcement of the requirement shall be through second level (Deputy Purchasing Officer) review of all files $10,000 through $25,000, and third level (Purchasing Officer) review of all files $25,000 and over. Review levels to commence September 2, 2003 through December 31, 2003.

Target Completion Date: December 31, 2003.

3. Pre-Work Hazard Analysis Obtained

Corrective Action: (70% compliant) In June 2002, the Buyers were required to obtain the Pre-Work Hazard Analysis for all types of work to be performed on SLAC premises. Management believes there was resulting confusion in the early months after that directive due to the fact that most of the findings occurred for

purchase orders awarded June through September of 2002. Reinforcement of the requirement through second level (Deputy Purchasing Officer) review of all files

$10,000 through $25,000, and third level (Purchasing Officer) review of all files $25,000 and over. Review levels to commence September 2, 2003 through December 31, 2003.

Completed as of: December 31, 2003.

4. Sole Source Justification Adequate

Corrective Action: (78% compliant) The justifications were either missing in the file or deficient in support of a sole source procurement. In other instances the correct web format was not used. Reinforcement training of Buyers and the

Associate Purchasing Officers on proper documentation requirements of sole source procurement is necessary. Reinforcement of the requirement will be through third level (Purchasing Officer) review of all files $25,000 and over. Review level to commence September 2, 2003 through December 31, 2003.

Completed as of: December 31, 2003.

5. Price Analysis Adequacy

Corrective Action: (82% compliant) Buyers were not adequately addressing the requirement of price reasonableness by comparison. In mostly sole source procurements they failed to compare pricing to other vendors selling similar items and, instead, relied solely on previous purchase orders (some of which were outdated) with the same vendor to make that comparison. Reinforcement of the requirement through second level (Deputy Purchasing Officer) review of all files $10,000 through $25,000, and third level (Purchasing Officer) review of all files $25,000 and over. Review levels to commence September 2, 2003 through December 31, 2003.

Completed as of: December 31, 2003.

6. Proposal Accepted As Proposed

Corrective Action: None Required (100% compliant)

7. EEO Certification Not Properly Filled Out

Corrective Action: (82% compliant) Buyers were not verifying that the vendor completed all sections of the EEO certification. Reinforcement of the requirement through second level (Deputy Purchasing Officer) review of all files $10,000 through $25,000. Review level to commence September 2, 2003 through December 31, 2003.

Completed as of: December 31, 2003.

8. Representations And Certifications Complete

Corrective Action: (79% compliant) Reinforcement training of Buyers is necessary to emphasize the importance of assuring that representations and certifications are completed for every section of the document. Reinforcement of the requirement shall be through third level (Purchasing Officer) review of all files $25,000 and over. Review levels to commence September 2, 2003 through December 31, 2003.

Completed as of: December 31, 2003.

9. Use Of DOE ICPT Agreements

Corrective Action: (87% compliant) Buyers failed to insert the correct language on the face of the purchase order incorporating the ICPT/BOA number. Reinforcement of the requirement through second level (Deputy Purchasing Officer) review of all files $10,000 through $25,000, and third level (Purchasing Officer) review of all files $25,000 and over. Review levels to commence September 2, 2003 through December 31, 2003.

Completed as of: December 31, 2003.

10. Accuracy of Conflict Of Interest Citation

Corrective Action: None Required (97% compliant)

11. Debarred Listing Citation

Corrective Action: None Required (97% compliant)

12. Financial/Technical Responsibility

Corrective Action: (86% compliant) Some buyers neglected to make the required statement in their memo to file regarding the determination of financial and technical responsibility they had performed on the vendor prior to award.

Reinforcement of the requirement through second level (Deputy Purchasing Officer) review of all files $10,000 through $25,000, and third level (Purchasing Officer) review of all files $25,000 and over. Review levels to commence September 2, 2003 through December 31, 2003.

Completed as of: December 31, 2003.

13. Buy American Waiver

Corrective Action: (89% compliant) There was one instance where the Buyer failed to obtain from the Purchasing Officer a Buy American waiver. This issue was discussed with the Buyer and reinforcement training of the BSD procedure was emphasized.

Completed as of: September 3, 2003.

14. Non-Excessive Verbiage

Corrective Action: None Required (100% compliant)

15. Correct Optional Clauses (s) Used

Corrective Action: None Required (95% compliant)

16. Overall Adequacy Of File Documentation

Corrective Action: (93% compliant) There were some instances where the Buyer checklist was not properly completed and documents such as the Pre-Work Hazard Analysis were missing from the official file. Purchasing management will need to reinforce the requirement to all Buyers that files must provide a complete and accurate audit trail of the purchase transaction.

Completed as of: September 3, 2003

2.2.2 Reviews

During FY2003, the following audits were conducted that included the Purchasing Department’s participation:

2.2.2.a. Review of Receiving, Stores, and Inventory Control Operations

This analysis was performed during the months of January and February of 2003 by an independent consultant, who recently retired from Lockheed-Martin as the Manager of Stores, Inventory and Receiving Department. The purpose of this assessment was to evaluate the activities currently being performed within the SLAC Material Management system and recommended functions where improvements could be made. Specifically, the areas of concern were Receiving, General Stores, Metal Stores, Air/Gas Activities, and Inventory Control. Both general and specific recommendations were provided by Mr. Harrington in his report. A copy of this report is available upon request.

General Recommendations

• Outsourcing. Material/Support activities are very viable areas for outsourcing. There are numerous suppliers of general labor and products that can provide service and supplies more efficiently and cost effectively than performing these functions internally. The report recommends that periodically these processes should be evaluated for outsourcing in order to ensure that the required program support is being accomplished in the most cost effective and efficient manner. Specific candidates for outsourcing are Metal Stores, Air/Gas products, and portions of General Stores.

• Electronic Ordering. SLAC should pursue the implementation of electronic ordering throughout the Purchasing and Materials activities as it would be more efficient, minimize errors, provide a history and eliminate redundancy.

• Direct deliveries should be made in order to save space, time, and cost.

• The absence of the Associate Purchasing Officer needs attention by Management

Specific Recommendations

• Receiving. The report recommends that the system improvements that have occurred during the past few months should continue. The database should be combined to include Purchasing, Receiving and Accounts Payable data in order to speed up the receiving process as well as reduce opportunities for error.

• Enclosure of Dock. Enclosing the Receiving dock in Building 81 would reduce a number of problems that have occurred as a result of people being able to walk directly on the dock. The benefits of enclosing this area would be; physically securing receipts, providing a better environment from the weather for the receiving personnel, and adding approximately 1500 square feet of usable space to the building.

General Stores

• Continue with the outsourcing of items carried by Grainger and Corporate Express

• Purchasing needs to evaluate other commodities in stores for their potential for outsourcing

Spares

• Evaluation of spares should be done by item to ensure there is a continued need and to validate that the spares are not identified on the active inventory list

• Decentralized spares in order to organize who ordered the material and to claim ownership

Metal Stores

• Establish a Blanket Purchasing Agreement with one metals supplier

• Order metal pre-cut to required size directly from the Supplier

• Outsource Metal Stores to an outside Supplier

• Evaluate retention of metal stock

Air/Gas Activities

• Set up a process of using an electronic form only in order to simplify the ordering process and for more accurate record keeping

• Evaluate totally outsourcing Stores bottled gas. This would eliminate the double handling of bottles, reduce labor in Material, and make space available that is currently being used for the storage of bottled gasses for other uses.

Inventory Control

• Continue to work on increasing physical security in and around the Stores area.

• In order to improve effectiveness, increase the amount of training employees receive concerning the receipt, control, disbursement, and record keeping of items in stores

• Accomplish more frequent physical inventories of Stores to discover "root cause" and to take quick corrective action.

Resolution

The recommendations outlined in this report are currently being considered for implementation by the Purchasing Officer who will decide by December 31, 2003 which recommendations will be pursued during Fiscal Year 2004.

2.2.2.b. Review of SLAC Food Services Contract Performed by

Stanford University Internal Audit Department

SLAC’s Associate Director and Purchasing Officer requested that Stanford University’s Office of Internal Audit perform a review of SLAC’s food services contract awarded to Guckenheimer Enterprise, Inc. The objective of this review was to determine whether financial agreements were being complied with in accordance with the terms of the contract, and to decide if Guckenheimer’s reported profits and losses being paid by a SLAC subsidy, were reasonable and accurately reported. The audit concentrated on four (4) months, September and October of 2002, and January and February of 2003.

The results of the audit determined that Guckenheimer was in compliance with the financial agreements required by the terms of the subcontract. Concerning the accuracy of Guckenheimer’s profit and loss statements for the four (4) months solicited, no exceptions were found when tracing the amounts of cafeteria sales to cash register tapes and the vending commissions to North County Vending schedules. Original invoices for all procured expenses and amounts were in agreement. Payroll expenses were traced to timecards and recalculated without any findings. In her review, the Auditor was also able to recalculate Guckenheimer expenses based on a certain percentage of net sales. A copy of this report is available upon request.

Observations and Recommendations

Recommendations

1. Provide the Contract Administrators training in administering contract requirements and in exercising diligence in managing contracts.

Resolution

During FY03, Purchasing Management established a more robust training program for the Buyers and Contract Administrators. All attended the course as identified in Section 5 entitled "Training" of this report. Management intends to continue this trend for FY 04 with specific concentration on Government Contracting principles and processes. In addition, the Contract Administrator, who was assigned the task of soliciting the new cafeteria contract to the Eurest Corporation, received training in cost allowability as well as other contracting principles and processes.

Completed as of: Completed as of August 30, 2003.

2. Obtain explanation from Guckenheimer regarding Area Manager’s vacation charges before final payment

Resolution

The assigned Contract Administrator, Purchasing Officer and Stanford University Internal Auditor met with representatives from Guckenheimer on July 30, 2003 to discuss the vacation charges. Resolution was reached with Guckenheimer on the charges to be included in the final payment on September 25, 2003.

Completed as of: September 25, 2003

3. Reconcile the aging schedule of accounts receivable from Guckenheimer with SLAC’s accounting records.

Resolution

Aging accounts for both the cafeteria operations as well as catering services were reconciled on the dates identified below.

Completed as of:

Catering Services Invoices: July 30, 2003

Cafeteria Operations Invoices: September 25, 2003

2.2.3 Internal Review Board

The Internal Review Board (IRB) is comprised of the Purchasing Officer, the Deputy Purchasing Officer and one (1) Associate Purchasing Officer, with Staff Counsel serving as an advisor as necessary. All procurement actions to be submitted to the DOE for approval are required to be reviewed by the Board prior to submittal. In addition, all procurement actions exceeding $100K are to be reviewed by the IRB whether or not they are to be submitted to the DOE. The review focuses on the following areas:

• Overall completeness of the procurement.

• Compliance with mandatory requirements of regulations.

• Quality of documentation in support of contract type, source selection, and price.

• Proper application of SLAC Purchasing Procedures.

• Compliance with prime contract provisions.

• Legal adequacy as a contractual document.

A total of 130 actions were reviewed by the IRB for FY 2003. The reviews disclosed

weaknesses in price analysis, representations and certifications not completed properly, purchase orders lacked appropriate language/conditions, period of performance conflicting dates, specification document not clear, and inconsistency or lack of file documentation, and other minor errors and omissions.

2.2.4 Effective Supplier Management

Objective: To ensure goods and services are delivered on time

Measure: % delivery on time (no later than 3 days after the Purchase Order due date)

Target: 85% on time delivery (5 Total Points Possible)

Results: Per the Narrative below, 68% (2 points - BSC Measured Rating) of the purchase orders were delivered on time.

Narrative

SLAC has designed a PeopleSoft query to capture vendor performance by line item.

After discussions with Procurement Managers at various DOE Office of Science Laboratories, it was determined that on time delivery was calculated by others to include those items delivered up to 3 days after the Purchase Order due date so as to accommodate internal processing of the delivered items.

The data indicates that 12,622 Purchase Order line items were measured during FY 2003, of which, 68% were delivered on time. This equates to a Balanced Score Card

Measured Rating of 2 points. This falls short of the Target for FY 2003 of 85%. Root cause analysis was determined to be across all commodity lines but particularly in machine shop procurements. Unrealistic delivery due dates were also a mitigating factor.

For fiscal year 2004, SLAC Purchasing Management will continue to designate this area as a need for special attention by the Buyers and Expeditors. Increased monitoring of a

vendor’s performance in this area will be conducted. This includes management analyzing late deliveries to identify those vendors that need to improve their on-time deliveries. Purchasing intends to continue reviewing on time performance during FY04, however, in our FY04 Balanced ScoreCard Plan we have identified that this level of review will only be performed on SLAC’s key suppliers.

2.2.5 Effective Utilization of Alternate Procurement Approaches

This objective measures the transfer of traditional purchasing activities such as supplier selection, best value determination, and ordering and receiving from the purchasing organization directly to the user organization. The percentage of this volume is determined by the total number of transactions (Just In Time, Purchasing Authorization Card, Releases against Basic Ordering Agreements) placed directly by the user divided by the total number of actions awarded (includes Purchasing awards). The period covered is October 2002 through September 2003.

2.2.5.1 Objective: Traditional Purchasing Activities Transferred

Measure: Optimum % of transactions placed by users (JIT, Purchase Card, Blanket Order Releases) divided by the sum of total transactions.

Formula to be applied to obtain the percentage of transactions placed by users is as follows:

Total number of transactions placed by users

Total number of transactions

Target: 75% of transactions (5 Total Points Possible)

Results: A 76.9% (5 Points - BSC Measured Rating) measurement was obtained as follows:

BIS Transactions	= 6,536
Office Supply Releases - on line	= 3,448
Office Supply Releases - faxed	= 254
Office Supply Releases – phone	= 237
U.S. GPO Releases	= 34
Blanket Order Releases	= 915
Book Order Releases	= 23
Purchasing Card Transactions	= 15,752
Petty Cash Transactions (est.)	= 1,114
Total Number of Transactions	= 28,313
Customer Issued Transactions	= 21,777
Percentage of Volume (21,777/28,313)	= 76.9%

 2.2.5.2 Objective: Rapid Purchasing Activities Transferred

Measure: Optimum % of transactions placed through Rapid Purchasing Techniques (RPT) (JIT, Purchase Card, Blanket Order Releases, E-Commerce, ICPT, Oral Purchase Orders,

Strategic Agreements, and supplies Programs) divided by the sum of total transactions. Formula to be applied to obtain the percentage of transactions placed by RPT is as follows:

Total number of RPT transactions placed

Total number of transaction

Target: 80% of transactions placed through RPT

(5 Total Points Possible)

Results: A 77.1% (3 Points - BSC Measured Rating) measurement

was obtained as follows:

BIS Transactions	= 6,536
Office Supply Releases - on line	= 3,448
Office Supply Releases - faxed	= 254
Office Supply Releases – phone	= 237
U.S. GPO Releases	= 34
Blanket Order Releases	= 915
Book Order Releases	= 23
ICPT Transactions	= 518
Purchasing Card Transactions	= 15,752
Petty Cash Transactions (est.)	= 1,114
Total Number of Transactions	= 28,831
Customer Issued Transactions	= 22,238
Percentage of Volume (22,238/28,831)	= 77.1%

2.2.6 Acquisition Process

This objective measures the efficiency of the acquisition process by measuring the time between receipt of an approved purchase requisition and award of the purchase order. The average cycle time is determined by dividing the total of time between receipt of requisitions and award by the number of awards.

Objective: Acquisition Process

Measure: Average cycle time (exception Purchasing Authorization Card)

Targets:

Actions <$100K: Average of 9 to 12 days

Actions >$100K: Average of 30 to 45 days

All Actions: 12 to 15 days (15 Total Points Possible)

Results: A 15 point rating has been assigned to this measure based upon the following results:

Actions < $100K - 2.9 days

Actions > $100K - 19.8 days

All Actions - 3.1 days

Narrative

For Fiscal Year 2003, the average cycle time for BIS procurements under $100,000 was 2.9 calendar days (6,441 transactions), for procurements over $100,000 it was 19.8

calendar days (95 transactions), and for All procurements it was 3.1 calendar days (6,536 transactions). Transactions are defined as both Purchase Orders and Subcontracts. Processing time is not tracked for the remaining dollars, which are attributable to credit card purchases, blanket order releases, and modifications to existing purchase orders and subcontracts.

Measured cycle time begins with the approval by Purchasing Management of the purchase requisition (subsequently assigned to the buyer) and ends with the award of the purchase order or subcontract. Important to note here is that efforts normally defined as pre-procurement planning are not represented in the information system calculations. Purchasing staff is oriented to the customer service process of initiating the request for proposal/bid package as early as possible, which often precedes receipt and approval of the purchase requisition from the requesting organization. This process is deemed to be more responsive to the customer’s needs and supportive of SLAC’s mission.

A comparison of fiscal year 2002 and fiscal year 2003 data is as follows:

Transaction$	FY 02	Transactions	FY 03	Transactions
Under $100K	2.1 Days	7629	2.9 Days	6441
Over $101K	30.7 Days	69	19.8 Days	95
All Actions	2.4 Days	7698	3.1 Days	6536

As can be seen in the chart above, purchase requisition processing time increased slightly

for transactions under $100K but dropped significantly (10.9 days) in the number of

processing days for actions over $100K. This reduction was accomplished while experiencing an increase in the number of transactions over $100K being processed by the department. However, due to the .8 increase in processing time for actions under $100K, the measurement for all actions increased by this same amount for the year.

Some of the factors that affected our cycle times include a directive from the SLAC Director that mandated that all SLAC employees use as much vacation time as they earn during the fiscal year and required staff to take four (4) days off without pay in July 2003. In addition, SLAC encouraged Staff to reduce their work hours if they chose to do so. These measures were implemented in order to minimize the impact against our FY03 budget cut. As a result, these mandates reduced the amount of time that the buyers had available to them in order to process procurements, which greatly affected Purchasing’s ability to process requisitions within the established measurements during the fiscal year.

2.2.7 Socioeconomic Subcontracting

This objective measures the success in achieving business practice goals. This will be measured by dividing the number of socio-economic goals achieved by the total number of goals.

Objective: Socioeconomic Subcontracting

Measure: % of economic and social diversity and local participation program goals achieved including: SB and SDB Goals, Regional/Local Outreach/Support Good Neighbor Program. Note: Not weighted for BSC purposes.

Target:

Far exceeds expectations = >106% of goals.

Exceeds expectations = 101% to 105% of goals.

Meets expectations = 92% to 100% of goals.

Needs improvement = <92% of goals.

Results: As of September 30, 2003, SLAC attained 147.4% of the goals set with the DOE.

Narrative

With the level of SLAC’s participation in both "in-reach" and "out-reach" activities, SLAC was able to attain the target of Far Exceeds Expectations.

Goal Performance

During this fiscal year SLAC’s actual reportable dollars for socioeconomic goal performance totaled $62,778,071. This is a $17,778,071 increase from our originally

projected socioeconomic base of $45,000,000. Based upon this achievement, SLAC exceeded its socioeconomic goals for the categories of Small Business, Small Woman-

Owned Business and Veteran-Owned Business. If our analysis was performed on dollars

alone, SLAC exceeded the projected dollars for the categories of 8(a) Pilot, however, fell short of meeting the percentage goal. SLAC's efforts in fiscal year 2003 are summarized as follows:

FY 2003	GOALS		ACTUAL REPORTABLE
TOTAL	$ 45.0M		$ 62,778,071
Sm. Bus.	$ 25.8M	57.5%	$ 39,451,555	62.8%
Sm. Disadv. Bus.	$ 3.6M	8.0%	$ 1,521,996	2.4%
Sm. W/O	$ 2.7M	6.0%	$ 4,486,271	7.1%
8(a) Pilot	$ 1.3M	3.0%	$ 1,512,837	2.4%
Veteran Owned	$ 45K	0.1%	$ 268,349	0.4%
HubZone	$ 450K	1.0%	$ 348,572	0.6%

SLAC’s inability to meet the FY03 socioeconomic goals for the categories of Small Disadvantaged Business, 8(a) Pilot Program and HubZone is the direct result of several obstacles that were encountered during our efforts this fiscal year. One of the primary

obstacles was discovered when preparing the data for the purpose of publishing this report. In calculating SLAC’s socioeconomic achievements for the year, a discrepancy was discovered in Purchasing’s Vendor Database that ultimately resulted in us not being allowed to count several purchase orders that were awarded to minority owned firms (SDB’s). The discrepancy that was found was the inconsistent identification of minority owned firms in the vendor database as SBA certified minority owned businesses. This inconsistency resulted in us filtering through procurements that were awarded to minority owned firms during FY03 to ensure that they had been certified by the SBA. This effort resulted in our original estimate of minority owned business awards $2,700,000 or 6% of our total achievement being significantly reduced to $1,521,996 or 2.4% of our total effort.

Note: In order to ensure the data used to comprise our other goal achievements were correct, Purchasing performed a secondary review in order to re-validate our achievements on the additional socioeconomic goals. This additional analysis determined that our systems data was accurate.

SLAC’s purchase card program continued to have a major impact on our socioeconomic results again this fiscal year. In FY03, we experienced an increase in our purchase card usage, from $5.4M in FY02 to $5.6M. Albeit this increase is slight, the use of the purchase card continues to eliminate a large portion of the procurement dollars ($5.6M) from the reportable base that might have been made available for award to small, small disadvantaged, and small woman owned businesses.

The DOE Headquarters Integrated Contractor Purchasing Team (ICPT) initiative also contributed to a decrease in available dollars for the socio-economic goals. Although using ICPT agreements is a cost effective means of procuring goods and services and is an efficient way to achieve product standardization, the program has a substantial impact on the socio-economic program. For example, SLAC has historically purchased desktop and laptop computers from small disadvantaged and small woman-owned businesses. However, since FY 1998, by utilizing an ICPT BOA, SLAC has standardized on Dell computers.

Outreach Efforts

SLAC participated in the following outreach activities during Fiscal Year 2003:

• The "High-Tech" 2003 Small Business Procurement Fair and Conference in Los Angeles in March 2003, sponsored by JPL and NASA. The two-day event included 200 Prime Contractor booths and was attended by representatives of over 1000 small businesses. The conference included numerous workshops on doing business with federal agencies, prime contractors, and technology commercialization. SLAC successfully established several new SDB and woman owned sources at this conference.

• SLAC also participated in the Fourth Annual DOE Small Business Conference in Albuquerque, NM in May 2003. In attendance were over 1,300 participants consisting of individuals from DOE Program Offices, other M&O Contractors, and over small businesses throughout the country.

• In addition to this conference, SLAC also engaged in a variety of outreach efforts throughout the fiscal year in order to provide small businesses with the "maximum extent practicable" concerning procurement opportunities. Some of these efforts are reflected by the following events:
  • Industry Council for Small Business Development (ICSBB)
  • General Services Administration’s (GSA) monthly Market Fair
  • Oakland Chamber of Commerce "Women in Business Roundtable"
  • U. C. Berkeley Tradeshow
  • The U. S. Small Business Administration’s 8(a) Showcase (as scheduled)
  • MedWeek Celebration hosted by the San Francisco Region’s Minority Business Development Agency (MBDA)

In addition to the activities identified above, SLAC also maintains

• memberships and/or liaisons with the following:
• Bay Area Chambers of Commerce:
  • Menlo Park Chamber
  • Oakland Chamber
  • San Jose Hispanic Chamber
• National Association of Women Business Owners (NAWBO)
• Minority Business Development Agency (MBDA), San Francisco Regional Office
• Small Business Administration (SBA), San Francisco Regional Office
• Professional Business Women of California
• Northern California Supplier Development Council (NCSDC)
• National Minority Supplier Development Council (NMSDC)
• National Council of La Raza

The Purchasing Officer, in his role as Subcontracting Plan Administrator, routinely reports socio-economic program progress to the Associate Director, Business Services Division, for his information. He, in turn, disseminates such information to other

members of the Directorate so as to keep them informed of SLAC's progress in meeting the Department of Energy's socio-economic goals. The Subcontracting Plan Administrator, in his capacity as Purchasing Officer, reviews goals, and reports progress on salient ideas and innovative methods during scheduled buyer meetings. On a monthly basis, each buyer is informed of individual accomplishments and overall cumulative progress in meeting the total goals of the Laboratory. All personnel are encouraged to develop new small, small disadvantaged, and small woman-owned sources and assist such firms in becoming viable sources of services and supplies to the Laboratory.

In order to increase subcontracting opportunities for all small businesses, the Purchasing Department continued to support a Senior Buyer with 23 years of experience in the role of Assistant Small Business Liaison. The duties of this individual are to locate qualified small, small disadvantaged, small woman-owned, and 8(a) businesses and introduce these companies among the SLAC buying and programmatic communities so that they can be added to bid lists and compete for work.

During our yearly employee performance appraisals, we stress to each Buyer the importance of the program and encourage them to solicit small, small disadvantaged, and small woman-owned business concerns at every opportunity. We have in place means for monitoring each buyer's performance and utilizing the results as one tool in our salary setting process. This process has proven itself to be very satisfactory for SLAC as evidenced by our year-to-year achievements, which we consider to be outstanding. Individual buyer achievements are acknowledged and discussed at buyers meetings along with progress toward meeting SLAC's goals.

During FY2003, SLAC received 102 letters and emails from small, small disadvantaged, and small woman-owned businesses seeking inclusion on our bidder’s list. Each letter of inquiry was reviewed and personally responded to by the Purchasing Officer, giving the vendor the name and phone number of the assigned buyer. A copy of the letter and any

vendor literature is forwarded to the appropriate buyer for reference and inclusion on

their bidder's lists. With implementation of the Business Information System, we have also been sending questionnaires to these new vendors. Both the SLAC Buyers and requisitioners load the information provided by the vendors into our PeopleSoft vendor database so that it can be utilized on future procurements.

In summary, the Stanford Linear Accelerator Center continues to provide a very aggressive, positive, and outstanding small, small disadvantaged, and small woman-owned business program.

This perspective measures the functional cost efficiency of the purchasing organization. This will be measured by establishing a cost to spend ratio, which will be calculated by dividing Purchasing organizational costs by the business volume. Organizational costs are the total costs for acquisition, i.e., labor, direct, indirect, fringe benefits, overhead, travel, training, etc. Business volume is defined as the total of all dollars obligated.

Measure: Cost to Spend Ratio: Purchasing Operation’s Operating Costs Divided by Purchasing Obligations

Target: $.025 per $1 of Goods and Services Procured.

Results: The Purchasing Administration cost to acquire $1 of goods and services at SLAC during Fiscal Year 2003 was $.023 (10 points - BSC Measured Rating). This is calculated as follows:

Total Salaries and Fringe Benefits = $ 1,578,000

Total Procurement Dollars in FY 03 = $68,400,276

Cost to Procure $1 of Goods and Services:

$1,578,000/$68,400,276 = $.023

Purchasing administration includes salaries and fringe benefits and related M&S costs for those Purchasing staff directly involved in the procurement of goods and services.

The metrics included in the FY 2003 Balanced Score Card Self Assessment Plan are as follows:

Outstanding = <$.025

Excellent = $.025 to $.0279

Good = $.028 to $.0309

Marginal = >$.031 to $.0339

Unsatisfactory = >$.0344

The learning and growth perspective measures Purchasing’s ability and potential to develop and grow. This perspective looks to the future and sets objectives that strive for benefit at a later date.

This objective measures the level of satisfaction Purchasing staff experience with their working environment. As part of this measurement, data was reviewed regarding employee voluntary termination from the Purchasing Department. In the review Year 2003, Purchasing’s work force was reduced by one (1) Senior Buyer and one (1) Contract Administrator. Both of these individuals opted to take advantage of the voluntary lay-off program offered to all SLAC employees at the beginning of the fiscal year. In the past, the department has not exhibited a high transitory workforce. In a more stable budget year, there is virtually no turnover among the Buyers and Contract Administrators whose length of SLAC service run from four (4) to twenty-four (24) years.

The primary measurement used to determine employee satisfaction was by the Climate Survey Questionnaire (see Exhibit V). The survey was distributed to twenty-two (22) individuals within the Purchasing Department. A total of fifteen (15) individuals were responsive to the survey and seven (7) individuals were non-responsive. The survey asked for the employee’s view of his/her working environment in the following categories:

• Training Adequacy
• Working Environment
• Management Support and Leadership
• Employee Empowerment
• Information Availabilit

On the Employee Satisfaction survey a response above the 3.00 level was considered a positive outlook on the working environment. Any average response below 3.00 was

considered as a negative outlook. The results of this survey found the majority of responses, ten (10), registered an average of 4.00 or higher, four (4) responses registered 3.00 or above, and one (1) response registered at 2.00 or above. Out of the fifteen (15) individuals who responded, fourteen (14) employees gave the Department a rating of 3.0 or greater providing satisfactory ratings for their surveys. One (1) individual rated the Department 2.86, thereby, providing an unsatisfactory response to the survey. The areas of concern from the dissatisfied individual were reflected in a rating of 2 and 1 on two (2) survey questions. One question, located in the Management Support and Leadership section, which asked if Purchasing Management supports an employee’s effort to succeed in their job was rated a 2. Another question that received a rating of 1 from this individual was in the Employee Empowerment section and asked if Management’s current, as well as future, vision for the Purchasing Department was clear to the employee. This survey question was specifically addressed by Management in the PowerPoint presentation entitled "The Purchasing Journey, What Path Lies Ahead?" (Exhibit VI) presented to all departmental personnel on November 30, 2002.

Satisfaction levels of the survey respondents were calculated as follows:

1. The climate survey had 6 statements the Purchasing staff was asked to respond to with each response assigned a mathematical identity as follows:

• 5 points Strongly Agree
• 4 points Mostly Agree
• 3 points Agree (deemed as the Satisfactory level for the survey)
• 2 points Disagree
• 1 point Strongly Disagree
• 0 points for No Opinion; and

2. The number of points for each statement for every respondent was added up; and
3. We calculated the average rating by dividing the total points by the number of
questions responded to by that respondent; and
4. We counted the number of satisfied respondents (average rating of 3 or above) and divided by the total number of respondents to arrive at the percentage gradient

    

   (14) No. Of Satisfied Staff = (93.3%) Satisfaction Rating

   (15) No. Of Staff Surveyed

The percent of satisfied employees was measured by dividing the number of satisfied employees (14) by the number of employees responding to the survey (15). (14 divided by 15 = 93.3%)

Results: A 93.3% weighting (5 points - BSC Measured Rating) for this perspective was assigned per the above.

This objective measures the availability to Purchasing employees of current information on strategic goals and objectives, on customers, on vendors, on internal processes, and on financial consequences of their decisions. A survey (see Exhibit VII) was conducted in

July 2003 to determine what information tools are necessary for the employees to do their jobs better and faster. This was measured by dividing the number of information items available by the number of information items needed.

Survey Results: Verification was made of the following information resources available to each Buyer:

• Purchasing Buyers Handbook (BIS)
• Purchasing Procedures
• Conflict of Interest Listing
• Debarred Listing
• Business Information System Web Site
• FAR and DEAR web sites
• DOE Integrated Contractor Purchasing Team (ICPT) Homepage
• FAR Handbook
• SBA 8(a) and SDB Certification Homepage
• Purchasing Department Homepage

Of the ten (10) information tools available, all were considered necessary for the employee to perform his/her responsibilities more efficiently. This translates into a measurement of 100% (10 points - BSC Measured Rating) for this perspective.

The analysis of the Four Perspectives (Customer, Internal, Financial, Learning and Growth) of the FY 2003 SLAC Balanced Score Card Review concluded that the processes and procedures of its Purchasing System are adequate and compliant with applicable laws, regulations, and prime contract terms and conditions to support the continued approval by the DOE.

The Procurement Performance Assessment Model (PROAM) "Gauge Model" (Exhibit VIII) summary depicts the total activity value and total activity score for each of the Four Perspectives as identified in this Balanced ScoreCard Report for FY 2003. The Total Activity Score for FY 2003 is 89, which translates into an adjective rating of "EXCELLENT".

It is the opinion of the Review Team that the SLAC Purchasing System is consistent with and supports the DOE core values and critical success factor strategies of providing services that are responsive to customer needs, in accordance with established compliance requirements, and employment of best business practices to the maximum extent possible.