E. PROCEDURES

     1. Points of contact selected by heads of DoD Components shall develop internal policy and procedures to implement this Directive and shall coordinate production management activities.

     2. Emphasis shall be placed on application of fundamental engineering principles and relevant technical disciplines during development and production. Assessment of production risks shall be made throughout the acquisition process. These assessments shall be formalized through industrial resource analyses (IRAS) and production readiness reviews (PRRs). Risks shall be reduced to acceptable levels in accordance with DoD Directive 4245.7 (reference (c)).

     3. A manufacturing strategy shall be developed as part of the program acquisition strategy. Manufacturing voids, deficiencies, and dependencies on critical foreign source materials shall be addressed concurrently with concept demonstration and validation through the use of manufacturing technology projects (DoD Instruction 4200.15, reference (d)), or other means. The producibility of each system design concept shall be evaluated at the full-scale development (FSD) decision point to determine if the proposed system can be manufactured in compliance with the production cost and industrial base goals and thresholds.

     4. Contractor past performance (to the extent that it has a bearing on the concept involved), production management capability, quality history, and the potential to execute the production program shall be among those factors included in the contractual solicitations and evaluated thereafter in the source selections.

     5. A comprehensive praducibility engineering and planning (PEP) program is a requisite for entering FSD. PEP programs shall be conducted throughout FSD and shall contain specific tasks, measurable goals, and a system of contractor accountability.

     6 . A quality gkogram in accordance with DoD Directive 4155.1 (reference (e)) shall be conducted throughout acquisition and deployment. Industrial preparedness planning shall be integrated effectively with production management and production planning under DoD Directive 4005.1 (reference (f)). Determinations of priorities and allocations shall be within the framework of DoD Component delegation of authority, consistent with DoD Instruction4400.1 (reference (g)).

     7 . The Office of the Under Secretary of Defense for Research and Engineering (OUSDR&E) shall maintain visibility of production management matters throughout the acquisition process for all major programs. Production decisions under consideration at a Defense Systems Acquisition Review Council (DSARC) or OSD program review shall be supported by an independent OSD assessment of production readiness in addition to an evaluation of the findings of a formal PRR. PRRs shall be planned and conducted by the DoD Components in accordance with DoD Instruction 5000.38 (reference (h)) to confirm:

a. The stability and producibility of the design.

b. Progress toward meeting reliability and maintainability characteristics.

c. The adequacy of supporting manufacturing technology.

d. The refinement of manufacturing methods, techniques, and processes.

e. The suitability of manufacturing, cost, and quality assurance control provisions.

     8. An acquisition may not proceed into produttion until it is determined that the principal contractors have the physical, financial, and managerial capacity to meet the cost and schedule commitments of the proposed procurement. An assessment shall be made of the contractors' capabilities to meet surge (peacetime) and mobilization (declared national emergency) requirements and their commitments to participate in the DoD industrial preparedness production planning program under DoD Directive 4005.1 (reference (f)).

     9. Competition, value engineering, tailoring of specifications and standards, design-to-cost, cost benefit and trade-off assessments, preplanned product improvements, multiyear-procurement, industrial modernization incentives, and other techniques shall be used, as appropriate, to reduce production, operating, and support costs. Standardization, commonality, and interchangeability shall be promoted throughout the acquisition cycle to reduce lead time and life-cycle cost.

     10. Technical data packages shall be developed and proven by means of production demonstration and configuration audit, consistent with competition, component breakout, and reprocurement objectives.

     11. Continued emphasis shall be placed on life-cycle cost reduction during the production phase through the use o f contractual incentives and other means.

     12. Production management planning and implementation shall include provisions for measuring progress in meeting design-to-cost and life-cycle cost commitments.

     13. Selection of contracts and subcontracts requiring contractor cost and schedule management systems to comply with the DoD Cost/Schedule Control Systems criteria shall be made in accordance with DoD Instruction 7000.2 (reference (i)). When a contractor or subcontractor is not required to comply with the criteria, the Cost Schedule Status Report approach to performance measurement set forth in DoD Instruction 7000.10 (reference (j)) normally shall be used.

     14. Production engineering and management shall include those actions that are required to maintain a capability to produce materiel for the operation and maintenance of equipment after the production phase is complete. The planning for these post-production activities shall start during the development phase.

     15. Program Milestone Reviews. Production management shall be addressed specifically at each program milestone decision point in the major system acquisition process in accordance with DoD Instruction 5000.2 (reference (k)).

a. Milestone I - Demonstration and Validation. Production feasibility of candidate system concepts shall be addressed and areas of production risk defined. Manufacturing technology needed to reduce production risk to acceptable levels shall be identified. Preliminary goals and thresholds for production cost shall be formulated. Preliminary goals and thresholds for industrial base capability shall be formulated based on an IRA.

b. Milestone II - FSD. The producibility of the design approach shall be confirmed and production risk determined acceptable. The FSD phase shall include provisions to attain producibility of the production design using cost-effective manufacturing methods and processes. Resource requirements for PEP, long-lead procurements, critical materials, labor skills, facilities, equipment, and limited production shall be identified and programed. The capability to meet production unit cost, schedule, and surge requirements shall be confirmed at the prime and key subcontract levels.

c . Milestone III - Production and Deployment. Production decisions shall be supported by an assessment of the program readiness for production, based on a formal PRR. The PRR shall include assessing the results of PEP and manufacturing technology activities. Plans and provisions for accomplishing cost reduction during production shall be described.