Sign In
  • Question

    What is the standard Beyond Economical Repair (BER) percentage for End Items? How to determine when an item is BER? Is there a regulation or statue for BER?


    Answer

    What is the standard Beyond Economical Repair (BER) percentage for End Items? While there are some "rule of thumb" percentages (several business websites referred to an 80% threshold as a commonly used figured), I could find no specific reference to a required percentage for broad application as a standard.  With regards to this, the DCMA-INST 328, dtd May 22, 2013 (Validated Current with Administrative Changes, July 7, 2015) states in paragraph 3.2.4.1.3. "On component or item level repairs, evaluate the supplier’s “Beyond Economical Repair” (BER) dispositions. This may be a multifunctional effort involving other functional specialists. Typically, BER thresholds are established by the procuring activity and any costs exceeding BER threshold or disposal of the BER equipment need to be coordinated/ approved by the procuring contracting officer (PCO)."
     
    How to determine when an item is BER?  There are many factors that can influence a BER decision. A threshold percentage can be used as you indicated above; it can also be based on a raw cost figure (although this does not appear to be as common as a percentage). The cost baseline can be the new/like item replacement cost, a carcass cost, original cost, or some other figure. The repair cost can be calculated based on any number of factors, to include: the cost of component parts (SRAs), labor, warranty, material, hazmat handling, hazwaste handling; in total or in some combination.
    Cost can also be determined as some factor besides a dollar value, it may be measured in time (i.e., lead time, customer wait time, etc.), readiness impact, opportunity cost, or some other value.  The determination of where to draw the line for a BER is dependent upon the item/system under discussion, impact of loss, funding availability and outcome measures.
    Even though your situation is for a DMISA, the same principles that apply to dealing with contractors relative to BER determinations can apply. So if you are building an MOU/MOA/SLA, and intend to use a percentage for determination, here is the clause used by the Air Force, under the AFMC supplement to the FAR (the language would just need to be modified to accommodate organic activities/organizations vice commercial):
    FAR Chapter 53: Air Force Materiel Command Supplement
    Part 5352: SOLICITATION PROVISIONS AND CONTRACT CLAUSES
    Subpart 5352.2:
    Section 5352.291-9005: End Items Beyond Economical Repair.
    As prescribed in 5391.102(e), insert the following clause in Section I:
    END ITEMS BEYOND ECONOMICAL REPAIR (AFMC) (JUL 1997)
    (a) "Economically Reparable End Items" are defined as end items which can be restored to a serviceable condition, in accordance with applicable requirements, when costs of repair will not exceed (Insert percentage) of the Stock List Price specified in the contract. If the contractor estimates the total cost of the repair and/or overhaul of any end item received will exceed the above percentage of the Stock List Price, the Contractor shall promptly notify the administrative contracting officer in writing and shall not perform further services on any such items except at the direction of the administrative contracting officer. Upon receipt of the written notification that a particular item is not reparable, the contractor shall dispose of the unit in the manner directed by the administrative contracting officer
    (b) The procuring contracting officer may authorize the contractor, through the administrative contracting officer, to exceed the percentage of the Stock List Price in subparagraph (a) above when an item is in critical supply status.”
    (End of Clause)
     
    Is there a regulation or statue for BER?  An extensive search for a regulation, directive, or instruction specific to BER determination failed to turn up any specific results. There are a few references that simply state BER is an acceptable condition for determination of an item as a loss to the government, but not how to make a BER determination. This question, or one similar to it has been asked a few times in AAP. The most recent was in 2010, and reference was made to a response to a 2000 question. The response still has merit and is repeated below (following link applies https://dap.dau.mil/aap/pages/qdetails.aspx?cgiSubjectAreaID=38&cgiQuestionID=106161):
    “My initial research into DAP, ACC, DAG and AAP showed nothing on beyond economic repair (BER)--however, Google had a lengthy 2000 AAP answer to a similar question--
    In this era of acquisition reform, there are few absolutes. Research for a complete definition of the terms you specified resulted in the conclusion that none were/are provided within current regulatory guidance. This appears to be by design, rather than an oversight. Support and procurement decisions are expected to be based on the situation for that program, rather than a “one size fits all approach”. An assessment must be made for each alternative identified. This approach involves examining elements of cost that have traditionally been ignored. It involves taking a rigorous look at schedules, remaining service life, usage and deployment information, and implementation costs to ensure that changes to current practices will be cost effective. It is recommended that a repair or replacement decision be the outcome of a Cost Benefit Analysis (CBA).This will allow a Business Case to be made for the alternative selected. The procedures to conduct a Cost Benefit Analysis include:
    Determine/Define Objectives
    - This should include the project objectives and other pertinent background information, so that the project stands on its own and can be understood by a reviewer who is not intimately familiar with the equipment Document Current Process
    – Understand the current process to provide the basis for decisions regarding new alternatives Estimate Future Requirements
    - Two key items to consider are the system life cycle and the peak life cycle demands. Collect Cost Data
    - Sources of data include experience, current system costs, market research, publications, analyst judgment, and special studies. Choose at Least Three Alternatives
    - A number of alternatives may be considered. Document CBA Assumptions
    - Because a CBA often relies on many assumptions, documenting all of them, and, if possible, justifying them on the basis of prior experiences or actual data is important.
    Estimate Costs
    - All costs for the full system life cycle for each competing alternative must be included. Estimate Benefits
    - Benefits include the services, capabilities, and qualities of each alternative system, and these should be viewed as the return on an investment Discount Costs and Benefits
    - After the costs and benefits for each year of the system life cycle have been estimated, convert them to a common unit of measurement to properly compare competing alternatives. Evaluate Alternatives
    - When some benefits have dollar values assigned, but others do not, the non-cost values should be considered. Perform Sensitivity Analysis
    - The estimates for sensitive input parameters should be re-examined to ensure that they are as accurate as possible and that high cost drivers are identified.”


    Open full Question Details