posted on 06.12.14

MTI has been informed that Nadcap and NUCAP audit pricing will be increasing as of December 1, 2014.  The following is the notice sent to Nadcap accredited companies:

Nadcap is contacting you with regards to an upcoming change to the pricing of Nadcap and NUCAP audits. This notice includes the rationale and the impact on future audit pricing.  Nadcap is an industry-managed program that exists for the benefit of the global aerospace industry. It is the policy of the Performance Review Institute (PRI) to administer Nadcap without making a commercial profit.  Audit pricing is set solely to cover costs and to mitigate risk. PRI’s objective is to increase the quality of special processes for the industry while maximizing the value to the suppliers in a cost-effective manner. This is evidenced by the fact that 85% of respondents to the 2011 Supplier Survey reported that Nadcap has helped to improve quality.

Approximately three years ago,  Nadcap audit growth slowed considerably due to several factors. Firstly,  the number of initial audits entering the system declined. In addition,  the number of suppliers having audits on an extended frequency continued to increase due to merit (4,122 in 2014, up from 2,760 in 2009). These factors had the cumulative effect of creating an overall stabilization in the number of Nadcap audits being conducted each year.

Until audit numbers stabilized,  Nadcap costs were offset by sustained growth in the number of audits conducted annually. This allowed PRI to benefit from economies of scale and reduce Nadcap pricing several times since 1990.  Once Nadcap audit numbers stabilized,  PRI instituted a number of cost containment measures to maintain pricing. These cost containment measures included auditor travel cost control via local auditor sourcing,  geo-scheduling and batch scheduling of Nadcap audits.  Additionally,  PRI has made significant efforts to control indirect and administrative cost.  These measures are no longer sufficient to ensure the continued financial health of the Nadcap program and the current situation is not sustainable.  Any further cost containment measures risk compromising the quality of the program. Consequently,  a new pricing structure has been approved by the PRI Board of Directors.

It is important to recognize that Nadcap audit prices have not increased since 1990. In fact,  they have been reduced several times. Had Nadcap audit prices kept pace with inflation in North America,  a three-day audit that actually cost $5, 700 in 1990 would now cost approximately $10, 000 instead of the current price of $4, 875.  The new pricing structure has been developed in recognition of the different cost of conducting audits in different regions. The full transition to regional pricing will take place over three years to reduce significant pricing changes in any one year. This change means that each audit will assume the costs directly associated with that audit,  regardless of the audit location,  plus contribute equally toward indirect and administrative expenses. PRI maintains detailed records of audit expenses,  including fees and travel costs. This information was used in calculating the regional cost differences as well as Export Control fees for each region.

Based on the above,  a price increase of 4% will be implemented for audits starting on or after December 1,  2014 for all North American countries.

Details of the new pricing structure are available now on eAuditNet (www.eAuditNet.com  under Resources / Documents / Public Documents / General Documents).   Take the opportunity to review the new pricing and if you have any questions, contact Scott Klavon at Nadcap at sklavon@p-r-i.org.