Robert is pointing out that there is a Cobol program expecting a file called PARMS. You therefore would need a DD statement for PARMS. If it has to be for instream data, it would go like this:
followed immediately by your data
The DD statement followed by the data can go anywhere inside your step (not "inside" another JCL statement). Try putting it immediately after you SYSTSIN DD * and the data associated with that.
I do believe if you google you'll find that someone has had the identical problem in the past.
EDIT: The PARM you have already is going elsewhere, to do with running DB2. Don't touch that. The exercise has an element of confusion by having a DD called PARMS as well as the PARM on the EXEC. Forget the PARM on the EXEC. Did you write the Cobol program, or you just have to get the JCL working?