Performance Based Logistics“What’s Worked, What Hasn’t, What’s Next”
October 25, 2006
Panel Members
• Randy Fowler,
• Jerry Cothran,
• Jeff Heron,
• Bob Dickie,
Panel Areas of Inquiry
• Genesis and evolution of PBL• Partnering as an integral concept• Range of PBL options• Proven successes• Training and education• Issues with financial enablers• Business case analysis confusion• Contracting for PBL• Increased warfighter/operational connection• Auditors’ observations• PBL way ahead• Audience dialogue
Where did PBL start and how has it developed?
30 PilotPrograms
DoD 5000
Policy
Oversight viaDAB/DAES
DAB New programImplementation (120 Pgms)
OperationalDemonstrations
LessonsLearned
Adjustments
Oversight viaR-TOC Forum
ReengineerProduct Support
• F/A-18 E/F• EFV (AAAV)• F-22• F-35 (JSF)• FCS• CVN-21• V-22
DAES Process (84 Pgms)• Health of Logistics
A joint, disciplined program to successfully implement & sustain PBL!
JACG
IND/Gov’t Forums• PEO/SYSCOM• PM Roundtable• AIA Product Support• NDIA Sys Engr & LOG
Defense
Acquisition
Guidebook
Performance-Based LogisticsRoadmap (1998 – 2005)
Customer Support MilitaryCustomer Support Military
Aerospace
Information contained herein is privileged or confidential information of Parker Hannifin Customer Support, Inc. and exempt from public disclosure under subsection (b)(4) 5 USC 552, subsection (b). Do not disclose outside recipient organization of the U.S. Government.
PerformanceBased
BusinessEnvironment
PerformanceBased
Contracting
LogisticsChain
Management
Supply ChainManagement
Total SystemPerformance
ResponsibilityClear Accountability
in Design
Performance Based Logistics
RiskManagement
PrimeVendorSupport
Prime VendorVirtual Prime
Vendor
Third PartyLogistics
Life CycleProgram
Management
SystemsEngineering
Life CycleLogistics
Life CycleCosting
Flexible Sustainment
Reliability BasedLogistics
Trigger BasedAsset Management
F3I Changes
Sustained Maintenance PlanningReliability Centered
Maintenance
Price perFlight Hour
TeamingProcess Improvement
Business ReengineeringTechnology Insertion
DVD (Repairables)Direct Vendor Delivery
Past PerformanceMetrics / Incentives
Award Term Contracts
Metrics / Incentives forProduct Improvement
Long Term Contracts
F3I Responsibility
Logistics Management Information
Total AssetVisibility
How did PBL evolve How did PBL evolve ––CUSTOMER FOCUSED!CUSTOMER FOCUSED!
When did partnering come on the scene, and what’s the relationship
between PBL and depot maintenance partnering?
Role of Partnering
Contractor Support
Organic SupportCLSORGANIC
More Organic More Commercial
MAJORITYORGANICSUPPORT
MAJORITYCONTRACTSUPPORT
Public/PrivatePartnering
Opportunities
MIX
GOAL: Leverage Innovative Concepts of the Private and Public Sectors to Support the Warfighter at the Best Value for the Department of Defense and the Taxpayer
PBL Offers MultiplePBL Offers MultipleOpportunities for PartneringOpportunities for Partnering
Industry Prime Vendor(Product Support Integrator)
Subcontractor
Subcontractor
Subcontractor
DoD Depot(Subcontractor)
Organic Depot as Subcontractor
to Industry PSI
Contractor utilizingDepot facilities
Contractor/Depotpersonnel sharing
workloads
Government Relationships Are Closer With Industry
Contractors Understand Benefits of PBL RelationshipsShared PBL Objective Requires Trust and Development of Mutually Beneficial Arrangement… “Partner Vice Adversary”RelationshipIndustry Has Better Understanding of PBL Process…OSD, NAVICP, NAVAIR and AIA, etc, PBL Training, Meetings and Working GroupsPositive Relationship Affects All Business…Traditional USN and FMS Support Improves As Well
PBL- What We Have Learned
How did PBL evolve into being applicable to a wide range of
options (e.g., platforms, subsystems, and components?)
PBL Implementation ScopePBL Implementation ScopeRange of OpportunitiesRange of Opportunities
Single Multiple AllSystem Level
Single elementfor an entire system
Multipleelementsfor entire system
All elements for entire system
Sub-SystemLevel
Single element for a singlesub-system
Multipleelementsfor sub-system
All elementsfor sub-system
Component Level
Single element for a single component
Multipleelementsfor a single component
All elementsfor a single component
Logistics Support Elements
There is no There is no ““one size fits allone size fits all”” PBL strategyPBL strategy
Few Long Term, Firm Fixed Priced Contracts at System Level- With Most System Level PBLs, Financial Risk Remains With the USG
F/A-18 FIRST, Covering 73% of the Super Hornet, is the “First”, Long Term, FFP System Level PBL Contract (Awarded 23 Dec 05)
Industry Risk Aversion To FFP for Total System Support
Addition of Components to FIRST Is Based on a BCA and Value Provided by the Airframe OEM
Some Major Sub-System and GFE are Under Separate PBL Contracts
Cost Effectiveness is the Determining Factor, and Must Be Validated by the BCA
Considerations Include Value-Added and Pass Through Costs
Some Aircraft Manufactures, While Proficient in Manufacturing and Systems Integration, Have Little Experience in Sustainment and PBL, and Have Performed Poorly in Pre-MSD Interim Contract Support
Current Issue- System vs. Sub-System Level PBLs
PBL Maturity ModelThe DoD classifies PBLs in 4 stages of Maturity.
Con
trac
t Sco
pe
Wea
pons
Sys
tem
s Sc
ope
Stage 1 Stage 2 Stage 3 Stage 4
Delivery Speed
OperationalAvailability
MaterialAvailability
MissionAssurance
MissionPerformance
Weapon System
Performance
LogisticsPerformance
DistributionPerformance
Logistics Logistics Chain ServicesChain Services
SupplySupplyChain ServicesChain Services
Whole SystemWhole SystemAvailabilityAvailability
Mission SuccessMission Success
Level 1 Level 2 Level 3 Level 4Source: Adaptation of the PRTM Maturity Model framework/benchmarking study presented at Fall 2005 AIA conference
What are some outstanding examples of PBL successes?
Army PBL Army PBL Performance SuccessesPerformance Successes
Navy PBL Navy PBL Performance SuccessesPerformance Successes
Air Force PBL Air Force PBL Performance SuccessesPerformance Successes
And Optimizes Cost…
• Proven Operational Readiness improvements from PBL • Clear signs that PBL has positive impacts on cost as well
Why They Work:We Buy a Comprehensive Performance Package… Not Individual Parts, Repairs, ECPs, etc.This Approach Changes the Provider Incentive Paradigm
Fixed Price “Pay for Performance” Contract Now Motivates Provider to Reduce Failures / ConsumptionLong Term (5-15 years) Commitment Enables Provider to Balance Risk Vs. Investment
Improves Parts Support … Material Availability Increases + Logistics Response Time (LRT) Decreases Resulting in Improved ReadinessOptimizes Depot Efficiency … Build Specs, Repair Turn Around Time (RTAT), Awaiting Parts (AWP), & Work in Process (WIP) DecreaseInvests in Reliability … Mean Time Between Failures (MTBF) ImprovesProactive in DMSMS Management … Must Resolve DMSMS and Obsolescence Issues to Achieve Outcome Based Performance Metrics
PBL- What We Have Learned
Provider Actions