Performance-Based Logistics PBL

1. Performance-Based Logistics (PBL)

2. 2 Integrated Life Cycle Management Cradle to grave enterprise perspective Life cycle planning Systems engineering E.g., reliability, availability, maintainability, supportability (RAMS); sensors (CBM+); operational safety, suitability, & effectiveness; interoperability & commonality; configuration Product support E.g., strategy (PBL), sourcing (Core, 50/50, DSOR), partnering, prod spt integration, spt elements (Mx, supply, SE/ATS, technical data, facilities, PHS&T, manpower & personnel, training) Total ownership cost

3. 3 Product support requirements addressed in materiel solution analysis of alternatives Integrated acquisition and sustainment life cycle strategy by program initiation Depot source of repair determination by program initiation Technical data needs prior to issuance of an acquisition contract solicitation Public-private partnerships consideration in contract solicitation Identify and manage industrial base constraints

4. 4 Materiel product support solutions that: Optimizes Operational capability Affordable supportability Minimizes Logistics footprint Total ownership cost

5. 5 Product Support: Package of logistics support functions necessary to maintain the readiness and operational capability of a system or subsystem. Performance Based Logistics (PBL): Strategy for weapon system life cycle sustainment that links product support to an integrated weapon system performance package designed to optimize readiness. Business Case Analysis (BCA): A decision support document that identifies alternatives and presents convincing business, economic, and technical arguments for selection and implementation to achieve stated organizational objectives/imperatives.

6. 6 Expectation Management Agreement (EMA): An agreement between the SPM and lead/using major commands (MAJCOMs) that provides real-time support to proactively resolve or de-conflict potential issues over the program life-cycle between the acquirer and operator of capabilities needed, when required and at the most affordable cost. Performance Based Agreement (PBA): An agreement that provides clear delineation of performance outcomes, corresponding support requirements and the resources required to achieve both. PBL Contract: A contract between the Government and commercial entity that provides clear delineation of performance outcomes and corresponding support requirements.

7. 7 “PBL” A Strategy for product support Applicability: Air Force requires for all ACAT I & II Programs and prefers for all other All PBL strategies must be validated by a BCA Characteristics: Based on warfighter operational requirements Defines the performance goals Establishes clear lines of authority and responsibility Provides clear delineation of performance outcomes, corresponding support requirements and resources required to achieve both Implementation: Between Gov’t entities: PBAs Between Gov’t and industry: PBL contracts (not synonymous with “contract logistics support”) PBL transitions DoD support strategies from DoD transaction-based purchases of specified levels of spares, repairs, tools, and data, to the purchase of “capabilities,” such as system availability. This is a fundamental and significant change, in that it transitions the responsibility, and corresponding risk, for making support decisions to the Product Support Integrator. The PM will tell the provider “what” they want, not “how” to do it. PBL is about managing our logistics business to achieve performance based outcomes and provides incentives for attaining the outcomes. PBL delineates outcome performance goals of systems, ensures that responsibly are assigned, provides incentives for attaining these goals, and facilitates the overall life-cycle management of system reliability, supportability, and total ownership costs. PBL states requirements in terms of performance Defines output performance goals PBL optimizes total system availability while minimizing cost and logistics footprint It applies to both industry and government activities Misconceptions about PBL are the root cause of the inconsistent application of successful PBL strategiesPBL transitions DoD support strategies from DoD transaction-based purchases of specified levels of spares, repairs, tools, and data, to the purchase of “capabilities,” such as system availability. This is a fundamental and significant change, in that it transitions the responsibility, and corresponding risk, for making support decisions to the Product Support Integrator. The PM will tell the provider “what” they want, not “how” to do it. PBL is about managing our logistics business to achieve performance based outcomes and provides incentives for attaining the outcomes. PBL delineates outcome performance goals of systems, ensures that responsibly are assigned, provides incentives for attaining these goals, and facilitates the overall life-cycle management of system reliability, supportability, and total ownership costs. PBL states requirements in terms of performance Defines output performance goals PBL optimizes total system availability while minimizing cost and logistics footprint It applies to both industry and government activities Misconceptions about PBL are the root cause of the inconsistent application of successful PBL strategies

8. 8 “BCA” Based on performance requirements Reflect operational requirements for contractors on the battlefield; DOD core logistics capabilities; depot level maintenance contracting limit; synchronization with Defense Transportation System; and contingency and surge flexibility Address performance, supply chain responsiveness and surge risk assessment Use information provided by product support stakeholders, government and industry (maintaining competitive environment) Assess changes from existing product support strategies for legacy systems to support the product support strategy for new weapon systems Evaluate all services or activities needed to meet lead/using MAJCOMs’ performance requirements using best value assessments Address cost per output, performance measures, capitalization/asset ownership, logistics footprint, reliability growth, system life cycle costs, diminished manufacturing sources management, obsolescence, mitigation plan, technology insertion and risk management. Assess support cost and performance baselines: for legacy systems, based on historic experience and costs; for new systems, considering reliability and maintainability projections Sept 01 QDR directed the application of PBL to new and legacy weapon systems FY06-11 SPG directs completion of PBL Business Case Analysis on all (ACAT I & II) weapon system platforms by 30 Sep 2006 DOD policy directs implementation of PBL DoDD 5000.1 mandates PBL implementation in order to optimize total system availability, minimize cost and reduce the logistics footprint and DoDI 5000.2 defines the sustainment elements necessary to maintain readiness of deployed systems The DOD 5000 Guide has an entire section on PBL Sept 01 QDR directed the application of PBL to new and legacy weapon systems FY06-11 SPG directs completion of PBL Business Case Analysis on all (ACAT I & II) weapon system platforms by 30 Sep 2006 DOD policy directs implementation of PBL DoDD 5000.1 mandates PBL implementation in order to optimize total system availability, minimize cost and reduce the logistics footprint and DoDI 5000.2 defines the sustainment elements necessary to maintain readiness of deployed systems The DOD 5000 Guide has an entire section on PBL

9. 9 “EMA” Collaborative written agreement between the operator and the acquisition community General Officer or Senior Executive Service level signatures Big picture look Programs have a process to manage requirements, cost, schedule, risk and performance expectations Program office and operator meet at least annually to review and adjust the expectations EMA is attached to the Program Management Directive (PMD) Every acquisition I-III program requires an EMA Operator, acquirer and sustainer inputs Required at Milestone B with PMD Joint Programs use Memorandum of Agreement (MOA), not EMA

10. 10 Every implementation of a PBL strategy requires a PBA and/or performance based Contract Provide clear delineation of performance outcomes, corresponding support requirements, and the resources required to achieve both Define Expectations of Force Provider Define Roles and Responsibilities Define Range of Support Requirements Basis for Negotiating Support Contracts Ensure Accountability in Meeting Warfighter Requirements

11. 11 Levels of PBL Support

12. 12 EMA and PBL Linkage

13. 13 PBL; An Approach Strategy: Prior to MS-B (during Concept Refinement and Technology Development) Initial BCA – finalized by MS-C Life cycle and enterprise considerations: Traditional sustainment strategy of similar systems/end-items Extent of logistics requirements and access to data Lead/using MAJCOMs’ stated capability requirements Achievable and maintainable under PBL approach with a high potential for achieving an increase in system performance Linkage to requirements: Contracts: requirements to metrics & metrics to incentives PBAs: requirements to metrics & metrics to PBAs between the SPM and organic product support providers Cost per operational unit of performance capable of being reduced through PBL BCA shall: Be based on performance requirements Reflect operational requirements for contractors on the battlefield; DOD core logistics capabilities; depot level maintenance contracting limit; synchronization with Defense Transportation System; and contingency and surge flexibility Address performance, supply chain responsiveness and surge risk assessment Use information provided by product support stakeholders, government and industry (maintaining competitive environment) Assess changes from existing product support strategies for legacy systems to support the product support strategy for new weapon systems Evaluate all services or activities needed to meet lead/using MAJCOMs’ performance requirements using best value assessments Address cost per output, performance measures, capitalization/asset ownership, logistics footprint, reliability growth, system life cycle costs, diminished manufacturing sources management, obsolescence, mitigation plan, technology insertion and risk management. Assess support cost and performance baselines: for legacy systems, based on historic experience and costs; for new systems, considering reliability and maintainability projections BCA shall: Be based on performance requirements Reflect operational requirements for contractors on the battlefield; DOD core logistics capabilities; depot level maintenance contracting limit; synchronization with Defense Transportation System; and contingency and surge flexibility Address performance, supply chain responsiveness and surge risk assessment Use information provided by product support stakeholders, government and industry (maintaining competitive environment) Assess changes from existing product support strategies for legacy systems to support the product support strategy for new weapon systems Evaluate all services or activities needed to meet lead/using MAJCOMs’ performance requirements using best value assessments Address cost per output, performance measures, capitalization/asset ownership, logistics footprint, reliability growth, system life cycle costs, diminished manufacturing sources management, obsolescence, mitigation plan, technology insertion and risk management. Assess support cost and performance baselines: for legacy systems, based on historic experience and costs; for new systems, considering reliability and maintainability projections

14. 14 PBL Metrics System-level metrics Operational availability (materiel availability) Total not mission capable supply Mission capable (MICAP) hours Operational reliability (materiel reliability) Maintainability (mx man-hours per flying hour or per failure) Logistics response time Total Ownership Cost Unit-level metrics Mission capable (MC) rate Total not mission capable maintenance Production Scheduling Effectiveness Flying SE, Depot flow days, commodity production target Performance is defined in terms of military objectives such as Operational Availability Operational Reliability Logistics Response Times Cost Performance is defined in terms of military objectives such as Operational Availability Operational Reliability Logistics Response Times Cost

15. 15 Accountability & Responsibility Accountability: System: System Program Manger (SPM) Program: Program Manager (PM) Product Group: Product Group Manager (PGM) Other: Air Logistics Center Commander (ALC/CC) Responsibilities: Development and implementation of PS strategies Implements tenets of integrated PS planning Develop an EMA with lead/using MAJCOMs (as applicable) Document performance & support requirements in PBAs (as applicable) Ensure planning consideration for USC Title 10 compliance Preserve competitive options Accomplish BCA (as applicable) Ensure PS concept is integrated to provide agile & robust capability May utilize a PSI (responsibility includes intra- and inter- system integration) Sept 01 QDR directed the application of PBL to new and legacy weapon systems FY06-11 SPG directs completion of PBL Business Case Analysis on all (ACAT I & II) weapon system platforms by 30 Sep 2006 DOD policy directs implementation of PBL DoDD 5000.1 mandates PBL implementation in order to optimize total system availability, minimize cost and reduce the logistics footprint and DoDI 5000.2 defines the sustainment elements necessary to maintain readiness of deployed systems The DOD 5000 Guide has an entire section on PBL Sept 01 QDR directed the application of PBL to new and legacy weapon systems FY06-11 SPG directs completion of PBL Business Case Analysis on all (ACAT I & II) weapon system platforms by 30 Sep 2006 DOD policy directs implementation of PBL DoDD 5000.1 mandates PBL implementation in order to optimize total system availability, minimize cost and reduce the logistics footprint and DoDI 5000.2 defines the sustainment elements necessary to maintain readiness of deployed systems The DOD 5000 Guide has an entire section on PBL

16. 16 Spectrum of Support Opportunities

17. 17 Public-Private Partnerships Partnerships leverage public and private sector capabilities and investment Facilitate implementation of new technologies and innovative processes Government re-capitalization in depots – 6% by law Private Sector business investments at Government facilities Partnerships are effective in: Implementing PBL strategies Satisfying 50/50 and Core Title 10 requirements

18. 18 Centers of Industrial Technical Excellence (CITE) & Public Private Partnerships Facilitate reengineering of industrial processes & adoption of best-business practices at CITEs (Air Force Air Logistics Centers designated CITEs) Access to technical data and maximization of capacity Integration of organic sustainment in a PBL environment More effective maintenance operations Economical sustainment of organic capabilities Depot maintenance dollars excluded from 50-50 calculations if workload performed by non-federal personnel at a CITE As of: 3/14/2007 As I mentioned before partnerships are the preferred way to bring new maintenance workload capability into the depots. Partnerships are our focus to establish new emerging workloads and technologies capabilities in our depots. As of: 3/14/2007 As I mentioned before partnerships are the preferred way to bring new maintenance workload capability into the depots. Partnerships are our focus to establish new emerging workloads and technologies capabilities in our depots.

19. 19 PBL Challenges Organic PBL Issues PBAs lack ways to incentivize for exceptional performance or provide consequences for not meeting performance requirements Contracting issues Incentives relative to performance Appropriate measurable metrics for needed performance Lack of historical data on new systems for fixed price contacts Insufficient or obsolete BCA Multiple contracts at differing levels on same system Confusion concerning support of unique type commodity items vs. system level support Financial management issues Multiple expense codes Must pay obligations/commitments Quantitative verification for reducing total ownership cost

20. 20 Key Take Away PBL strategy utilized to optimize operational capability, minimize the logistics footprint, and reduce total ownership cost Key PBL characteristics: Single point accountability Strategic sourcing (partnering) Performance-based arrangements Long-term vendor relationships Integrated logistics chains Incentivized performance based on metrics Considerations: Life cycle and enterprise perspective Historical data and commonality Statute requirements (50/50, Core, partnerships to leverage capabilities) Challenges: Strategy developed early in the life cycle A good BCA that is maintained The “right” performance metrics to incentives Proper oversight and enforcement - CLS/COMBS COST (provider Raytheon) – FY 05 $81M, FY 06 $60M, FY 07 $59M, FY 08 $60M, FY 09 $69M – New contract beginning FY 09- CLS/COMBS COST (provider Raytheon) – FY 05 $81M, FY 06 $60M, FY 07 $59M, FY 08 $60M, FY 09 $69M – New contract beginning FY 09

21. 21 QUESTIONS?

22. 22 Backup

23. 23 Building a Business Case

24. 24 Contract Incentives