Joe Grosson Director of Logistics Lockheed Martin

1. AIA Spring 2004Product Support ConferencePublic Private Partnerships ~ An Enabler of Performance Based LogisticsPlenary Panel11 May 2004 Joe Grosson Director of Logistics Lockheed Martin

2. Evolution of Total Support Responsibility for Lockheed Martin Systems Total System Support Responsibility (Ultimate Goal: Maintenance Free Operating Deployments) • In-Place NAVY • Performance Based Logistics Contracts • ------------------------------------------------ • Surface Combat System Related • AEGIS Lifetime Support ~ NAVSEA • MK 41 VLS ~ NAVICP • SQQ 89 ~ NAVICP • MK-92 MSP ~ NAVICP • UYk-70 CDVD ~ NAVICP/NAVSEA • ------------------------------------------------- • Aviation Related • S-3 PVS ~ NAVAIR • CASS ~ NAVICP/NADEP • LANTIRN PBL ~ NAVICP • Navy Aircraft Tires ~ NAVICP • H-60 Tip to Tail ~ NAVICP/NAVAIR • APS-145 MSP ~ NAVICP • -------------------------------------------------- • Submarine Related • BSY2 POSS ~ NAVSEA • ARCI PBL ~ NAVICP Incremental Expansion Under Existing Contracts (Where Possible) • Enabled Through • Partnerships • ---------------------- • Gov’t Labs • Depots & Arsenels • DoD Warfare Centers • Academia • Small Business • Industry PSI D2D Solution Set & Autonomic Logistics • Infusion of Major and Other • Program TSPR/PVS • Experience/Investments • ------------------------------------- • F117 TSPR ~ USAF • F-35 TSPIR • HIMARS PVS ~ US Army • JAVELIN ~ US Army • THAAD ~ US Army • MMA, LCS, MUOS, …

3. Total System Support Responsibility ~ Partnerships are Vital as One Organization Can Not Do It All • Systems Integration • Software Development • Enterprise Resource Planning • Installation and Maintenance • Depot Maintenance • Remote Condition Monitoring • Work Order Generation • Fault Response Monitoring • Installed Base Maintenance (RCM, CBM) • Documentation Updates • System Grooming • Distance Support to Field Operators and Maintainers • Asset Data Collection • Data Base Maintenance • Supply Support • Depot Management • Requisition Processing • Supply Chain Management • Transportation and Distribution • Stock Point Functions • Modeling and Forecasting • Repair and Return Single Point Accountability • Lifetime Engineering • Technology Refresh and Insertion • Configuration Management • Baseline Mgmt. - Functional, Physical • Supportability Engineering • Safety Engineering • Test Planning • Test, Validation and Verification of Technology Refresh/Insertion • Software Maintenance • Hardware Maintenance • Commonality Analysis • Training • New Operators and Maintainers • Workforce • Management • Technical • Operational • Compliance • Refresher and Update Training • Curriculum Updates • Program Management • Strategic Planning • System Upgrade and Major Maintenance Schedules • Cost Baselines • Ownership Cost Reduction • Contracting Services for: • Maintenance • Support Services • Upgrades • Major System Overhaul • Schedule Baselines • Technology Insertion Development Schedules • Subsystem Upgrade Schedules

4. PPP • “Government & Industry committed in working together to achieve a common goal as efficiently and effectively as possible, while maximizing quality and minimizing cost.” • NOT: a legal concept of a partnership that involves joint ownership of a business for profit or establishment of a separate legal entity. • Incorporated into a contract or as a separate memo of understanding But Could it be a Joint Venture?

5. Basic Elements of an AgreementCreate accountability under a common goal where all parties share equally in the success • Common goals • Customer satisfaction and product quality are the responsibility of both parties who will work together for mutual success • Open communications and collaboration in a spirit of trust and good faith • Agreement to immediately resolve any problem as a team in order to eliminate any potential misunderstanding • Signature of all key stakeholders

6. Partnerships Work When • A strong, dependable personal relationship exists amongst the leaders • A written instrument is in-place • boundaries & expectations defined • statutes and laws have been researched • limitations created by virtue of the partnership are understood and documented, e.g. • competition restrictions • anti-trust • Mutual Benefit to each party defined and understood

7. Random Partnering Ideas • R&D Collaboration: Increasing relevance of the government tech base and industry IR&D • System Supportability: • teaming on DOD Performance Based Logistics • Joint Planning of COTS management and • Resolution of obsolescence/DMS in Defense Systems • Maintenance of the US Industrial Base • Full Service Contracting teaming in order to sustain CORE LOGISTICS CAPABILITY within the government infrastructure, satisfy the Depot 50-50 Statute, and provide an exit strategy from FSC to organic DOD support • Reduced overall DoD TOC by avoiding redundant infrastructure • Strategies for Adapting New System Technologies into Legacy Systems

8. Types of Public-Private Partnerships* • Range of Possibilities Includes: • Direct sale: Depot provides articles and/or services to industry ** F/A-18E/F Integrated Readiness Support Teaming – Boeing & NADEPs Jax & NI • Industry leases depot equipment and/or facilities. Performs work for either the public or private sector ** Gunner’s Primary Sight Manufacturing-General Dynamics & Anniston Army Depot • Worksharing arrangements ** Abrams Integrated Management for the 21st Century – General Dynamics & Anniston Army Depot • Teaming arrangements where depot and industry jointly contract with a Program Manager ** Propulsion Business Area partnership – Lockheed Martin & OC-ALC *Source: DAU Presentation by Hollis Hunter, Office of the Assistant Deputy Under Secretary of Defense, (Logistics & Materiel Readiness) Maintenance Policy, Programs & Resources **Source: GAO Report to the Subcommittee on Readiness, Committee on Armed Services, House of Representatives, April 2003

9. Aircraft & Logistics Centers F-117 Total Sustainment Performance Responsibility C-130J Long Term Support Aeronautics Company Aeronautics Company Partnering: A Key Element of Lockheed Martin’s Sustainment Business Strategy H-60TTT Partnering with depots (NADEPs Jax and North Island, CCAD) Maintaining existing work-share F/A-22 Weapon System Partnering Charter Strategic Supplier Alliance LM – Boeing – P&W Strategic Supplier Alliance A Network of Partnering Agreements 00-ALC – LM Aero MOU Internal Partnering Agreements C-130J Direct Sales Agreement

10. Other Lockheed Martin Examples • LM MS2 with NSWC Crane regarding electronics obsolescence • Information Systems with STRICOM & NAWC-TSD re e-Business • ONR re electronics wiring faults diagnostics • Wright-Patt AFB on Decision Processes • Letterkenny & Red River on HIMARs • Missiles & Fire Control with Warner Robins AFB for LANTIRN • LM Aero with Warner Robins and Ogden

11. Measuring Success of PBL Partnerships • Improve sustainment performance • As measured by warfighter metrics, e.g., customer wait time, operational availability, mission capability • Decrease total customer ownership cost • Significant reduction compared with traditional approach expected • Accept responsibility for product sustainment integration • Be empowered to make decisions to optimize performance and cost reduction • Reduce costs by eliminating/reducing sustainment transactions • Establish and maintain network of value added partnerships with customer organizations and industry • Financial rewards for risks associated with being the product sustainment integrator • Double digit return-on-sales objective – must be competitive with development and production margins

12. Sustainment Integration Is… Contract from SPO Prime Contractor Direct Fleet Mgmt Interface to Users • Shared Risk/Rewards for System Cost & Performance • Multi-Year (5 – 10+) • Minimum CLINs (4 – 10) • Short, Performance-Based SOW (vs Task-Based) Sustainment Integration • Proactive Leadership Of • Sustaining Engineering • Engineering Source Data & Tech Orders • Configuration Management • Fleet Health Management • Supply Chain Management International Partners Strategic Partners USG Depots Others . . . Supplier Base

13. Sustainment Integration Is… Contract from SPO Prime Contractor Direct Fleet Mgmt Interface to Users • Shared Risk/Rewards for System Cost & Performance • Multi-Year (5 – 10+) • Minimum CLINs (4 – 10) • Short, Performance-Based SOW (vs Task-Based) Sustainment Integration • Proactive Leadership Of • Sustaining Engineering • Engineering Source Data & Tech Orders • Configuration Management • Fleet Health Management • Supply Chain Management Strategic Partnership Network Strategic Partnership Network International Partners Strategic Partners USG Depots Others . . . Supplier Base

14. Partnerships & Sustainment Integration Strategy • Best-in-class solutions required to meet customers’ cost/value requirements • A single entity can not currently provide or sustain best-in-class performance in all Sustainment discipline areas • Carefully selected strategic partners provide: • Demonstrated levels of performance • Willingness and commitment to provide funding to enhance their disciplines • Senior management focus on the discipline • Strategic partners includes partnerships with customer organizations Sustainment Focus Must Be On Meeting Warfighter Expectations At Greatly Reduced Total Ownership Costs Through Performance Based Logistics Contracts in Partnered Environments.

15. Sustainment Partnerships Emerging at Different Organizational Levels • A range of relationships have been noted – from corporation to government department down to intra-program (contractor-to-customer program offices) agreements • Partnerships also emerging within corporations and between and among industry entities • All partnerships can be value added, but rhetoric does not automatically translate to sustainment results • Lessons learned from partnership experiences can and should be studied and reapplied across applications

16. Summary • Partnering is, unquestionably, a critical element of emerging performance based logistics sustainment strategies • Existing and evolving partnerships have different forms and objectives • Sustainment partnerships being created to take advantage of best value capabilities of involved organizations…in order to provide affordable sustainment for our nation’s warfighters

17. Back Up Slides

18. NADEP Commercial Service Agreement (CSA) H-60TTT • Compliant with Title 10 USC 2474 • Agreed with NADEP Jax • Under final review with NADEP North Island • Unique aspects • LM provides piece-parts / NADEP provides labor only • LM provides advance funding (quarterly forecast) • Cost plus zero fee (NADEP “cannot” accept Fixed Price) • No acceptance of FAR/DFAR flowdown clauses • Cost reporting / audits / defective pricing • No performance guarantees • No remedies for poor performance within CSA • Relief in prime contract • No termination unless prime contract is terminated • Small disputes (<$10K) unilaterally resolved by NADEP CO • Suspension of work for “unusual and compelling circumstances” • Work restored to NADEP when capability to perform is restored

19. Strategic Supplier Alliance Strategic Supplier Alliance Participants: USAF (AFMC), Army (AMC), DLA, & LM Duration: Not time limited • Objectives: • Improve support to our nation’s warfighters through • Relationship of collaborative decision making • Leveraging member organization capabilities • Support transformation initiatives including PSCM, • Logistics modernization, & business system modernization

20. F/A-22 Weapon System Partnering Charter Participants: F/A–22 SPO, Propulsion SPO, WR-ALC, OO-ALC, OC-ALC, Boeing, P&W, & LM F/A-22 Weapon System Partnering Charter Duration: Not time limited • Objectives: • Actively seek out opportunities for mutually beneficialcooperative public-private partnering initiatives • Provide a framework for implementing documents

21. C-130J Long Term Support Participants: WR-ALC, PEO (A, T and M & S), C-130J SPO, And LM Aero C-130J Long Term Support Duration: Until October 2005 • Objectives: • Integrate efforts and capabilities to • Meet warfighter requirements • Support government transformation goals • Achieve collective objectives

22. C-130J Direct Sales Agreement C-130J Direct Sales Agreement Participants: WR-ALC & LM (C-130J Program) Duration: Not time limited • Objectives: • Provide exceptional support to C-130J operational customers • Provide best value to the USAF • Comply with public law

23. Goals of Partnering* *Source: “The USAF Depot Maintenance Master Plan”, Fiscal Years 2004-2020, Washington D.C., August 2002 • High quality and timely depot level repair • Improved lifetime performance and sustainment • Combining of complementary capabilities to ensure best value life cycle support • Long-term partnerships that are essential to minimize life cycle costs • Integrated team approach to maintain force readiness and sustainment • Sharing of investments that benefit both public and private sectors