Performance Based Logistics

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Performance Based Logistics

• Presented By
• Ms Patricia R. Martin
• Director, 762d Combat Sustainment Group
• 5 April 2007

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Performance Based LogisticsOverview

• ?DISCUSSION TOPICS
• Sustainment Transformation Goals
• PBL Definition
• Product Support Integrator
• PBL 12-Step Process
• Benefits
• PBL Opportunities for Partnering
• Expectations Govt Contractor
• Business Case Analysis (BCA)
• AF Challenges-Issues
• Summary

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Sustainment TransformationManagement Goals
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Performance Based LogisticsDefinition

• PBL is the purchase of support as an integrated,
  affordable, performance package
• designed to optimize system readiness and meet
  performance goals for a weapon system
• through long-term support arrangements with
  clear lines of authority and responsibility.
• The Essence of PBL is Buying Performance
  Outcomes, Not Individual Parts Repair Actions

• PBL is the purchase of support as an integrated,
  affordable, performance package
• designed to optimize system readiness and meet
  performance goals for a weapon system
• through long-term support arrangements with
  clear lines of authority and responsibility.
• The Essence of PBL is Buying Performance
  Outcomes, Not Individual Parts Repair Actions

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Performance Based LogisticsProduct Support
Integrator (PSI)

• The PSI is an entity performing as a formally
  bound agent (e. g. contract, MOA, MOU) charged
  with integrating all sources of support, public
  and private, defined within the scope of the
  Performance Based Logistics agreements to achieve
  the documented outcomes.
• The product support managereffectively
  delegates responsibility for delivering
  warfighter outcomes to the PSI.
• In this relationship, and consistent with
  buying performance, the PSI has considerable
  flexibility and latitude in how necessary support
  is provided, so long as the outcomes are
  accomplished.

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DAU PBL Implementation Framework
12-Steps
4 Phases
1. Foundation
2. Planning
3. Execution
4. Control
Tailor the sequence and priority of events
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Performance Based LogisticsBenefits

• ? Improve Operational Availability
• ? Increase Mission Reliability
• ? Reduce Cost Per Unit Usage
• ? Decrease Logistic Footprint
• ? Lower Logistics Response Time

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PBL Offers MultipleOpportunities for Partnering
Contractor/Depot personnel sharing workloads
Organic Depot as Subcontractor to Industry PSI
Industry Prime Vendor (Product Support Integrator)
Contractor utilizing Depot facilities
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How PBL Optimizes the Logistics Chain

• ?Focuses on an END PRODUCT vs an inventory
  commodity (Customer vice Process optimization)
• ?Leverages Commercial sector advantages in
  forecasting, procuring, and managing inventories
• ?Incentivizes suppliers to do the right things
• Deliver Availability
• Manage Obsolescence
• Improve Reliability

Leverages Commercial Competencies!
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Performance Based LogisticsGovernment
Expectations

• ?Material availability under PBL must be equal to
  or greater than current availability at a cost
  equal to or preferably less than current costs
• ?This must be achieved within the 50/50 and Core
  mandates
• ?Highly desirable to have a public/private
  partnership with organic depot
• ?Firm fixed pricing structure preferred
• ?Government ownership of engineering changes upon
  contract completion

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Performance Based LogisticsContractor
Expectations

• ? Long-term contract commensurate with payback
• period for investments
• ? Profit commensurate with risk

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PBL Win/Win Strategy
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PBL Business Case Analysis Equations for
Comparison

• CURRENT COST Labor Material Costs Repair
  Costs Component Engineering Overhead Costs x
  Demands Total Current Cost
• Overhead Categories
• Systems
• Supplies
• TDY
• Storage
• Training
• Transportation
• Vs
• ?FUTURE COST Contractor Proposed Price
  Overhead Government Retained Labor Costs
  Government Sunk Costs x Demands Total Future
  Cost

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PBL Notional Example

• Major airframe assembly
• ERRC T reparable item
• Stable program for next five years
• Latest Acquisition Cost 240K
• Latest Repair Cost 66K
• Material Cost Recovery 22K
• Business Operating Cost Recovery 22K

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PBL Business Case Analysis Notional
Example-Increased Reliability

• Over the past five years the AF spent 10.6M on
  repairs, spare buys, engineering and overhead for
  the candidate sub-system stock numbers
• Next five years projected costs are 11.2M based
  on inflation and increasing material costs
• Over the past five years AF SCM performance for
  candidate sub-system equaled CWT of 6.7 days,
  average MICAP incidents of 4.85 and reliability
  of 670 hour MTBD
• Weapon system application and flying hours are
  projected to remain constant
• Contractor proposes to improve and sustain MTBD
  to 1000 hours and average lt 2.00 MICAP and lt3.0
  CWT for 9.7M over contract period of
  performance-- five years
• AF will pay 1.5M for retained overhead tasks
• Contractor agrees to AF approval for
  configuration control above form, fit and
  function and to deliver all engineering data on
  contract termination
• Risk is evaluated as low, given track record of
  contractor and candidate application

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PBL Business Case Analysis Notional
Example-Reduced Cost

• Over the past five years the AF spent 10.6M on
  repairs, spare buys, engineering and overhead for
  the candidate sub-system stock numbers
• Next five years projected costs are 11.2M based
  on inflation and increasing material costs
• Over the past five years AF SCM performance for
  candidate sub-system equaled CWT of 6.7 days,
  average MICAP incidents of 4.85 and reliability
  of 670 hour MTBD
• Weapon system application and flying hours are
  projected to remain constant
• Contractor proposes to maintain and sustain MTBD
  of 670 hours over life of the contract and
  average MICAP incidents of 2.85 and 6.7 days of
  CWT for 9.1M over contract period of
  performance-- five years
• AF will pay 1.5M for retained overhead tasks
• Contractor agrees to AF approval for
  configuration control above form, fit and
  function and to deliver all engineering data on
  contract termination
• Risk is evaluated as low, given track record of
  contractor and candidate application and results
  in savings of 600K

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PBL Notional BCA ExampleIncreased Reliability
and Reduced Cost

• Current Forecast Cost
• 100 repairs 6.6M
• 10 buys 2.4M
• BOCR Overhead 2.2M
• Total 11.2M
• Current Performance
• MICAPS4.85
• CWT 6.7
• MTBD 670 hours

• PBL Cost
• Contractor Price9.1M
• AF Retained Overhead costs 1.5M
• Total 10.6M
• PBL Performance
• MICAPS lt2
• CWT lt3.0
• MTBD gt1000

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Performance Based LogisticsIssues

• ? Must Pays and Flexible Funding
• ? Incremental Funding
• ? Contractor Access to D035A
• ? Contractor Access to D200A
• ? D035K Issues
• ? SORAP for Component
• ? 50/50 and Core Compliance
• ? Source of Supply for Common Items

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Performance Based LogisticsMust Pays and
Flexible Funding Issues

• Issue
• Enterprise prioritization of PBLs is critical in
  order to effectively balance must
  pays and funding flexibility
• Resolution
• AFMC will determine appropriate percentage of
  Cost Authority dedicated to PBLs each FY
• Prioritize in accordance with established
  criteria
• Leverage Commodity Council Governance for
  approvals
• Proposed flexible ceiling (80, 85, 90, 100)

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Performance Based LogisticsIncremental Funding
Issue

• Issue
• Periodic disbursement of cost authority to ALC
  for obligation of funds to contractor
• Resolution
• Cost authority will be provided as identified in
  ALC execution plan

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Performance Based Logistics D035A Issue

• ?Issue
• Contractor needs real time asset position and
  backorder status in order to react daily to
  customer needs
• Resolution
• Manual extraction of need to know data
• Utilize electronics interface that will allow
  contractor access to filtered data

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Performance Based Logistics D200A Issue

• Issue
• Secondary Item Requirements System (D200A) must
  be updated with demand planning data from the PBL
  contractor in order that data required by public
  law can be transmitted
• Resolution
• CDRL will be added to contract requiring
  contractor to provide required data

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Performance Based Logistics D035K/DSS Issue

• Issue
• Reparable asset movement from Contractor to
  Organic Repair shops must be captured in the
  Depot Retail Supply System (D035K) and DLA
  Storage and Distribution System (DSS)
• Resolution
• Will work with DLA to add additional delivery
  point in maintenance (Bldg 641)
• Will map out induction process

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Performance Based Logistics SORAP Issue

• Issue
• All NSNs must have an approved Source Of Repair
  Assignment Process (SORAP) and must be complied
  with
• Resolution
• If no SORAP has been done, must initiate one
• For those with approved SORAPs, Workload Approval
  Process (WAP) provides flexibility to move items
  temporarily

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Performance Based Logistics 50/50 Issue

• Issue
• 50/50 Law
• Resolution
• 50/50 law must be complied with
• Govt objective will be to establish
  public/private partnerships that improve 50/50
• Contractor authority to flex up to 15 of current
  organic work

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Performance Based LogisticsSource of Supply
(SOS) Issue

• Issue
• Can a PBL contractor serve as the Source of
  Supply (SOS) for common items (NSN on more than
  one weapon system or used by more than one
  service)?
• Resolution
• AF will document that it is acceptable for a
  contractor to manage a specific NSN that crosses
  multiple weapon systems.

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Performance Based LogisticsSummary

• ?Air Force should leverage the lessons learned by
  the Navy on PBL (20 of its sustainment
  portfolio)
• ?AF Policy issues remain but we strongly believe
  in the PBL concept and will continue to push
  issues as they are identified
• ?Wins Breed Success!!

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Discussion/Questions