2014 LOA PBL Page 1 Lockheed Martin Corporate Engineering, Technology, & Operations Logistics & Sustainment 10530 Rosehaven St., Ste. 600 Fairfax, VA 22030

2014 LOA PBL Page 1

The Current State of Performance Based Logistics (PBL)

Lockheed MartinCorporate Engineering, Technology, & OperationsLogistics & Sustainment10530 Rosehaven St., Ste. 600Fairfax, VA 22030

Instructor: Michael D. “Bo” [email protected](703) 434-0396

2014 LOA PBL Page 2

Agenda

Session 1: PBL Background and History

Session 2: PBL Basics• Levels• Scope • PBL Application Model

Session 3: PBL Contracts & PSAs

Session 4: PBL Roles

Session 5: PBL Depot Involvement

Session 6: S&RP for PBL

Session 7: PBL Enablers and Barriers

Session 8: Summary

2014 LOA PBL Page 3

Performance Based Logistics (PBL) has become the preferred life cycle product support strategy for U.S. Department of Defense (DoD) systems and International customers, and as such offers significant business opportunities matched to customers’ outcomes needs. The objective of PBL is to improve weapons system readiness by procuring top level performance outcomes while optimizing support cost by capitalizing on integrated logistics chains and public-private partnerships.

Background

2014 LOA PBL Page 4

• Know the history of PBL

• Understand the fundamental concepts of PBL arrangements

• Recognize the attributes of successful PBL strategies

• Describe the levels and scope of PBL application

• Identify the current laws, policies, and directives that impact PBL implementation and execution

• Describe the Standard and Repeatable Processes (S&RP) that facilitate effective performance-based Product Support Arrangements (PSAs)

• Understand the constraints and enablers influencing development and execution of PBL strategies

Session Objectives

2014 LOA PBL Page 5

Session 1

PBL Background and History

2014 LOA PBL Page 6

PBL

Legacy: Performance Based LogisticsLegacy: Performance Based Logistics

Emerging: Performance Based Lifecycle Product Support

“PBL is synonymous with performance-based lifecycle product support, where outcomes are acquired through performance-based arrangements that deliver Warfighter requirements and incentivize product support providers to reduce costs through innovation.

These arrangements are contracts with industry or intragovernmental agreements.”1

2014 LOA PBL Page 7

PBL Definition

An outcome based product support strategy that plans and delivers an integrated, affordable performance solution that optimizes weapon system readiness.

https://acc.dau.mil/CommunityBrowser.aspx?id=527144#definition

2014 LOA PBL Page 8

Outcomes

PBL focuses on delivering weapon system outcomes across the lifecycle

2014 LOA PBL Page 9

Some PBL examples• Aircraft Tires PBL

– Scope: Availability of Naval aircraft tires– Outcomes

• Availability: 95%• Delivery: 2 days CONUS; 4 Days OCONUS

• Army HIMARS PBL– Scope: Availability of HIMARS Rocket Launcher System– Outcomes

• Availability: 92%• Delivery: 24 hours CONUS; 96 Hours OCONUS• Repair Turnaround: 5 days Field; 45 days Vendor

• H-60 “Tip to Tail”– Scope: Depot-Level Repair/Overhaul– Outcomes

• Fill Rate: 88% (vs. 80% contract requirement)• High priority SMI supply response time: 100%• All-time low backorders on 1,286 components: 24

http://images.google.com/imgres?imgurl=http://www.skytreads.com/air_retread4.JPG&imgrefurl=http://www.skytreads.com/&h=240&w=188&sz=5&hl=en&start=1&tbnid=OpJ8d15gfyxmqM:&tbnh=110&tbnw=86&prev=/images?q=aircraft+tires&gbv=2&svnum=10&hl=en&sa=G

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2014 LOA PBL Page 10

How did PBL get its start?

A more effective system sustainment approach

was required!

A more effective system sustainment approach

was required!

• Situation with U.S. military systems, mid-1990s– Aging weapon systems

• Procurement decline following Cold War • Fewer new systems, keeping old ones longer

– Aging systems need more support• Fixed Defense Budget • Sustainment was rising as a total life cycle cost percentage

– No strategy to correct the downward spiral• DoD lacked funds to invest in modernization or replace systems• Systems were never ‘designed for supportability’

– A crisis was clearly imminent• U.S. Congress mandated action


PBL History

NDAA:DoD must report to Congress on Product Support Reengineering

PSAT Implementation

• F-117• APU

1998

Product Support ReengineeringReport to Congress

30 RTOC Pilot Programs

1999

QDR Mandates PBL:(First official use of the term)

DoD Program Managers Guidebook published

2001

DoD 5000 policy: PBL is DoD’s preferred Product Support Strategy

ACAT 1 &2:Use PBL or justify why not

2003

Revised DoD 5000.2 is released

Product Support Assessment Team launched

2008

DoD Weapon System Acquisition Reform Product Support Assessment

DoD WSAR-PSA implementation

2009

• Sustainment

Quad Chart•“Proof Point” phase I

2010

• PSM, BCA,

ILA• Post-IOC

review• “Proof

Point” phase II

2011

NextGen

2012

CONCEPT POLICY ADOPTION EVOLUTION


PBL History (cont.)

2012

IMPLEMENTATION AND EXECUTION

Endorsement of Next Generation PBL Strategies

“A recently completed study by ASD(L&MR) provided compelling evidence that properly constructed and executed performance-based product support strategies (commonly referred to as PBLs) deliver best-value weapon system support.”


PBL Progress

2012


2013



“The PM shall employ effective Performance-Based Life-Cycle Product Support (PBL) planning, development, implementation, and management. Performance-Based Life-Cycle Product Support represents the latest evolution of Performance-Based Logistics.”

DoDI 5000.0226 Nov 2013


PBL Progress

2012


2013




AT&L(M&R)22 Nov 2013

“CAEs, PEOs, and PMs will emphasize through appropriate communication vehicles the importance of pursuing performance based product support strategies.”

Performance Based Logistics Comprehensive Guidance


PBL Progress

2012


2013




Better Buying Power 2.0 Achieving Greater Efficiency and Productivity in Defense Spending

AT&L24 Apr 2013

“The Department will broadly implement effective PBL strategies.

PBL’s success, however, is dependent on ensuring the workforce has the expertise and support to properly develop and implement PBL arrangements.”


PBL Progress

2012


2013




“CAEs, PEOs, and PMs will emphasize through appropriate communication vehicles the importance of pursuing performance based product support strategies.”

“The Department will broadly implement effective PBL strategies.

PBL’s success, however, is dependent on ensuring the workforce has the expertise and support to properly develop and implement PBL arrangements.”


PBL 2014

May

MOVING FORWARD

“PBL has been the preferred sustainment strategy since the 2001 Quadrennial Defense Review.”

“The policies governing these strategies have gone through several iterations since 2001, but the intent has remained the same. . .”

“INCREASE THE USE OF PBL”

September

ASD(L&MR)

“Recent studies point to additional opportunity to be realized through more broadly applying properly structured and executed PBL arrangements.”

3.0

“When properly established and effectively executed, PBL is an effective way to balance cost and performance regardless of whether industry or the government is providing the logistics service. If industry is the provider, PBL also provides explicit productivity incentives and ensures the best value for the DoD, particularly for service contracts such as maintenance and support contracts. We believe there is opportunity for more progress in expanding the use of PBL, and it will be receiving additional emphasis and management attention going forward.”

PBL GUIDEBOOK


It works in the Army


And the Navy…


And the Air Force

Met or exceeded all performance metrics


PBL Comprehensive Guidance22 November 2013

• CAEs will provide a summary of their PBL implementation efforts to the Business Senior Integration Group (B-SIG) on an annual basis.

• Continue to provide sustainment quad charts for DAB and DAE summary reviews. Ensure PMs list specific PBL arrangements.


“The Quad Chart”

The Product Support Quad Chart is a recent addition to formal program review process

The Chart are required for Defense Acquisition Board reviews for major programs

The four reportable quadrants are:Product Support StrategySustainment ScheduleMetrics DataO&S Data



Session 2

PBL Basics


PBL Levels of Implementation

Co

ntr

act

Sco

pe

Level 2 Level 3

Delivery Speed

OperationalAvailability

MaterialAvailability

Logistics Chain Services

Whole SystemAvailability

Level 1

DistributionPerformance

SupplyChain Services

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PBL Levels of Implementation (Component Level)

Co

ntr

act

Sco

pe

Performance Outcomes…

Delivery Speed



Level 1



EXAMPLE: Navy Aircraft Tires Contract

• Situation prior to PBL contract

– Supply Availability 81%

– Aircraft tires treated as commodity, bought in bulk, stored until needed

• Large on-hand 365 day inventory (wholesale and retail)

• Use of organic (DoD) distribution system; delivery times as long as 60 days

• May or may not have right mix of tires




EXAMPLE: Navy Aircraft Tires Contract

• Navy awarded a $260M PBL contract in 2001 to supply Naval Aircraft Tires– 5 year Fixed Price base with two 5 year option periods

• Contractor role: Supply Chain Management

– Demand forecasting, order fulfillment– Warehousing, inventory

• Contractual Goals

– 95% on-time fill rate– Delivery: 2-day CONUS; 4-Day OCONUS




• Contractor actions

– Contractors own the entire wholesale/retail tire inventory

– Sub-contract let for warehouse services

– Modeled several warehouse configurations to balance transportation costs against on-time delivery• Selected 2 warehouse sites: Charlotte NC and Sacramento

CA

– Distribution• One for international shipments• One primarily for for CONUS shipments• FEDEX supplements

EXAMPLE: Navy Aircraft Tires




• Results

– Supply availability 98% over contract term

– Deliveries average 32.5 hours CONUS & 58.25 hours OCONUS

– Reduced warehouse inventory level from 365 days to 90 days

– Virtually eliminated retail inventories (4769 reduced to 1626)

– On track to a projected $48M 15-year savings

Learning Point:

Good business opportunities even in

lower level PBLs

EXAMPLE: Navy Aircraft Tires




PBL Levels of Implementation (Subsystem Level)

Co

ntr

act

Sco

pe

Delivery Speed






Level 2 Level 3Level 1





EXAMPLE: Navy Auxiliary Power Unit (APU) contract

• Situation prior to PBL contract

– Supply Availability 65%– APUs were aging; support costs escalating

• Reliability and Availability declining; no funding to modernize

• Contractual Goals– Supply and delivery response time:

90% on-time– Reliability guarantees ranging from

25% to 300% improvement



• Navy awarded a $189M 10 Yr PBL contract

– Subsequently expanded to $500M covering APUs across 6 platforms

– FAR Part 12 (commercial) Fixed Price per flight hour

• Contractor role

– Total system performance (availability and reliability)

– Supply chain management, configuration management, tech insertion


• Contractor actions

– Sub-contract for Supply Chain Management

– Partnered with Fleet Readiness Center – East (Naval Depot (NADEP) Cherry Point)

• NADEP Cherry Point a ‘subcontractor’ to Prime Contractor

– Cherry Point does depot overhaul. – Contractor ensures they have parts and technical

support (on-site)



• Results

– Supply availability 97% over contract term

– 25% inventory reduction

– Reliability improvements up to 300%

– Gainsharing provision when reliability improvements > 25%

– On track to a projected $70M savings

Learning Point:

Public-Private

Partnerships Work!



PBL Levels of Implementation (Platform/System Level)

Co

ntr

act

Sco

pe

Delivery Speed

OperationalAvailability



Whole SystemAvailability




Level 2 Level 3Level 1



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• U.S. Army awarded a 4-year (1 base year, 3 option years) $55M Fixed Price PBL contract– Contingency support is CPFF

• 3 Metrics: 3% positive (meet/exceed metrics) and 3% negative (do not meet metrics) incentive structure– System Status Readiness: 92% target– Mission Capable (MICAP) deliveries: 24 hour

CONUS; 96 hours OCONUS– Repair TAT: 5 day average – on site repair; 45

day average – vendor repair

EXAMPLE: Ground-based mobile missile system


• Contractor role

– Supply: manage wholesale spares inventory

– Maintenance: ICS Depot Level maintenance with a plan to transition to a Partnership with an Army Depot

– Sustaining Engineering, Training, Technical Data, Configuration Management, Obsolescence Management




• PBL Contract Results– Successful System Status Readiness every

quarter since contract award– MICAPs: No launcher has been down for 24

hours due to PBL components since contract awarded

– Repair TAT has been 2 days (vs. 5 day goal) for on-site repair and 34 days (vs. 45 day goal) for vendor repair

– Cost savings predictions are $400M+ over contract term

Learning Point:

OEMs can deliver

system-level

performance!


PBL Levels summary

Single Multiple All

System LevelSingle 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

PBL can be implemented at any “Level” of end item…

PBL can be implemented at any “Level” of end item…

EXAMPLE: Aircraft Tires

EXAMPLE: Auxiliary Power Unit

EXAMPLE: F117 Aircraft


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Scope of PBL Applications


Understanding “Scope”

• PBL contracts will be different than “traditional” sustainment contracts

• PBL metrics are specific to outcome needs

• Outcomes can be achieved by properly assessing the IPS areas, and aligning the range of the scope with desired outcomes and contract metrics


Integrated Logistics Support Elements

(Through 2009)


Remember what “PBL” is

• Performance Based Lifecycle Product SupportProduct Support

“The term “product support” means the package of support functions required to field and maintain the readiness and operational capability of major weapon systems, subsystems, and components, including all functions related to weapon system readiness.”

• Title 10, USC 2337 defines “product support”


Integrated Product Support Elements


DoD IPS Element GuidebookDecember 2011

• 575 pages


PBL and the IPS Elements


Not all Product Support Elements are equal in PBL

• 99%+ of all PBL contracts include Supply Chain Management (including PHS&T)

– Availability of spares, components, or subsystems

• Next highest included element is Maintenance, Repair, & Overhaul

– A critical part of the DoD/Defense Supply Chain (primary source of inventory replenishment)


Single Multiple All

System LevelSingle 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

Integrated Product Support Elements

PBL Implementation Scope



Component Component

Component

Component

Component

Component

Subsystem

Component

Component

Component

Subsystem

Subsystem

Subsystem

SYSTEM

Long-term PBL strategy


The PBL Application Model


The PBL Application Model• PBL: Simple in concept; more complex in

application. • The solution varies depending on:

the Level of implementation (Component, Subsystem, or System/Platform)

the scope of implementation The 12 Integrated Product Support (IPS) Elements

the Outcome Metrics the Life Cycle Phase of the objective system

Early (immature data), Later (mature data)?

the constraints that prescribe how maintenance workload is allocated and performed

Title 10 US Code, Military Department policies


PBL Basics

REPAIRS

SPARES

- Availability- Reliability- Response times

- Supply chain- Maintenance and repairs

- Smaller Footprint…at an affordablecost

Traditional Strategy(Non-PBL)

PBL Strategy

Desired Outcomes

SUPPLIES

Repairs

Spares

PHS&T

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Traditional vs. PBL

Traditional Strategy

REPAIRS

SPARES

SUPPLIES

The Traditional Strategy is based upon individual transactions

“Bottom-Up”

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Traditional Transactional

• The historic DoD approach• Non-integrated, stove-piped support• Does not enable the critical inter-relationships across

the product support elementso A negative action in Supply Chain Management (e.g., poor

demand forecasting) has significant impacts on maintenance, transportation, etc.)

o Sub-optimizes within stovepipes • The PM “hopes” that the sum total of support will

meet the warfighter readiness requirements o Reality says it seldom does . . . o . . . nor is it affordable

• It is a “Win-Lose” constructo The worse performance gets, the more customer pays, a

portion of which goes to industry.

“Bottom-Up”


• Is reactive, not proactive

– Its goal is to repair or replace things that break, not prevent them from breaking.

• Lacks an inherent improvement component

– Factors that increase failure (decreasing reliability, obsolescence) must be initiated and funded externally; They are not inherently initiated.

– Over time, performance declines and cost rises.

Its focus is on continually treating the symptoms, not on making the patient well

Transactional approach“Bottom-Up”


• Contractor Logistics Support (CLS)

– The traditional historic CLS approach was and is transactional.

– By design beginning in a program’s overall Acquisition Strategy, the contractor provides lifetime support.

– The contractor will be responsible to:

– Develop the support

– Acquire maintenance capability

– Provide the necessary support resources

–PBL is not CLS!



• Assumes all risk for:o right partso right repairso right timeo right quantities

• Forecast requirements• Specify buy quantities• Pay for each spare part and repair on a Unit Price basis

• Forecast requirements• Specify buy quantities• Pay for each spare part and repair on a Unit Price basis

The more Isell, the

moreprofit I make!

The more Isell, the

moreprofit I make!

Traditional Transactional Contract Support

Military Customer

Responsibilities

“Bottom-Up”


00000000

“In transactional sustainment arrangements, the incentives are neutral at best and more likely tilted againstthe military Services and Defense Logistics Agency.

Compounding this problem is that essentially all financial and performance risks reside with the Services.”


November 30, 2011


Top-DownProduct Support Business model(The PBL system outcome view)

• System-level availability focus

• Outcome-based

• Natural “Win-Win” construct is mutually beneficial to customer and contractor Needs of customer are met Needs of contractor (to include profit opportunity)

• Continuous Process Improvement is inherent


The less Iuse, the

moreprofit I make!

The less Iuse, the

moreprofit I make!

Specify Performance

Outcomes

Specify Performance

Outcomes

• Forecast requirements• Specify buy quantities• Pay for each on a Unit Price basis• Assume all risk for:

right parts right repairs right time

right quantities

• Forecast requirements• Specify buy quantities• Pay for each on a Unit Price basis• Assume all risk for:

right parts right repairs right time

right quantities

• Improve Reliability• Improve Repair processes

Motivated to:

Top-Down approachFixed Price PBL Contract

Military Customer

Responsibilities


Project “Proof Point”

November 30, 2011

Sustaining weapon systems, subsystems, and major components via Performance Based Logistics arrangements deliver improved readiness at reduced life cycle costs when compared to traditional, transactional sustainment arrangements.


What DoD says…

1,246 pages

• Defense Acquisition Guidebook

– “The essence of PBL is buying performance outcomes…versus individual parts and repair actions”

– “This is accomplished through a business

relationship that is structured to meet the warfighter's requirements”

– . . .(while) “continually improving the cost-effectiveness of logistics products and services”


PBL changes how support is acquired

• PBL doesn’t fundamentally change Product Support; it changes how it is acquired− At the operating level, all systems still require the

same resources and activities to keep them operational• Spares, Repairs, Technical Support, Training,

Distribution, Transportation, Warehousing, etc.

− What it changes is the business relationship by which these elements are obtained

− Risk and accountability for performance outcomes are assigned to a Product Support Integrator, who determines ‘how’ to achieve them


Traditional Bottom-Up Historical Results

COST

AVAILABILITY

RELIABILITY

Time


PBL Top-Down Approach

COST

AVAILABILITY

RELIABILITY

Fixed Price Contract

Time

Who benefits from PBL?


Who benefits from PBL?

The contractor• Opportunity to improve product reliability• Opportunity to improve process efficiency• Opportunity to decrease costs• Opportunity to increase profit

The customer• Increased availability of system• Increased reliability of:• Systems• Processes• Decreased Program costs• Confidence in achieving desired outcomes

Other programs• Freed-up capacity• Lessons learned


Session 3

PBL Contracts& PSAs


What makes a contract a “PBL” contract?

Characteristics of a “PBL” contract:Incentivizes contractor achievement of specified ‘outcomes’Contractor is financially at risk for performanceContractor receives positive financial (and other) benefits for positive performanceContractor suffers tangible negative consequences for non-performanceContractor has broad flexibility in ‘how’ to achieve the ‘what’ specified by the contract Contractor either manages, performs, or has strong agreements in place over those support functions leading to achievement of the specified outcomes

PBL


Contract types vis-à-vis PBL

CPFF Cost Plus Fixed Fee

CPAF Cost Plus Award Fee

CPIF Cost Plus Incentive Fee

FPI Fixed Price Incentive

Fixed Price Award Fee

Firm Fixed Price

FPAF

FFP

Early PBL

Robust PBL

Not PBL


Risk-to-Profit opportunity ratio

– Firm Fixed Price

– Fixed Price Incentive

– Fixed Price Award Fee

– Cost Plus Incentive Fee

– Cost Plus Award Fee

– Cost Plus Fixed Fee

High

Low

ContractorRisk

ContractorProfit

Opportunity

High

Low


PBL contracting strategy should align to the DoD Acquisition process

DoD Lifecycle Management Framework

IOC

Technology Maturation

& Risk Reduction

Production & Deployment

Operations & Support

FOCMaterielSolutionAnalysis

ProgramInitiationBA C

Engineering and Manufacturing Development


}

. . . which drives the need for a contracting strategy

Systems Acquisition

Pre-PlanningCost Plus

(CPAF or CPIF)Fixed Price;or CP with

Cost Targets•Collect Supply Data•Collect Repair Data•Compile Cost Baseline•Apply Initial Metrics•Apply Initial Incentives•Assess Results

•Finalize Metrics•Final Incentives•Assess Results

} }

Acquisition Milestones

Transition to FP when pricing risk is acceptably low

RUN

IOC

Technology Maturation

& Risk Reduction

Production & Deployment

Operations & Support

FRP DecisionReview

FOCMaterielSolutionAnalysisMateriel Development Decision

ProgramInitiationBA C

Engineering and Manufacturing Development

Post-CDRAssessment

Post PDRAssessment

WALK

CRAWL

• Forecast Supply Data• Forecast Repair Data• Forecast Cost

Baseline• Develop Initial

Metrics• Develop Initial

Incentives

Sustainment



Component Component

Component

Component

Component

Component

Subsystem

Component

Component

Component

Subsystem

Subsystem

Subsystem

SYSTEM


MSATM & RR

E&MD P&D O&S

A B C IOC FOC

CPFF CPAF CPIF FPAFCPIF

FPIFFPIFFFP

FPn


The PBL contracting strategy…

. . . is CRITICAL• Best PBL strategy can be handicapped by a poor

contracting strategy• Priority actions in devising a contracting strategy are:

Contract type Contract phasing

Primary objectives: Tailor contract type to correspond to:• Level of risk consistent with the phase of the program• Level of risk is associated with the maturity of the data

Ultimate goal is a Fixed Price contract• Crawl, Walk, Run towards a Fixed Price contract



Component Component

Component

Component

Component

Component

Subsystem

Component

Component

Component

Subsystem

Subsystem

Subsystem

SYSTEM


MSATM & RR

E&MD P&D O&S

A B C IOC FOC

CPFF CPAF CPIF FPAFCPIF

FPIFFPIFFFP

FPn

Data Maturity


Product Support Agreements

• Product Support Arrangements (PSAs) are implemented by Product Support Agreements

• “Product Support Arrangement” is a generic term that includes a wide range of relationships between organizations associated with product support.

https://acc.dau.mil/CommunityBrowser.aspx?id=454907https://acc.dau.mil/CommunityBrowser.aspx?id=454907


Types of PSAs• The Contract

• MOA – Memorandum of Agreement– Parties to the agreement are dependent on actions by the

other party

• MOU – Memorandum of Understanding– Parties to the agreement are not dependent upon actions by

the other party

• CSA – Commercial Services Agreement– Agreement between a Contractor and DoD entity that provides

for a Contractor to buy DoD goods and services

• SLA – Service Level Agreement– Used in commercial processes more than in DoD systems;

primarily used in software-related relationships


Product Support Agreements

• Even beyond the contract, the Product Support Agreements are critical elements in implementing PBL 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

• Getting them right is critical!

Clarify Support Expectations!

PSA


Session 4

PBL Roles & Responsibilities


Roles and Responsibilitiesin a PBL Strategy

Warfighter

Product Support Manager

Product SupportIntegrator

Product SupportProviders

Program Manager


PBL Roles – Historical view

PM

PSI

PSPs

Inherently Government

Could be Governmentor Contractor


Top-level Government

accountability and Product Support management role

• Retains Product Support Integrator role

• Recognizes possibility of multiple PSIs

PBL Roles – Current view

The Product Support Business Model


Any supplier, public or private, that provides products or services in the sustainment of a DoD system

Supply/WarehousingDepot Repair

Contract Support

Common Commodities

Transportation

Maintenance

Product Support Providers (PSP)


The PSI(Product Support Integrator)

“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”

(DoD Product Support Guide)

• “An entity within the Federal Government or outside the Federal Government charged with integrating all sources of product support, both private and public, defined within the scope of a product support arrangement” (2010 NDAA, Section 805)

• PSIs are RESPONSIBLE and ACCOUNTABLE for delivering the designated PERFORMANCE OUTCOMES to the Warfighter customer

PSI


Who can be a PSI?

• Industry– OEM usually default choice

• Has knowledge of system; technical data, proprietary rights & licenses; unique parts; maintenance expertise

• Example: LM for F-117 aircraft– 3PL (Third Party Logistics Provider)

• Not OEM, but has required integration/other expertise• Examples:

– LM contract with DLA as broad scope parts supplier– LM partner with Michelin for Aircraft tires contract

• Government (Organic)– Program Management Office, Depot, Inventory Control

Point • Growing impetus for Government to assume PSI role• Example: Navy Subsystem/Component PBLs


The DoD Product Support Manager

• Title 10 USC 2337: “The Secretary of Defense shall require that each major weapon system be supported by a product support manager”

• “. . . ensure achievement of desired product support outcomes through development and implementation of appropriate product support arrangements”

• “. . .use appropriate predictive analysis and modeling tools that can improve material availability and reliability, increase operational availability rates, and reduce operation and sustainment costs”

PSM

AlsoInherently

Government


PM

Supply/DLA

Contractor Support

Transportation

Warfighter Outcomes

ProductSupport

Agreement

Contract

How the roles fit together

Product SupportProviders

Depot RepairDeliversOutcomes

Contractsor

Performance Based

Agreements

PSM

Product SupportIntegrator

Pro

gram

Off

ice


Logistics & Sustainment

Session 5

PBL Depot Involvement


Depot Workload Allocation

• In major weapons systems, long-term depot-level maintenance is going to be a major factor

• Government maintenance depots and commercial maintenance facilities may be able to perform the system’s depot-level tasks

• The Government PM, PSM, and the support contractor will play a role in determining where this kind of activity will occur


PSI Workload determination

• PBL gives significant top-level integration responsibility to the Product Support Integrator

• The PSI has great latitude in determining how the support will be provided to achieve the outcomes


HOWEVER, • DoD is governed by statutes, policy, and

formal guidance that significantly bound where, and by whom workloads can be performed

DoD boundary and enabler conditions


Depot Workload Allocation Process

Statutory Requirements

Title 10DoD Policy Best Value

Workload Allocation

Agreements

Statutory Requirements

Title 10DoD Policy Best Value

What the program

WANTS to doWhat the Program

MUST do

Planning Process Sequence1 2 3 4

Workload Allocation

Agreements


Workload Allocation is determined along two axes

CONTRACTORORGANIC

OrganicSupport

Contractor Support

TransactionBased

Support

PerformanceBased

Support

BestMix

Determined by: • Title 10 US Code• Partnering Opportunities• Service Policies• OSD/Service Guidance• Existing Infrastructures• Best Competencies & Value

1. Best mix ofPublic/Private

capabilities

1. Best mix ofPublic/Private

capabilities

2. Maximize use ofPerformance Based

strategies

2. Maximize use ofPerformance Based

strategies

Determined by: • DoD 5000-series Policy• DoD Guidance• Service Policies & Guidance• Business Case Analysis• Need to Optimize Performance


DoDI 4151.21 – Depot-level PPP(2012)

• Public-private partnerships for depot-level maintenance shall be employed whenever cost-effective in providing improved support to the warfighter, and to maximize the utilization of the government’s facilities, equipment, and personnel at DoD depot-level maintenance activities.

• Performance-Based Logistics implementation strategies shall consider public-private partnerships . . .


Title 10 and Depot activitiesSECTION

DLM 2460 Definition of Depot-Level Maintenance & Repair

Reporting 2461 Commercial or Industrial type functions: Required studies and reports before conversion to contractor performance

Core 2464 Core Logistics Capabilities

50/50 2466 Limitations on the performance of Depot-Level maintenance of material

$3M Rule 2469 Requirements of competition for contracts to perform workloads previously performed by Depot-Level activities of the DoD

Procedures 2469a Use of competitive procedures formerly performed at certain military installations

Authority 2470 DLM – Authority to compete for other Federal Agency workload

Lease of Excess Material 2471 Persons outside the DoD: Lease of excess Depot-level equipment and facilities

End Strength 2472 Management of Depot-Level employees

Public-Private Partnering 2474 Centers of Industrial and Technical Excellence (CITEs) / Designation of PPPs

BRAC 2687 Base Realignment and Closures

WCF 2208 Working Capital Funds


Section 2464: Core Logistics

• DoD must maintain a core logistics capability that is Government-owned and Government-operated

– To ensure effective and timely response to a mobilization, national defense contingency situations, and other emergency requirements


Section 2466: The “50/50 Rule”

• At least 50% of the money allocated annually for depot-level maintenance and repair must be performed by a Government organic entity

– no more than 50% can be “contracted out”

• Computed annually at the Military Department level – it is not weapon system specific

– Calculated based on FUNDS, not MANHOURS

Government Industry


• Authorizes the Designation of Depot Maintenance activities within the Military Departments “as a Center of Industrial and Technical Excellence (CITE) in the recognized core competencies of the designee”

– also authorizes partnering

Section 2474 CITEs & Partnerships


• Workshare

• Direct Sales

Types of Partnerships


GovernmentBuying Activity

Contractor USG Depot

$$$ $$$

Agreement

Workshare(10 USC 2474)

• Each is paid separately • Contractor and Depot establish a partnering agreement• May engage in a “teaming” arrangement

Contract

GovernmentBuying Activity

Contractor USG Depot

$$$

$$$

“Subcontract” (CSA)

Direct Sales(10 USC 2563)

• Contractor ‘subcontracts’ with Depot • USG Depot does overhaul

o Compliance with Core, 50-50o Paid by Contractor

• Contractor is ‘accountable’ for end item in PBL contract• Depot accountable via ‘Hold Harmless’

Contract

Types of Partnerships summarized

• ‘Hold Harmless” not applicable unless inserted in partnering agreement


Public-Private Partnering Guidebook(2012)

“Defense acquisition policy requires PMs to develop and implement performance-based logistics (PBL) strategies that include the best use of public and private-sector capabilities through government-industry partnering initiatives.”


Depot Partnering Examples

The Guidebook (Section 3) lists case studies:

• Sniper Pod Warner Robins ALC / Lockheed Martin

• F404 EngineFleet Readiness Center / GE

• M1 AbramsAnniston Army Depot / GD Land-Honeywell

• F-35 Lightning II FighterUSAF/USN/USMC / Lockheed Martin – Pratt & Whitney

• Rock Island ArsenalRock Island Arsenal / BAE Systems

• HMMWVDLA/Army TACOM / AM General



Session 6

S&RP for PBL


Standard & Repeatable Processes (S&RP) for PBL

“A gap identified by DoD through the course of the OSD-charted PBL Study (Proof Point) was the need for standardized repeatable processes to facilitate effective performance-based Product Support Arrangements.”


S&RP for PBL

• The “12-Step Model” stages

Foundation Planning Execution Oversight

PBL Guidebook: Figure 4. the DoD Product Support Strategy Process Model


It is a Guide

• It is not intended to be a rigid one-size-fits-all process chart

• It can be used as a checklist of things to consider

• It is intentionally flexible, to be tailored to the needs of the specific program

• The “steps” do not need to be performed sequentially


1. Integrate Warfighter Requirements & Support

• “The PM/PSM should coordinate with Warfighter representatives to ensure product support requirements are identified/ documented and threshold values are established/updated.”

- PBL Guidebook 2.1.3


1. Integrate Warfighter Requirements & SupportJROC requires a sustainment KPP

• JROC – Joint Requirements Oversight Council• KPP – Key Performance Parameter• AM - Materiel Availability

The Materiel Availability KPP is a de facto requirement.

• Of the four mandatory KPPs, there is one that specifically addresses sustainment: AM

PBL Guidebook: Figure 5: Relationship between AO and AM

• Operational Availability (AO) can apply all the way down to the LRU level.

• AM is a fleet-level metric.


2. Form the PSM IPT• A collaboration of key functional

areas

o Lifecycle Logisticso Engineering o Financeo Contractingo Legal o Others, as deemed relevant by PSM

• Other consultants could also be used

• Can include Contractor and Government personnel


2. Form the PSM IPT

PBL Guidebook - Figure 6: Product Support Management IPT


3. Baseline the System

• Assess the “as-is” state of the system

• For a new system, engineering and supportability data must be developed.

• For active, fielded “legacy” systems, inventory of assets, assessment of services, and understand current process and availability metrics is key. MTBF, RTAT, CWT, Fill Rates, OTD, NMCS, NMCM,

etc.


4. Identify/Refine Performance Outcomes• Establish outcome goals

• In a PBL Arrangement in particularly, establishing outcome-base metrics is key

• Establish at what level(s) within the system should be addressed (component, subsystem, system)


5. Business Case Analysis

• May include trade-off analyses, cost:benefit analysis, product support analysis, analysis of alternatives, economic analysis, etc.

• The intent is to identify a best value support solution, balancing desired outcomes with associated costs

• A best practice is to ensure consideration of Public-Private Partnerships


6. Product Support Value Analysis• The analysis of product support

alternatives includes both financial and non-financial considerations.

• Programs may assign weights relative to cost, benefits, and risk with product support alternatives

The weighting of these three criteria is critical to the decision-making process\

A PBL Leading Practice is to use modeling and simulation to give insight


7. Determine Support Method(s)• The PSMIPT will engage in

structuring an appropriate support strategy

• Assess product support work scope relative to Product components Product Support Elements

• Consider the scope and kinds of relevant product support metrics to be used

• Develop a performance-based contracting strategy and plan


8. Designate PSI(s)

• Consider the complexity of the program being supported, and the complexity of the supportability itself

• If the use of the PSI concept is in order, select from relevant ones. Typical candidates include The system’s Prime Contractor/OEM The system’s own Logistics organization A third-party logistics (3PL) provider from the

private sector An organic agency (e.g., DLA, Depot, ICP, et al)

•


9. Identify PSPs

• Define the scope of support• Communicate with all stakeholders to

generate a mutual understanding of support requirements.

• Document the warfighter and stakeholder support requirements

• Clearly identify the specific items to be covered • Align PSP requirements to current and future

support posture• Define configuration control • Begin DMS/MS planning, to include obsolescence• Plan for lifecycle cost considerations • Ensure compliance with statutory requirements (i.e.,

Title 10 USC 2464, 2466, etc.)


10. Identify/Refine Financial Enablers

PBL Guidebook Figure 21Alternatives to Fund a PBL Contract

Effective PBL arrangements require active PSM involvement in establishing long-term financial planning

A best practice is to for the PSM to maintain continual interaction with a Program’s Financial Officer


11. Establish/Refine Product Support Arrangements

• Effective Product Support Arrangements include: Objective and measurable outcome-

focused product support work description Outcomes-focused contracting strategy Contract type Contract length Pricing strategies

Outcomes-focused metrics, few in number Incentives to achieve and improve outcome

objectives Consideration given to lifecycle cost reductions Shared risks and rewards with Government and

commercial PSIs and PSPs


12. Implement and Assess

• Tracking performance is integral to a PBL arrangement

• Best practices include:

Operating with a Quality Assurance Surveillance Plan (QASP)

Routine reviews Continual performance monitoring Close collaboration with stakeholders Continual alignment with evolving warfighter

requirements


S&RP for PBL Summary and Discussion



Session 7

PBL Enablers & Barriers


Enablers and Barriers to PBL

• PBL has been in the DoD inventory for over 15 years

• There are factors that enhance PBL’s probability of success

• There are factors that inhibit PBL


PBL Enablers & BarriersDefense Acquisition Research Journal

“Scholarly peer-reviewed journal published by DAU. All submissions receive a blind review to ensure impartial evaluation.”Research asked the question,

“What factors impact PBL?”

1. Funding2. Statutory-Regulatory Requirements3. Cultural Paradigms4. Existing Infrastructure or Organization5. Tech Data Rights6. PBL Awareness and Training7. Incentives/Awards8. Supply Chain Management9. Strategic Alliances/Partnerships10. Performance Based Contracting11. Performance Metrics12. TLCSM13. Adoption of COTS14. Total Ownership Costs







Barriers

Enablers

CU

LTU

RE

WA

RF

IGH

TE

R



Discussion



Session 8

Summary&

Resources


Defense Acquisition PBL resource


Defense Acquisition PBL resourcehttp://www.dau.mil

Online Continuous Learning Modules


Defense Acquisition PBL resourceOnline Continuous Learning Modules


Defense Acquisition resource

PBL Community of Practice

Improving DoD Materiel Availability and Reliability While Reducing O&S Costs and Mean Down Time


Questions, comments?

The End


Documents

2014 LOA PBL Page 1 Lockheed Martin Corporate Engineering, Technology, & Operations Logistics & Sustainment 10530 Rosehaven St., Ste. 600 Fairfax, VA 22030