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
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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
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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
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• 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
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Session 1
PBL Background and History
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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
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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
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Outcomes
PBL focuses on delivering weapon system outcomes across the lifecycle
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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
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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
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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 implement- ation
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
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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.”
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PBL Progress
2012
IMPLEMENTATION AND EXECUTION
2013
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.”
“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
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PBL Progress
2012
IMPLEMENTATION AND EXECUTION
2013
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.”
“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.”
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
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PBL Progress
2012
IMPLEMENTATION AND EXECUTION
2013
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.”
“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.”
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.”
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PBL Progress
2012
IMPLEMENTATION AND EXECUTION
2013
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.”
“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.”
“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.”
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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
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It works in the Army
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And the Navy…
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And the Air Force
Met or exceeded all performance metrics
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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.
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“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
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Session 2
PBL Basics
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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
DistributionPerformance
SupplyChain Services
Level 1
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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
SupplyChain Services
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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
SupplyChain Services
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• 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
SupplyChain Services
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• 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
SupplyChain Services
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PBL Levels of Implementation (Subsystem Level)
Co
ntr
act
Sco
pe
Delivery Speed
MaterialAvailability
Logistics Chain Services
DistributionPerformance
SupplyChain Services
Performance Outcomes…
Level 2 Level 3Level 1
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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
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EXAMPLE: Navy Auxiliary Power Unit (APU) contract
• 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
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• 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)
EXAMPLE: Navy Auxiliary Power Unit (APU) contract
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• 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!
EXAMPLE: Navy Auxiliary Power Unit (APU) contract
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PBL Levels of Implementation (Platform/System Level)
Co
ntr
act
Sco
pe
Delivery Speed
OperationalAvailability
MaterialAvailability
Logistics Chain Services
Whole SystemAvailability
DistributionPerformance
SupplyChain Services
Performance Outcomes…
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
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• 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
EXAMPLE: Ground-based mobile missile system
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EXAMPLE: Ground-based mobile missile system
• 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!
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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
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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
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Integrated Logistics Support Elements
(Through 2009)
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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”
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Integrated Product Support Elements
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DoD IPS Element GuidebookDecember 2011
• 575 pages
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PBL and the IPS Elements
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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)
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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
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PBL Implementation Scope
Component Component
Component
Component
Component
Component
Subsystem
Component
Component
Component
Subsystem
Subsystem
Subsystem
SYSTEM
Long-term PBL strategy
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The PBL Application Model
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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
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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”
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• 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”
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• 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!
Transactional approach“Bottom-Up”
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• 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”
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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.”
Transactional approach“Bottom-Up”
November 30, 2011
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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
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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
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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.
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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”
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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
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Traditional Bottom-Up Historical Results
COST
AVAILABILITY
RELIABILITY
Time
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PBL Top-Down Approach
COST
AVAILABILITY
RELIABILITY
Fixed Price Contract
Time
Who benefits from PBL?
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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
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Session 3
PBL Contracts& PSAs
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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
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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
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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
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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
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}
. . . 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
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PBL Implementation Scope
Component Component
Component
Component
Component
Component
Subsystem
Component
Component
Component
Subsystem
Subsystem
Subsystem
SYSTEM
Long-term PBL strategy
MSATM & RR
E&MD P&D O&S
A B C IOC FOC
CPFF CPAF CPIF FPAFCPIF
FPIFFPIFFFP
FPn
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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
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PBL Implementation Scope
Component Component
Component
Component
Component
Component
Subsystem
Component
Component
Component
Subsystem
Subsystem
Subsystem
SYSTEM
Long-term PBL strategy
MSATM & RR
E&MD P&D O&S
A B C IOC FOC
CPFF CPAF CPIF FPAFCPIF
FPIFFPIFFFP
FPn
Data Maturity
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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
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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
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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
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Session 4
PBL Roles & Responsibilities
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Roles and Responsibilitiesin a PBL Strategy
Warfighter
Product Support Manager
Product SupportIntegrator
Product SupportProviders
Program Manager
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PBL Roles – Historical view
PM
PSI
PSPs
Inherently Government
Could be Governmentor Contractor
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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
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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)
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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
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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
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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
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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
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Logistics & Sustainment
Session 5
PBL Depot Involvement
2014 LOA PBL Page 90
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
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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
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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
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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
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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
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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 . . .
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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
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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
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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
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• 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
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• Workshare
• Direct Sales
Types of Partnerships
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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
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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.”
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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
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Logistics & Sustainment
Session 6
S&RP for PBL
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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.”
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S&RP for PBL
• The “12-Step Model” stages
Foundation Planning Execution Oversight
PBL Guidebook: Figure 4. the DoD Product Support Strategy Process Model
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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
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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
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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.
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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
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2. Form the PSM IPT
PBL Guidebook - Figure 6: Product Support Management IPT
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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.
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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)
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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
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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
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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
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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)
•
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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.)
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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
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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
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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
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S&RP for PBL Summary and Discussion
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Logistics & Sustainment
Session 7
PBL Enablers & Barriers
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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
2014 LOA PBL Page 125
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
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PBL Enablers & Barriers
2014 LOA PBL Page 127
PBL Enablers & Barriers
2014 LOA PBL Page 128
PBL Enablers & Barriers
Barriers
Enablers
CU
LTU
RE
WA
RF
IGH
TE
R
2014 LOA PBL Page 129
PBL Enablers & Barriers
Discussion
2014 LOA PBL Page 130
Logistics & Sustainment
Session 8
Summary&
Resources
2014 LOA PBL Page 131
Defense Acquisition PBL resource
2014 LOA PBL Page 132
Defense Acquisition PBL resourcehttp://www.dau.mil
Online Continuous Learning Modules
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Defense Acquisition PBL resourceOnline Continuous Learning Modules
2014 LOA PBL Page 134
Defense Acquisition resource
PBL Community of Practice
Improving DoD Materiel Availability and Reliability While Reducing O&S Costs and Mean Down Time
2014 LOA PBL Page 135
Questions, comments?
The End
2014 LOA PBL Page 136