What are the cost impacts/cost risks when using contractor logistics support (CLS) vs organic forms of support?
Determining the cost impacts/cost risks when using Contractor Logistics Support (CLS) vs. organic forms of support is a very open-ended question. There are many variables at play in any potential response, such as the Integrated Product Support (IPS) Elements are to be covered, the complexity of the system(s) to be supported, the quantity of items, their commercial vs. military nature, the Government’s access to technical data, the applicability of US Code Title 10 requirements, and more.
Since there are so many factors to be considered when determining the product support strategy and associated workload allocation, selecting the program’s commercial and/or organic product support providers is almost always made on factors other than just cost. However, if we take a very simplistic view, here are some top-level rules of thumb to keep in mind regarding cost and logistics support solutions:
· Organic support is likely the most cost effective, least risky support option for existing/well-understood technology for which technical data and existing infrastructure (people, tooling, facilities, etc.) are available. This could include low-volume items or items that are not widely available in the commercial marketplace.
· Conversely, commercial support (whether it be CLS or a more targeted Performance Based Logistics (PBL) approach) will probably be the most cost effective, least risky support option for newer technology when technical data is either not available, or available only for a significant cost. Because of the advanced state of technology, there likely would not be an existing infrastructure, and transitioning to organic support would require an investment of time and capital.
One major way the Services determine the “best value” product support solution is via the application of a Product Support Business Case Analysis (BCA). The Product Support BCA is a structured methodology and document that aids decision making by identifying and comparing alternatives by examining the mission and business impacts (both financial and non-financial), risks, and sensitivities.
In accordance with DoD 5000.02, the initial BCA is due by Milestone B, and is then to be revisited at each major milestone, and once a system is fielded, every five years or whenever there is a significant program change – whichever comes first. This DoD policy implements the requirements outlined in 10 U.S.C. 2337 for the Product Support Manager (PSM) to "conduct appropriate cost analyses to validate the product support strategy. This includes cost-benefit analyses as outlined in Office of Management and Budget (OMB) Circular A–94.” Specific instructions on the Product Support BCA completion process, product template, and authoritative data sources are contained in the DoD Product Support BCA Guidebook.
For more information on developing affordable and effective product support solutions and workload allocations, recommend accessing the following references:
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