1. Operations & Maintenance (O&M) funds typically cannot be used for the procurement of material, whether it is a Performance Based Logistics (PBL) contract or not. O&M appropriations traditionally finance those things whose benefits are derived for a limited period of time (e.g., expenses, rather than investments). Examples of costs financed by O&M funds are headquarters operations, civilian salaries and awards, travel, fuel, minor construction projects less than $2M, expenses of operational military forces, training and education, recruiting, depot maintenance, purchases from Defense Working Capital Funds (DWCF) (e.g., spare parts), base operations support, and assets with a system unit cost less than the current expense/investment threshold ($250K). (For additional information on O&M funds, see the O&M Funds ACQuipedia article at https://shortcut.dau.mil/acq/o_mf)

1. PBL contracts themselves are typically funded with either O&M funds or via DWCF, although other types are funds are also used to help facilitate the PBL effort. Early in the Acquisition phase, procurement funds may be used to lay in initial spares and repair parts. Depending on scope of support, Research, Development, Test & Evaluation (RDT&E) funds may also be used development of a new or improved capability to the point where it is appropriate for operational use. (https://shortcut.dau.mil/acq/rdt_e).

After fielding, O&M funds are the predominant source of funding for system sustainment for both PBL and traditional transactional approaches, although other types of funds may still be used for disparate but critical sustainment functions, e.g., depot maintenance, spares, software and personnel.  This then drives the need for multiple ‘lines of accounting’ that may restrict PBL execution activities, and may complicate tracking and baselining of sustainment costs. The use of appropriated funds also limits the length of the contract – which can be antithetical to the outcome-based goals of true PBL efforts.

A key tenet of PBL as identified in OSD’s PBL Guidebook is the requirement to provide sufficient contract length for the product support provider to recoup investments on improved product and sustainment processes. (https://shortcut.dau.mil/JST/pbl-guidebook). DWCF are revolving funds established to satisfy recurring DoD requirements using a businesslike buyer-and-seller approach.  (https://shortcut.dau.mil/acq/wc_fund). The structure of the DWCF allows for contracts with multiple year performance periods and also allows coverage of a wide degree of sustainment functions, as long as they are supporting the end-items’ performance outcome. The Navy Supply Systems Command (NAVSUP) Weapon Systems Support (NWSS) has demonstrated great success in awarding long-term PBL contracts in this manner. (https://www.navsup.navy.mil/public/navsup/wss/)

1. As discussed above, O&M funds can be used for spare parts purchases from DWCF activities or assets or systems with a unit cost less than the current expense/investment threshold ($250K).