If you had not already seen it, the October 2013 issue of Defense Acquisition Research Journal (ARJ) contained an intriguing article entitled “Are the Performance Based Logistics Prophets Using Science or Alchemy to Create Life-Cycle Affordability? Using Theory to Predict the Efficacy of Performance Based Logistics.” According to the article summary, “numerous studies have provided evidence that performance based logistics (PBL) can control cost and improve performance. The success—and failure—of PBL strategies suggest the need to position the PBL research domain into a fabric of theory. Just as engineering theories predict the reliability of a new armored vehicle, economic and business theories provide a framework that explains the efficacy of PBL. This article describes the underlying theoretical fabric of PBL. Armed with a framework grounded in theory, senior leaders can make science-based decisions to explain, predict, refine, and advocate for affordability-enhancing, life-cycle governance structures by leveraging the critical success factors of PBL.”

A few interesting takeaways:

·         “PBL success depends on interactions among numerous variables. For instance, short-term contracts generate quick wins in classic logistics (warehousing, transportation, and inventory), medium-length contracts improve purchasing and item management, but real reliability-driven affordability requires a longer term contract.”

·         “PBL establishes a metric-based governance structure where suppliers make more profit when they invest in logistics process improvements, or system redesign that reduces total cost of ownership.”

·         “In transactional sustainment, little incentive exists, and even less capital is available, to make life-cycle affordability investments. PBL reverses that trend by treating repair and redesign similar to make or buy.”

·         “In PBL, contract length directly impacts the repair-redesign efficient frontier and has tremendous implications for life-cycle affordability.”

·         “…leaders who choose not to develop a theoretical understanding of life-cycle affordability may unwittingly begin to resemble mercurial alchemists, with a frustratingly inconsistent ability to reduce weapon system life-cycle cost or explain the efficacy of affordability-oriented strategies like PBL. Leaders who do not understand theory will be forced to watch as their peers explain, predict, refine, and advocate for PBL success after success. Leaders armed with theory will understand how to employ PBL strategy to build collaborative supply chain governance structures that increase the affordability of national security.”

·         “What does research say?

o    PBL manufactures internal competition, eliminates waste, and improves quality

o    PBL aligns incentives to avoid sub-optimization

o    PBL leverages long-term contracts to spur investment

o    PBL optimizes management of assets that are difficult to predict statistically

o    PBL shifts from a return on sales to return on investment business model

o    PBL creates optimal outcomes while dealing with uncertainty and differing constraints

o    PBL creates a governance structure based upon long-term relationships, stable cash flow, clear scope, and intelligent metrics

The net-net of this research activity is performance based strategies work. (emphasis added)”

Not coincidentally, this article dovetails with and in several instances, reinforces a number of points outlined in an article published in the March-April 2012 issue of Defense AT&L Magazine entitled “Performance Based Logistics and Project Proof Point: A Study of PBL Effectiveness”, including:

·          “PBL strategies are flexible. They are equally ef­fective regardless of whether applied to system, subsystem, or component level product support.”

·         “PBL strategies are policy. DoD Directive 5000.01, paragraph E1.1.17. directs that “PMs shall develop and implement performance-based logistics strategies that optimize total system availability while minimizing cost and logistics footprint.”

·         “PBL strategies are not synonymous with, nor should they be confused with Contractor Logistics Support (CLS). Successful PBL strategies leverage a best value mix of both public and private sector.”

·         “PBL arrangements which substan­tially adhere to generally recognized PBL tenets reduce DoD cost per unit of performance while simultaneously driving up the absolute levels of system, sub-system, and major com­ponent readiness/availability when compared to non-PBL ar­rangements.”

·         “PBLs can deliver significant value even with less than perfect implementation.”

·         “PBLs do not necessarily outsource or degrade DoD’s organic capability. Many PBLs include pub­lic/private partnering and have improved organic capability and increased workload.”

·         “PBLs can work with government providers, but the incentives are more difficult to establish and track.”

·         “PBL product support strategies work. In fact, PBL product support strategies deliver both reduced cost of ownership and increased readiness. (emphasis added)”

So the question remains: “are PBL (proponents) using science or alchemy to create life-cycle affordability”? While the casual reader may believe the Defense ARJ author’s implied answer is both, he makes a compelling case for the former, concluding by saying “the Proof Point Project (Defense AT&L Magazine article, March-April 2012) provided empirical evidence of PBL success. This article augments that effort by providing the business and economic theory at the core of that success. The criticality of reducing a weapon system’s life cycle demands that senior leaders inculcate into the acquisition corps a respect for business theory—similar to the strong respect that the corps has for engineering theory. It is critical that decision makers continue the intellectual engagement aimed at understanding the theoretical and practical foundation for successful PBL governance structures.”

Either way “life-cycle affordability” is clearly the outcome, and in both articles, the authors lay out a compelling case that effective performance based logistics product support strategies deliver.