Lexington Institute Report: “Back to the Future – The Perils of Insourcing”
According to a recently released Lexington Institute report by Daniel Goure, Ph.D entitled “Back to the Future –The Perils of Insourcing”, “the record of Public Private Partnerships (PPPs), in general, and Performance Based Logistics (PBL), in particular, is very good. Government, industry and academic studies all have reached the same conclusion: contracts have led to improvements in availability in the neighborhood of 20-40 percent while typically reducing costs by 15-20 percent. Improving availability creates an additional cost savings by reducing the total number of systems required in order to meet the warfighter’s needs. In addition, by streamlining supply chains and improving inventory control, PPPs have achieved hundreds of millions of dollars in cost avoidance. The private sector has invested many millions in the organic industrial base, provided invaluable training for government workers and transferred critical intellectual property. The integration of the public and private sectors has led to collaborations in the production of new weapons systems such as the Stryker vehicles, and aircraft and vehicle engines.” This report author goes on to assert that “by capitalizing on the comparative advantages of the public and private halves of the defense industrial base, the defense department can support the warfighter while reducing the costs for maintenance and sustainment, and improving the availability of weapons systems they need.”
Regardless of whether readers agree with the author’s assertions and recommendations regarding insourcing, he also correctly concedes what many PBL experts in both government and industry also believe to the case, namely that “central to such an effort is the development of a standardized, transparent and comprehensive analytic approach to defining the business case for or against insourcing. This approach needs to include consideration of the life cycle cost implications of alternative approaches to sustainment.”
What do you think? Do you agree with this report’s conclusions? Does it make a compelling case?