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The Department of Defense (DoD) must improve its ability to affordably satisfy war fighter needs in order to continue to provide ready forces in an increasingly fiscally constrained environment. The Department is determined to target affordability, control cost growth, and incentivize productivity and innovation. These efforts span all acquisition and sustainment activities. With respect to product support, acquisition and sustainment communities must work together on life cycle support solutions for the department's systems, subsystems, and components. Every activity from requirements generation to fielding and sustainment must be evaluated for its ability to affordably deliver war fighting capability.
One of the ways the Department is incentivizing productivity is by promoting broad implementation of performance based logistics strategies. Analysis has shown that properly structured and executed performance based solutions reduce the cost per unit level of performance while simultaneously raising the absolute level of operational performance. This is true regardless of whether the strategy is applied to a system, subsystem, or component. PBL accomplishes this by aligning the interests of the provider with those of the war fighter via the appropriate application of incentives and metrics. This is applicable for both commercial and public providers.
However, accomplishing broad implementation of PBL will require a shift in the way the Department trains and equips its acquisition and sustainment (life cycle) work force and the behaviors it rewards, in other words, a shift in the culture of acquiring and sustaining weapon systems to ensure weapon systems are designed, developed, fielded and sustained with supportability in mind and at the same time ensure optimized affordable readiness. Affecting this culture change will require the coordinated application of statute, policy, process, strategic communications and individual accountability.
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Definition & Overview
Performance Based Life Cycle Product Support (also referred to as Performance Based Logistics or PBL) is an outcome based product support strategy that plans and delivers an integrated, affordable performance solution that optimizes weapon system readiness. PBL focuses on the ability of the support solution to affordably satisfy the war fighter’s requirements, usually expressed in terms of availability, not on the consumption of resources or who performs the work. Measurable and manageable metrics that map to the war fighter established requirements are essential to properly structuring and executing any PBL. The Product Support Manager is the individual tasked with developing and executing the strategy on behalf of the PM. However, a successful PBL requires the participation of the PM, PSM, Contracting Officer, Systems Engineer, pricing team, and many others. PBL delineates outcome performance goals of weapon systems, subsystems, and components, ensures that responsibilities are assigned, provides incentives for attaining these goals, and facilitates the overall management of system reliability, supportability, and life cycle costs. In short, PBL focuses on delivering affordable performance, not transactional goods and services.
DoD Instruction 5000.02
Operation of the Defense Acquisition System clearly states as DoD policy that “the PM (program manager, and by extension, the product support manager) shall work with the user to document performance and sustainment requirements in performance agreements specifying objective outcomes, measures, resource commitments, and stakeholder responsibilities. 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. Both can be referred to as “PBL.”
PBL offers the best strategic approach for delivering required life cycle readiness, reliability, and ownership costs. Sources of support may be organic, commercial, or a combination, with the primary focus optimizing customer support, weapon system availability, and reduced ownership costs.”
Source-of-support decisions for PBL do not favor either organic or commercial providers. The decision is based upon a best-value analysis or business case analysis of the provider's product support capability to meet set performance objectives. The major shift from the traditional approach to product support emphasizes what, not from whom, program managers and product support managers ensure affordable life cycle product support. Instead of buying set levels of spares, repairs, tools, and data, with PBL, the focus is on ensuring a predetermined level of availability at an affordable cost to meet the warfighter's objectives. While PBL strategies can be implemented using a commercial sector product support integrator or product support providers, PBL is
not synonymous with outsourcing or Contractor Logistics Support (CLS). Unlike the Product Support Manager, which is by statute and policy an inherently governmental position, Product Support Integrators (PSI) can come from either the commercial or organic sectors.
Although superseded by Chapter 5 of the
Defense Acquisition Guidebook (DAG) and the
DoD Product Support Manager (PSM) Guidebook, two archived documents life cycle logisticians might still want to be familiar with as they plan and implement weapon system sustainment are
Designing and Assessing Supportability in DoD Weapon Systems: A Guide to Increased Reliability and Reduced Logistics Footprint dated 24 Oct 03 and
Performance Based Logistics: A Program Manager's Product Support Guide dated 10 Nov 04. The former provided an excellent overview of the linkage between performance and sustainment, which can be summarized as follows: Because a weapon system that cannot be sustained in combat is of little value to the warfighter, it is crucial that the warfighter's performance objectives drive the system's sustainment objectives which, in turn, drive the performance-based support strategy. For additional resources and references, encourage workforce members to visit the
Product Support Policy, Guidance, Tools & Training site.
In addition to the
DoD Product Support Manager (PSM) Guidebook, the Life Cycle Logistics section of the PM eToolkit, a Web-based
CLL 011 Performance Based Life Cycle Product Support (PBL) Continuous Learning Module, and a
Performance Based Logistics (PBL) ACQuipedia article, several other useful overview reference videos are also available to familiarize you with PBL product support strategies, including:
Product Support Business Model (PSBM)
The PSBM defines the framework in which the planning, development, implementation, and execution of product support for a weapon system, subsystem, or component is accomplished over its life cycle. The PSBM describes the methodology promoted by DoD to facilitate optimized product support by balancing weapon system availability and ownership cost and encouraging the most advantageous use of an integrated defense industrial base.
The model, as discussed in detail in the
Product Support Manager Guidebook and a related
PSBM ACQuipedia article, provides a clearly delineated description of the roles, relationships, accountability, responsibility and business agreements among the managers, integrators, and providers of product support. Those roles and responsibilities are portrayed, consistent with their level of accountability and responsibility.
Value Proposition & Benefits
Performance Based Logistics (PBL) (also known as Performance Based Life Cycle Product Support) aligns long-term product support planning and sustainment activities directly to operational outcomes. By focusing on the warfighter’s operational requirements vice the number of individual transactions or activities, support providers are incentivized to deliver more effective and affordable material support solutions. This focus on outcome vice transactions (e.g., on materiel availability or supply response time vice the number of inductions/month, number of repairs, or number of service calls) ensures resources are used to their best advantage. In PBL, activities that don’t demonstrate added value to the warfighter’s needs are eliminated.
When implemented with a commercial counterpart, PBL transfers some of the performance risk from the government to the provider since they are no longer rewarded for selling parts or services but instead are rewarded for delivering an outcome. PBL converts what are revenue centers under transactional support to cost centers under PBL. Additionally, in those cases where there is only one provider, the PBL business model incentivizes the provider to affordably deliver the required level of war fighting readiness, even without external competition. It does this by "manufacturing competition," typically through fixed price contracts that incentivize the product support provider to perform in a way that improves both their product and their processes and optimize the outcome for the Department. Investing to support cost reduction and performance gains translates into greater profit for the provider and a reduced price to the government. It also reduces the need for maintenance, inventory, transportation, and other logistics activities related to component failures and are a cost to the government.
Government, commercial and academic research all support the benefits of PBL in terms of reduced life cycle costs and reliability improvements. PBL studies by the Center for Naval Analysis, the Naval Air Systems Command and Deloitte Consulting; all cite the positive effect of PBL on cost and performance of DoD systems, subsystems, and components. Commercial applications produce a similar outcome. The Wharton School at the University of Pennsylvania and the Yale School of Management analyzed five years of commercial jet engine maintenance records at Rolls-Royce, comparing the use of PBL strategies against more traditional transaction-based Time and Materials (T&M) type contracts. After analyzing approximately 700 products delivered to more than 60 customers, they determined that the reliability of the jet engines rose between 10 - 25% through the implementation of PBL strategies over those jet engines supported via T&M vehicles. On a related note, the time between engine overhauls also increased by an average of 790 hours when performance-based arrangements were used.
In summary, using PBL can reduce cost, can increase sustainment efficiency, and can positively impact operation performance. Properly structured and executed PBL strategies encourage provider investments to improve affordability, reliability, and availability, and thus drive down the warfighter support costs to the DoD.
The Myths vs. the Reality (“Mythbusters”)
There are numerous misconceptions about PBL that are often based on inaccurate assumptions. Sometimes, what
everybody thinks they know about PBL is just not so. Several of the common misperceptions - along with some associated PBL realities - are discussed below:
1. Myth -
PBL and Contractor Logistics Support (CLS) are synonymous:
Reality - PBL is not synonymous with CLS. CLS is weapon system sustainment that is provided by a commercial activity over the total life cycle of the weapon system. CLS specifies
who of system support, not the
how. In other words, CLS is always provided by a commercial entity, but it can include traditional transactional spares and repair-type contracts, or it can be outcome-based support. On the other hand, PBL addresses the
how of sustainment, not the
who. In PBL arrangements the provider can be commercial or organic, but the focus must be outcome vice transaction-based support.
DoD Instruction 5000.02 Operation of the Defense Acquisition System: "PBL is performance-based product support, where outcomes are acquired through performance-based arrangements that deliver warfighter requirements and incentivize product support providers to reduce costs through innovation." It goes on to add, "Product support integrators and product support providers may be organic, commercial, or a combination."
While a majority of successful PBL Product Support Integrators (PSI) are, in fact, industry partners (and in many cases, the Original Equipment Manufacturer (OEM)), there is no mandate in DoD policy to use a commercial sector PSI, or even use an industry Product Support Provider(PSP). In reality, PBL optimizes the best public- and private-sector competencies "based upon a best-value determination, evidenced through a business case analysis (BCA), of the provider’s product support capability to meet set performance objectives" Defense Acquisition Guidebook (DAG)). This, as expressed in the following excerpt from the DAG, is absolutely critical to understand:
"This major shift from the traditional approach to product support emphasizes how program manager teams buy support, not who they buy from. Instead of buying set levels or varying quantities of spares, repairs, tools, and data, the focus is on buying a predetermined level of availability to meet the warfighter’s objectives."
While the authors of the
DAG Chapter 4 could arguably have avoided confusion by choosing a different word such as deliver or obtain, rather than "buy", it is a fact that PBL facilitates contribution by both public- and private-sector providers.
As a practical example, many PBLs are fully integrated into the existing supply system and performance outcomes are generated in arrangements that are completely transparent to the customer. Assets are reported in the supply system, normal requisition processing, funding, carcass tracking, and billing procedures continue to apply. The Service remains the designated Logistics Manager for all items on the PBL and the Hardware Systems Command Program Manager, as the Product Support Manager (PSM), is the single "belly button" for warfighter support. This approach enables the incorporation of existing support infrastructure and resources, including organic depot and "I" level maintenance capability, and reduces costs by avoiding the duplication of those supply chain processes.
2. Myth -
PBL at the Platform/System level is the first and best option for support:
Reality – The scope of Product Support Integrator (PSI) responsibility is directly related to the scope of the PBL strategy, and can be implemented at any point on a continuum. At one end of the continuum, the PSI could be responsible for a single support process (such as wholesale supply) for a single component (a fuel control, for example). At the other end, the PSI could be responsible for a complete platform, such as the F-117 Nighthawk stealth fighter, including the entire range of support processes (such as materiel management, maintenance, transportation, technical support, and training).
Early performance-based theory sometimes implied that a single PBL contract/arrangement (generally assumed to be with a Prime) with a single Mission Reliability outcome was the preferred starting point for PBL and was the optimum solution. In practice, PBL at the sub-system and component level is often the most affordable and achievable way to implement improved performance outcomes for the customer. A combination of OEM-focused sub-system and component level PBLs (and traditional support vehicles) aligned to higher level warfighter outcomes identified in customer-generated Performance Based Agreements (PBAs) deliver the same outcome as a single PBL covering an entire platform.
In general, most PBL strategies are implemented at various levels between these two extremes, and often implemented at the subsystem or major component level due to relative ease of implementation. Implementing a total system support PBL strategy for a major weapon system at the platform level is more difficult and requires significant effort to plan, develop, and execute. This does not mean it should not be pursued if it is the right solution for a specific program.
The approach taken will be guided by a range of factors, including:
3. Myth -
The government relinquishes configuration control to the PBL provider:
Reality - A basic principle of management is that, unlike authority, you cannot delegate responsibility. In the DoD, configuration managers are responsible for ensuring the correct configuration of hardware, software, and the information needed to employ them effectively for the operating forces and supporting activities. Some of these tasks may be performed by a commercial contractor as part of a PBL arrangement. However, regardless of the acquisition or support concepts employed, the DoD does not abdicate its responsibility for ensuring proper configuration control.
Improvements to components and parts through increased reliability and reduced maintenance costs are encouraged, incentivized, and enabled via performance-based arrangements, but such changes are implemented using appropriate configuration control procedures.
One of the most critical aspects of configuration management is who "owns" the configuration data and grants access to it. The transition to performance based procurement has decreased the need for DoD to have full "ownership" of configuration data. DoD rarely provides detailed item specifications when buying performance. They leave that largely up to the prime vendor. This has prompted a change in the day-to-day maintenance of configuration data. DoD often delegates data exchange capabilities and repositories to the PSI.
In configuration management, the concept of information "stewardship" (i.e., data sharing) replaces the practice of information "ownership". Once acquired, configuration data is stored digitally for re-use as many times as necessary. In accordance with DoD policy, the Program Manager has continuous access to configuration data, based on the need to accomplish his tasks.
Traditionally, DoD organic organizations purchased and retained control of configuration data. This resulted in multiple levels of coordination, duplicate data, and effort. In PBL, DoD delegates the low-level task of maintaining configuration data to the PSI but retains full responsibility and (at the high level) functionally manages performance specifications. In addition, DoD retains full responsibility for assuring continuous access to configuration data needed to execute the acquisition and support for each weapon system program.
In a PBL strategy, where DoD is "buying performance" from a commercial provider, DoD may choose to maintain only the performance specification to guide weapon system design or manage support. The PSI, whether organic or commercial, maintains the remaining configuration data. The Program Manager (PM) and the support providers must have sufficient continuous access to the configuration data in order to execute systems engineering and logistics management responsibilities.
4. Myth -
PBL circumvents 10 U.S.C. § 2464 Core requirements and the depot selection process:
DoD Directive 5000.01 requires that "sustainment strategies shall include the best use of public and private sector capabilities through government/industry partnering initiatives, in accordance with statutory requirements." Therefore, developing the workload allocation strategy is the "heart" of implementing a PBL support strategy. Determining where, how, and by whom workloads will be accomplished is a significant and critical task to achieve an optimum, best value support plan.
Support workloads* include both common subsystems, commodities, or components and system-exclusive subsystems, commodities, and components.
One of the most beneficial aspects of PBL strategies is the ability to concurrently leverage
Public-Private Partnerships (PPP), facilitating the inclusion of organic depot maintenance activity into an overall PBL product support arrangement.
The following provide the statutory foundation for effecting a partnering arrangement:
In essence, the organic depot accomplishes repair or overhaul of items included within the scope of a PBL contract and "sells" those items to the PBL PSI. This allows PBL contracts to facilitate compliance with other Title 10 requirements, such as:
These partnering arrangements can encompass several of the cooperative relationships that follow:
*Title 10 U.S.C. §2474 (CITEs)
Title 10 U.S.C. § 2474 directs the Military Services to designate depot level activities as Centers of Industrial and Technical Excellence and authorizes them to form public/private partnerships.
*Title 10 U.S.C. § 2563 (Sales to Non-DoD Entities)
Title 10 U.S.C. § 2563 authorizes military facilities to sell certain articles or services to non-DoD entities, in effect, permitting the facilities to act as subcontractors to private firms.
*Title 10 U.S.C. § 2464 (Core)
Title 10 U.S.C. § 2464 addresses the statutory requirement for the Services to maintain an organic industrial base capable of providing depot level maintenance support of DoD weapon systems or equipment deemed critical to Joint Chiefs of Staff contingency scenarios.
*Title 10 U.S.C. §2466 (50/50)
Title 10 U.S.C. § 2466 limits depot maintenance performance by contractor personnel to no more than 50% of the total expenditures for depot maintenance, at the overall Service level, in any given fiscal year.
*Organic Organization as Subcontractor
Authorized by various Title 10 sections, this relationship allows an organic agency (subject to compliance with specific statutory requirements) to act as a subcontractor to a prime contractor by "selling" goods and/or services to the prime. While the prime contractor does not directly pay the salaries of the organic personnel, it does provide work assignment and direction to the organic personnel in a management role.
Work share consists of a facility and equipment lease to a commercial contractor and splitting the total work package between Government and contractor personnel.
Joint use consists of depot maintenance personnel working side by side with commercial contractors within a Government facility.
Mixed production consists of a single line producing a mix of products that include Government and commercial products.
5. Myth -
PBL drives a two-level maintenance concept:
Reality - While many successful PBL arrangements leverage, facilitate, or encourage a two-level maintenance strategy, a two-level maintenance strategy is not a requirement for, a definition of, or synonymous with a PBL support strategy. In fact, many PBLs effectively sustain and enhance systems supported with three levels of maintenance. A PBL strategy is designed to incorporate the outcome of other support analyses. For example, reliability and other variables in a Level of Repair Analysis (LORA) drive the maintenance concept; the PBL is tailored accordingly, not the other way around. This is particularly true for PBL strategies implemented for previously fielded legacy systems, which were very often developed years or even decades ago with a three level maintenance strategy that included an intermediate level shop maintenance requirement.
6. Myth -
PBL is more expensive than traditional support:
Reality – As reported in the Defense AT&L: Product Support Issue of March-April 2012 entitled
Performance Based Logistics and Project Proof Point, A Study of PBL Effectiveness by John Boyce and Allan Banghart, “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.”
In most cases, a robust BCA process determines PBL affordability. Criteria for award of a PBL contract is "break-even or better" costs compared to traditional. As an example, documented savings associated with the PBL program in the Navy since FY00 are a little over 4%.
It should be stressed that this conclusion holds true independent of individual PBL's rigid adherence to all the tenets of an ideal PBL arrangement, exhaustive contract oversight, or contract renegotiation. The consistent ability of PBL arrangements to deliver positive cost and performance results with less-than-strict adherence to all tenets suggests the strategy is robust. Any business strategy whose success requires flawless execution is destined for failure in the long run.
7. Myth -
PBL will reap substantial savings: The corollary to number 6
Partial Reality - The ‘partial reality’ here is based on the statement the PBL “will” reap substantial savings. As noted in the Myth number 6 above, PBL arrangements are quite robust and can be successful even if only adhering to some of the tenets. However, it must be understood that less than consistent application of the key tenets will sub-optimize the performance and cost savings. Therefore, the corrected statement really should be that PBL “can” reap potential savings.
Developing a PBL arrangement than reaps savings can be difficult. The support provider will be taking on many additional responsibilities under PBL which they did not have in a traditional support arrangement – and will bear the burden for associated risks and costs. This risk poses an opportunity as well; however, as the underlying PBL concept is that the provider has the know-how to construct an affordable outcome that improves its bottom line when given responsibility commensurate to the risk. In successful, affordable PBL arrangements, the support provider understands the PBL risk/benefit proposition; and uses the opportunity enabled by the performance-based requirements to make product or process improvements to reduce costs. This effort is critical in order to make PBL affordable.
By designating of single point accountability for performance with a PSI, and developing support metrics and accompanying incentives, one can more readily ensure that performance and cost objectives will be met. But programs cannot claim victory just by labeling a sustainment approach a PBL arrangement without investing in the PBL basics. Calling a sustainment approach a PBL arrangement just doesn’t make it so.
8. Myth -
PBL is a panacea that will correct all issues across the Integrated Product Support spectrum including reliability:
Reality - PBL will not overcome a lack of sustainment planning, make up for an absence of effective program systems engineering, succeed with inadequate funding, mitigate the effects of poor leadership, or deliver instantaneous results. By identifying targeted metrics and incentives that focus on performance outcomes such as readiness, reliability, availability, maintainability, cost, and obsolescence/Diminishing Manufacturing Sources and Material Shortages (DMSMS) mitigation, it is often possible to improve system, equipment or component performance. It is not guaranteed, however, particularly for legacy systems with a history of existing performance problems. To use a baseball analogy, DoD program managers and life cycle logisticians alike must recognize that ignoring early logistics design influence opportunities cannot be rescued by a PBL “diving basket catch” at the eleventh hour.
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