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Performance Based Logistics

This Community serves as an interdisciplinary platform to connect PBL practitioners from across multiple career fields, facilitate knowledge sharing and peer support, as well as provide a knowledge repository for key PBL-related material across the Department of Defense.

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Strategic Imperative

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. 

"To maximize competition, innovation, and interoperability, acquisition managers will consider and employ performance-based strategies for acquiring and sustaining products and services.  "Performance-based strategy" means a strategy that supports an acquisition approach structured around the results to be achieved as opposed to the manner by which the work is to be performed.  This approach will be applied to all new procurements and upgrades, as well as re-procurements of systems, subsystems, and spares that are procured beyond the initial production contract award.  Product support strategies (PSS) will be informed by a business case analysis conducted pursuant to Section 4324 (formerly 2337) of Title 10, U.S.C.  The PSS is designed to facilitate enduring and affordable sustainment consistent with warfighter requirements.  Support metrics will be established, tracked, and adjusted where needed to ensure product support objectives are achieved and sustained over the system life cycle.  PSS include the best use of public and private sector capabilities through government and industry partnering initiatives, in accordance with statutory requirements. The Program Manager is accountable for achieving program life-cycle management objectives throughout the program life cycle.  Planning for operations and support will begin at program inception, and supportability requirements will be balanced with other requirements that impact program cost, schedule, and performance.  Performance based life-cycle product support implements life-cycle systems management." (Source: DoD Directive 5000.01, para 1.2k through 1.2m, 9 Sep 2020)  

 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 the Defense Acquisition Guidebook (rescinded in 2022) 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.  

In addition to the DoD PBL Guidebook and DoD Product Support Manager (PSM) Guidebook, the following resources are also available to familiarize you with PBL product support strategies, including:

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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, 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.

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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.

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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.

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. As expressed in the former Defense Acquisition Guidebook (DAG), "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 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 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, 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:

  • Operational requirements
  • Life cycle phase
  • Available resources
  • Current support infrastructure
  • Service guidance
  • Business Case Analysis

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:

Reality DoD Directive 5000.01 requires that "product support strategies include the best use of public and private sector capabilities through government and 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:

  • Title 10 U.S.C. § 2474 (CITEs)*
  • Title 10 U.S.C. § 2563 (Sales to Non-DoD Entities)*

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:

  • Title 10 U.S.C. § 2464 (Core)*
  • Title 10 U.S.C. § 2466 (50/50)*

These partnering arrangements can encompass several of the cooperative relationships that follow:

  • Organic Organization as Subcontractor*
  • Work Share*
  • Joint Use*
  • Mixed Production*

*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

Work Share consists of a partnership in which a government buying activity, in collaboration with a contractor and a depot maintenance activity, determines the best mix of work capitalizing on each partner's capabilities.  The workload is then allocated to each partner.  The contractor is funded through a contract, and the organic activity is funded through a project or work order (in the case of depot maintenance).  The partnering agreement between the contractor and organic activity focuses on the roles and responsibilities of each partner.  The partners work jointly to accomplish the overall requirement.
 

*Joint Use

Joint use consists of depot maintenance personnel working side by side with commercial contractors within a Government facility.

*Mixed Production

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 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 over a 10-year period exceeded 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.

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Warfighter

Combatant Command warfighters operate and, to varying degrees, repair and maintain our national defense systems.  Their need for new or upgraded warfighting capability drives government and industry’s iterative requirements generation, acquisition, and product support processes, per Chairman of the Joint Chiefs of Staff Instruction 5123.01H and DoD 5000-series policies.  The Services ensure that warfighter requirements for the sustainment performance and cost-affordability related characteristics of systems are specified in design-quantitative terms and tied to discrete development, test, and fielded performance metrics. 

These warfighter technical parameters requirements for sustainment-related system capability and their measurement metrics constitute the “performance based” prerequisite for all life-cycle sustainment strategies and subsequent organic and industry contractual arrangements, such as PBL. The term "Warfighter"  is intended to be neutral regarding military service, branch, and service status. It is frequently used in DoD memos or directives which are intended to apply to all services equally.

The term warfighter is also often used more broadly to refer to any individual, regardless of rank or position who is responsible for making decisions that affect combat power.  A warfighter can be then involved in a wide variety of functions, including those directly related to the battlefield such as movement and maneuver, intelligence, command and control, and protection, and also including those functions related to product support, sustainment, maintenance, supply and logsitics support.

Understanding warfighter requirements in terms of performance and affordability is an essential initial step in developing a meaningful product support strategy. (DoD Directive 5000.01) Representatives of the operational commands and organizations that support the warfighting combatant commanders are generally the PM’s primary customers, and thus key stakeholders on any PBL effort. For a graphical illustration of the desired linkages between the Program Manager/Product Support Manager and Warfighter product support requirements and desired outcomes, see the DoD Product Support Business Model (PSBM) ACQuipedia article or read more about it in the DoD Product Support Manager (PSM) Guidebook

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Program Manager (PM)

The PM is designated with the overall responsibility and authority to direct the development, production, and initial deployment (as a minimum) of a new defense system. The PM is accountable for cost, schedule, and performance reporting to the Milestone Decision Authority (MDA). The PM's role, then, is to be the primary agent within the defense acquisition system to ensure the warfighter's modernization requirements are met efficiently and effectively, in the shortest possible time.

Additionally, according to the DoD Product Support Manager (PSM) Guidebook, the effective PM should have the "big picture" perspective of the program, including in-depth knowledge of the interrelationships among its elements. An effective PM:

  • Serves as a leader and a manager, not primarily a task "doer";
  • Understands the requirements, environmental factors, organizations, activities, constraints, risks, and motivations impacting the program;
  • Knows and is capable of working within the established framework, managerial systems, and processes that provide funding and other decisions for the program to proceed;
  • Comprehends and puts to use the basic skills of management-planning, organizing, staffing, leading, and controlling, so people and systems harmonize to produce the desired results;
  • Coordinates the work of defense industry contractors, consultants, in-house engineers and logisticians, contracting officers, and others, whether assigned directly to the program office or supporting it through some form of integrated product team or matrix support arrangement;
  • Builds support for the program and monitors reactions and perceptions that help or impede progress; and
  • Serves both the military needs of the user in the field and the priority and funding constraints imposed by managers in the Pentagon and military service/defense agency headquarters.

Per DoD Instruction 5000.02 Operation of the Adaptive Acquisition Framework, the PM also is also required to work with the user community to document performance and sustainment requirements in performance agreements such that the program clearly specifies objective outcomes, measures, resource commitments, and stakeholder responsibilities. The PM is required to employ effective PBL planning, development, implementation, and management. It is important to note that the Product Support Manager (PSM) reports directly to the PM for ACAT I programs, and is responsible for developing and implementing the program’s PBL strategy.

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Product Support Manager (PSM)

According to the DoD Product Support Manager (PSM) Guidebook, “DoD recognizes that the Program Manager (PM) has life cycle management responsibility. In 2009, Congress officially established the PSM as a key leadership position, distinct from the PM, who reports directly to the PM. The PM is charged with delivering Warfighter required capabilities while the PSM, working for the PM, is responsible for developing and implementing a comprehensive product support strategy and for adjusting performance requirements and resource allocations across Product Support Integrators (PSIs) and Product Support Providers (PSPs) as needed to implement this strategy. Furthermore, the PSM‘s responsibility carries across the life cycle of the weapon system by requiring the revalidation of the business case prior to any change in support strategy or every five years, whichever occurs first. The PSM must be a properly qualified member of the Armed Forces or full-time employee of the Department of Defense.”

PSM roles, responsibilities and positional requirements were established in Public Law 111-84, Section 805, and implemented in Directive Type Memorandum (DTM) 10-015 Requirements for Life Cycle Management and Product Support. Extensive related information, including Service implementation policies, processes, presentations, articles, and links to related information are also available on the DAU Logistics Community of Practice (LOG CoP) and the Logistics Director’s Blog. Key enablers include, but are by no means limited to:

The Product Support Business Model “provides the PSM a common and consistent product support language and guidance on how to develop and execute product support...”, “provides a clearly delineated description of the roles, relationships, accountability, responsibility and business agreements among the managers, integrators, and providers of product support” and “...effectively describes the methodology by which DoD intends to ensure achievement of optimized product support through balancing maximum weapon system availability with the most affordable and predictable total ownership cost.” It also graphically illustrates the relationship between the PSM and other key stakeholders including the Warfighter, the Program Manager, the Product Support Integrator(s), and the Product Support Provider(s). Under the PSBM, the PSM leverages Product Support Arrangements to achieve the desired product support outcomes. According to the PSM Guidebook, “a Product Support Arrangement (PSA) is a contract, task order, or any type of agreement or non-contractual arrangement within the Federal Government, for the performance of sustainment or logistics support required for major weapon systems, subsystems, or components. The term includes arrangements for any of the following including performance based logistics, sustainment support, contractor logistics support, life cycle product support, and weapon systems product support.”

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Product Support Integrator (PSI)

The Fiscal Year 2013 National Defense Authorization Act (NDAA) Conference Report describes the role as follows: -–"The term 'Product Support Integrator' means an entity within the Federal Government or outside the Federal Government charged with integrating all aspects of product support, both private and public, defined within the scope of a product support arrangement."

The DoD Product Support Manager (PSM) Guidebook, provides amplifying information, stating that a PSI is an entity who performs as a formally bound agent (e.g., under a contract, Memorandum of Agreement (MOA), Memorandum of Understanding (MOU) or Service-Level Agreement (SLA)) charged with integrating all sources of support, public and private, defined within the scope of PBL agreements to achieve the documented outcomes.

The PSM, while remaining accountable for system performance, effectively delegates the responsibility for delivering warfighter outcomes to the PSI. In this relationship, and consistent with 'buying performance,' the PSI has considerable flexibility and latitude in how the necessary support is provided, so long as the outcomes are accomplished. The PM or PSM selects a PSI from DoD or the private sector. Activities coordinated by support integrators can include, as appropriate, functions provided by organic organizations, private sector providers, or a partnership between organic and private sector providers. The PM/PSM ensures that the product support concept is integrated with other logistics support and combat support functions to provide agile and robust combat capability. The PM/PSM invites the Services' and Defense Logistics Agency (DLA) logistics activities to participate in product support strategy development and IPTs. These participants help to ensure effective integration of system-oriented approaches with commodity-oriented approaches, optimize support to users, and maximize total logistics system value.

The role of the PSI can be narrow or broad, as directed and designed by the PSM.

  • At one end of the spectrum, a single PSI could be assigned with the responsibility for entire system level outcomes (e.g., Operational Availability, Materiel Availability). This approach has the advantages of clearly assigning responsibility (and visibility) of Warfighter outcomes to a single point of responsibility and provides for a comprehensive and horizontally integrated support solution that accounts for all the product support elements.
  • Alternately, the PSM can assign top level PSI roles for major subsystems; the most prevalent example would be dual PSIs for an aircraft system, with a PSI designated for the airframe and a PSI designated for the propulsion system.
  • Devolving further, PSIs could be assigned for multiple major subsystems that comprise a larger platform system capability, such as a naval vessel.

The determination of the number, designation, and responsibilities of the PSIs comprising a product support strategy framework will result from both the Business Case Analysis (BCA) process as well as the PSM‘s consideration of the operational mission role, environment, and support requirements of the objective system.

The PM or PSM selects a PSI from DoD or the private sector. Activities coordinated by support integrators can include, as appropriate, functions provided by:

  • Organic organizations;
  • Private sector providers; and/or
  • Partnership(s) between organic and private sector providers.

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Product Support Provider (PSP)

From the National Defense Authorization Act (NDAA) Conference Report, the term ‘Product Support Provider’ refers to an entity that provides product support functions. The term includes entities within the DoD, an entity within the private sector, or a partnership between such entities.

The DoD Product Support Manager (PSM) Guidebook adds that PSPs are assigned responsibilities to perform and accomplish the functions represented by the Integrated Product Support (IPS) elements which, in accordance with the BCA outcomes and consistent with statute and policy, comprise the range of best value or statutorily assigned workloads that achieve the required Warfighter support outcomes. This can be done at the program, portfolio, or enterprise level.

A primary objective of the BCA process is to determine the optimum sources of support depending on capabilities, competencies, best value, and the efficiency and effectiveness of support. For each of the IPS elements there will be logical candidates, both public and private, to accomplish the required product support. Within each of those IPS element support functions, the work will be further delineated into technical, hands-on, management, and quality tasks. The PSM may elect to assign support integration responsibilities to one or more PSIs who will be assigned specified performance or support outcomes and, consistent with that assignment, given authority to manage the PSP and functions necessary to achieve those outcomes.

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Life Cycle Logistician

The Life Cycle Logistics career field spans the entire system life cycle, encompassing both life cycle logistics and sustainment activities, and includes professionals responsible for planning, development, implementation, and management of effective and affordable product support strategies.

Life cycle logisticians perform a principal joint and/or DoD component logistics role during both the acquisition and operational phases of a system’s life cycle to: ensure product support strategies meet program goals for operational effectiveness and readiness; ensure supportability requirements are addressed consistently with cost, schedule, and performance; ensure supportability considerations are implemented during systems design; meet system materiel availability, materiel reliability, operations and support cost, and mean down time objectives; and deliver optimal life cycle product support. To be successful, they must therefore be proficient in the following competency areas:

  • Design influence
  • Integrated Product Support (IPS) Planning
  • Product Support and Sustainment
  • Configuration Management
  • Reliability and Maintainability Analysis
  • Technical/Product Data Management
  • Supportability Analysis

Life cycle logisticians ultimately must pursue two primary objectives, namely to ensure that weapons systems are designed, maintained, and modified to continuously reduce the demand for logistics; and to ensure effective and efficient logistics support. The resources required to provide product support must be minimized while meeting warfighter needs and ensuring long-term affordable materiel readiness.

Life cycle logisticians achieve these objectives by ensuring the integration of the Integrated Product Support (IPS) elements to maximize supportability, reliability, availability, maintainability, and mission effectiveness of the system throughout its life cycle. They influence system design and provide effective, timely product support capabilities that drive effective, best value product support planning and execution. Emphasis is placed on ensuring materiel readiness at optimal life cycle costs and integrating life cycle management principles by designing and implementing performance-based life cycle product support strategies to provide effective system support. Life cycle logisticians can work directly in a program management office, in support of the program manager, or in other supporting and sustainment logistics activity offices. Level III certified life cycle logisticians can also serve as DoD Product Support Managers (PSM) responsible for:

  • Providing weapon systems product support subject matter expertise to the Program Manager (PM) for the execution of the PM’s duties as the Total Life Cycle Systems Manager;
  • Developing and implementing a comprehensive, outcome-based product support strategy;
  • Promoting opportunities to maximize competition while meeting the objective of best-value, long-term outcomes to the warfighter;
  • Seeking to leverage enterprise opportunities across programs and DoD Components;
  • Using appropriate analytical tools and conducting appropriate cost analyses, to determine the preferred product support strategy;
  • Developing and implementing appropriate product support arrangements;
  • Assessing and adjusting resource allocations and performance requirements for product support to meet warfighter needs and optimize implementation of the product support strategy;
  • Documenting the product support strategy in the Life Cycle Sustainment Plan (LCSP); and
  • Conducting periodic product support strategy reviews and revalidating the supporting business case analysis.

Thus, life cycle logisticians and product support managers are ultimately responsible for designing, developing, implementing, and sustaining tailored life cycle product support that optimizes affordability, materiel readiness and joint warfighter requirements, and provides the nation an enduring strategic advantage over its adversaries.

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Contracting Officer

Individuals delegated authority by the head of the agency to enter into and administer contracts are Contracting Officers. Only these designated individuals are authorized to obligate funds and commit the Government contractually. This authority is vested in the individual. Some authorities are unlimited; others are limited to specific dollar amounts, or to specific functions, such as pre-award, administration, and termination. The extent of authority is expressly defined in "warrants" or other instruments of delegation, such as orders or certificates of appointment. While these agents of the Government receive advice from specialists in law, audit, engineering, transportation, finance, or other functions, they remain the ones who are responsible and accountable for the contracts.

Standards for serving as a Contracting Officer are demanding and called out in detail in the Federal Acquisition Regulation (FAR) and Defense Acquisition Regulation Supplement (DFARS). The standards include education and professional training requirements, as well as specified contracting experience, depending on the dollar value and complexity of the contracts to be awarded or administered in the position.

The term Contracting officer also includes certain authorized representatives acting within the limits of their authority as delegated by the Contracting Officer.  You may hear the following terms to further describe types of Contracting Officers:

  • Procurement Contracting Officer (PCO) - Generally performs pre-award functions prior to contract award.  A PCO may be responsible for performing both pre-award and post-award duties.  After award, however, the DoD PCO normally delegates certain contract administration functions to an Administrative Contracting Officer (ACO) at the Defense Contract Management Agency DCMA (see more information below)  
  • ACO - Refers to a contracting officer who is administering contracts. (FAR 2.101)
  • Termination Contracting Officer (TCO) - refers to a contracting officer who is settling terminated contracts. (FAR 2.101)
  • Corporate Administrative Contracting Officer (CACO) - refers to an ACO who is assigned to a specific contractor’s location.  Contractors with more than one operational location (e.g., division, plant, or subsidiary) often have corporate-wide policies, procedures, and activities requiring Government review and approval and affecting the work of more than one ACO. In these circumstances, effective and consistent contract administration may require the assignment of a CACO to deal with corporate management and to perform selected contract administration functions on a corporate-wide basis. (FAR 42.601)

Because a well-crafted arrangement is the key to PBL success, it is critical to have a Contracting Officer in a key role on the PBL Integrated Product Team (IPT). Decisions regarding vehicle type (e.g., Firm Fixed Price (FFP), Cost Plus Award and/or Incentive Fee (CPAF, CPIF), Fixed Price Incentive Firm (FPIF), or Cost Plus Fixed Fee (CPFF) etc.), contract length, performance metrics and monitoring techniques are just some of the decisions that must be made by or with a Contracting Officer.

Because planning and implementing a PBL arrangement is often a complex and novel endeavor to many of those involved, it is best to have a Contracting Officer who is both experienced and flexible. A Contracting Officer who is well versed in the "art of the contractually possible" AND one who can support the goal of crafting a tailored PBL arrangement will contribute substantially to the team’s PBL efforts. Conversely, working with an inexperienced Contracting Officer and/or one who is reluctant to move beyond traditional transaction-based support arrangements can mean a death knell to the most promising of PBL endeavors.  By working proactively with Contracting Management to assist in educating and exposing contracting personnel to PBL early in the acquisition process, through planning, requirements, and strategy development, it can greatly enhance the final product and result in a PBL contract that is aligned with the agency’s mission and goals.

Another contributor to the PBL contracting endeavors may be representatives from DCMA.  DCMA is the DoD component that works directly with Defense suppliers to help ensure that DoD, Federal, and allied government supplies and services are delivered on time, at projected cost, and meet all performance requirements.

DCMA professionals serve as "information brokers" and in-plant representatives for military, Federal, and allied government buying agencies -- both during the initial stages of the acquisition cycle and throughout the life of the resulting contracts.

Before contract award - DCMA provides advice and information to help construct effective solicitations, identify potential risks, select the most capable contractors, and write contracts that meet the needs of our customers in DoD, Federal and allied government agencies. 

After contract award - DCMA monitors contractors' performance and management systems to ensure that cost, product performance, and delivery schedules are in compliance with the terms and conditions of the contracts.

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Systems Engineer

Mr. Stephen P. Welby, former Assistant Secretary of Defense for Research and Engineering, stated  “My primary goal is to ensure that the DoD's systems engineering capabilities are focused on providing the technical insight required to support knowledge-based decision making throughout the acquisition process.” The importance of systems engineering to PBL cannot be overestimated.

Logisticians must work closely with Systems Engineers as early in the program life cycle as possible. Initially, the focus will be on affecting overall weapon system Reliability, Availability, Maintainability, and Supportability (RAMS) in the design. Designing in RAMS early in the life cycle of a weapon system usually costs far less than trying to improve it later; however, a properly constructed PBL approach may help to incentivize improvements in RAMS concerns over time. The Systems Engineers can help to identify specific components for monitoring throughout the system's life cycle. Done right, this approach will help focus the PSI or PSP on the targeted weapon system improvement that can enhance system performance and reduce support costs.

The PBL IPT must continually assess the actual levels of support achieved based on proposed system concepts and technological applications, and Systems Engineering representation is crucial to these ongoing assessments.

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 Test & Evaluation

T&E individuals are engineers, scientists, operations research analysts, system analysts, computer scientists and other degree-holding technical personnel who plan, perform, and manage T&E tasks in support of acquisition. They can be T&E team members, T&E leads for programs or Service, Agency, and Facility T&E managers. Individuals in T&E positions are subject matter experts who will plan, monitor, manage, and conduct T&E of prototype, new, fielded, or modified system. They analyze, assess, and evaluate test data and results and prepare assessments of system performance and reports of T&E findings. T&E participation with the PBL IPT is focused on ensuring that efficient and executable test strategies are included in the sustainment approach, where appropriate.

Per the T&E Enterprise Guidebook, testing must extend over the entire acquisition cycle of the system and be carefully planned and executed to ensure the readiness and supportability of the system. T&E representatives on the PBL IPT can assist in focusing testing on the support arrangement’s RAMS

Foundational PBL Tenets
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The 10 DoD Tenets of PBL are identified in Table 1-1 (and Appendix A) of the DoD PBL Guidebook, as follows:
 

Tenets of PBL Description
Tenets Tied to Arrangements 1.      Acquire clearly defined Warfighter-relevant outcomes, not just sustainment services or replacement equipment
2.      Use measurable and manageable metrics that accurately assess the product support provider's performance against delivery of targeted Warfighter outcomes
3.      Provide significant incentives to the support provider that are tied to the achievement of the outcomes (for aspects of performance that are within their control)
4.      Firm Fixed Price (FFP) contracts are generally the preferred contract type (Fixed Price Incentive Firm (FPIF) and Cost Plus Incentive Fee (CPIF) may be effective)
5.      Provide sufficient contract length for the product support provider to recoup investments on improved product (e.g., Mean Time Between Failure (MTBF) and sustainment processes (e.g., manufacturing capabilities)
Tenets Tied to Organization 6.      PBL knowledge and resources are maintained for the Government team and product support providers
7.      Leadership champions the effort throughout their organization(s)
8.      Everyone with a vested interest in the outcome is involved
9.      Supply chain activities are aligned to the desired PBL outcome versus disparate internal goals
10.   Risk management is shared between the Government, customer, and support provider
 

 

NOTE: The following additional tenets are provided for information.  Inclusion of this information is for Defense Acquisition Workforce information purposes and does not imply DoD or DAU endorsement of any particular authors, organizations, or recommendations. 
 

Success Factor #1 Alignment 

  • Tenet #1 - PBL Knowledge and Resources
  • Tenet #2 - Organizational Support for PBL
  • Tenet #3 - Cross Cutting Integration
  • Tenet #4 - Workload Allocation and Scope
  • Tenet #5 - Supply Chain Integration

Success Factor #2: Contract Structure

  • Tenet #6 - Appropriate Risk and Asset Management
  • Tenet #7 - Contracting Environment
  • Tenet #8 – Funding

Success Factor #3: Performance Management 

  • Tenet #9 - Establish and Align Top Level Desired Outcomes
  • Tenet #10 - Performance Reporting and Continuous Improvement Focus 

References & Detailed Information Behind These Three Success Factors & Ten Foundational PBL Tenets 

Primary Source:  The Tenets of PBL, Second Edition, A Guidebook to the Best Practices Elements in Performance-Based Life Cycle Product Support Management (©2012 The University of Tennessee, and Supply Chain Visions), was prepared by the University of Tennessee under contract to the United States Air Force. Used with Permission.


Success Factor #1: Alignment

Before starting down the path to Performance Based Life Cycle Product Support (also referred to as Performance Based Logistics or PBL), it is important to ensure both the government and the support provider have synchronized around the idea PBL is truly a business model shift. The goal of PBL is achieving desired outcomes—not simply negotiating Product Support Arrangements (PSA) or squeezing the support provider for the lowest cost per transaction. While it is possible to have a PBL business arrangement without a respectful and trusting relationship, this is similar to building a house with no foundation: during the first major storm, the entire structure is likely to collapse.

The foundational Alignment factor includes five tenets. These tenets are designed to help programs build strong linkages between PBL constituents and program outcomes and include the following:

  • Developing and Maintaining PBL Knowledge and Resources
  • Acquiring Organizational Support for PBL both internal and external
  • Designing for Cross-Cutting Integration
  • Appropriate Workload Allocation and Scope
  • Maximizing Supply Chain Integration

Each tenet is discussed below.

  • Tenet #1 - PBL Knowledge and Resources

The most successful PBL programs are those where both the government organization and the support provider have a comprehensive knowledge of and experience in performance-based concepts, tenets, business models, and implementation strategies at the beginning of their program efforts. The very best programs tend to assemble a team from both the government and the support provider with at least 1-2 people on the PBL IPT who have successfully managed a PBL program before.

Having a team with representatives from both sides with PBL experience enables these leaders to guide the rest of the team through challenges more easily than teams without PBL experience. The teams that do not include PBL-experienced staff at the onset often struggle with issues that seem to “take two steps forward and one step back” every time they move forward.

The Tenets of PBL, Second Edition, A Guidebook to the Best Practices Elements in Performance-Based Life Cycle Product Support Management (©2012 The University of Tennessee, and Supply Chain Visions), was prepared by the University of Tennessee under contract to the United States Air Force. Its purpose was to provide touchstones and operating principles for the successful implementation of PBL, and thus to help deliver affordable weapons system support to the warfighter. Their research uncovered a secret weapon for successful PBL organizations—establishing a PBL Knowledge Base. A knowledge base of PBL resources and information can be an effective tool in helping the organization and the PBL IPTs ramp up on PBLs in an effective and rapid manner. Unlike in the past, there is now a broad set of reference materials available from DoD.

DAU advocates care in the construction of a program culture that taps into the most skilled in PBL to help lead and teach those on the team that are new to PBL programs. Unfortunately, it is not unusual for PBL teams to be assembled with little practical experience, foundation, and/or resources such as reference documentation, guidebooks, lessons learned, etc. Program offices and support providers alike have the ability to leverage the experience they have garnered with previous programs and should actively seek to use it.

The most successful programs make a concerted effort to get the team smart on the fundamentals of PBL. In fact, most of the largest support providers invest heavily in educating their employees about the basics of PBL by encouraging their employees to complete the DAU on-line or classroom training, or and other available training, such as PBL training offered by the University of Tennessee.

To be successful, PBL education must be approached from a cross-functional perspective. The teams that achieve the highest return on investment from PBL training are those that approach it from a team perspective. Having an entire program team participate in PBL training in a hands-on group “workshop” environment tends to provide the biggest bang per training buck.

The very best organizations have a “PBL Center of Excellence” where a formal process exists to collect and leverage knowledge and resources across all PBL programs. Often the companies with PBL programs have more than one—and the best practice organizations have a formal PBL benchmarking program that exists to facilitate speedy ramp up of new PBL teams. Repeatable and measurable processes enable companies to have a more efficient approach in terms of cost and time to implement their PBL programs.

Unfortunately, many organizations reinvent the wheel for every new PBL excursion. There is a need to tailor every PBL strategy to fit the circumstance, but that does not mean starting at the beginning with each new start. This problem compounds for many large organizations both - private and public – because the organizations are “siloed” and there is little proactive sharing of PBL knowledge across programs. The Army, Navy and Air Force all have de facto centers of excellence at the Army Aviation and Missile Life Cycle Command (AAMCOM), the Naval Inventory Control Point (NAVICP) and the Air Force Life Cycle Management Center (AFLCMC), respectively.

  • Tenet #2 - Organizational Support for PBL

After deciding to proceed with a PBL-oriented business model, it is important that the cross-functional IPT identify all stakeholders and the PBL champions throughout the organization, and to involve them in PBL activities as early in the process as possible. The goal of the IPT should be to drive strong consensus and participation across all stakeholders toward common support strategy objectives. Research found that not having the appropriate stakeholders and champions on board was one of the biggest challenges to an efficient PBL implementation.

Research has found that many programs attempting to implement PBL product support strategies do not do an adequate job of developing a comprehensive stakeholder analysis, and do not have a solid plan to leverage known champions or build new ones, as the case requires. The very best programs focus heavily on identifying both stakeholders and champions.

Stakeholders
The first step in a rigorous stakeholder analysis is to identify the relative “power” of each of the stakeholders. After the team identifies all possible stakeholders, the team should determine the power of the stakeholders using the two defined variables below:

Influence
The first variable the team should consider is the relative amount of influence a stakeholder has. Influence is defined as “the extent to which a stakeholder is able to act on project operations and therefore affect project outcomes.” Each stakeholder is given an influence rating, a measure of the power of the stakeholder. Factors include:

  • Extent of control over the project funding
  • Extent to which the stakeholder informs decision-making around investments in technology and workplace productivity.

Importance
The second variable is importance, or the extent to which a stakeholder’s problems, needs, expectations and interests will be affected by the PBL project. As with influence, the stakeholder is given a rating on their potential importance.
Using these two factors, the IPT can determine the ‘Power Score’ of each stakeholder by simply multiplying the importance and influence scores. The goal is to determine the importance and influence of certain individuals or stakeholders in order to understand whether or not they will be “key or primary stakeholders” for the project as a whole.

The second step is to develop a plan that addresses each stakeholder’s needs to the fullest extent possible, and then to get stakeholders involved with the team as early as possible. Without the explicit support or involvement of the stakeholder community, it is unlikely that a successful PBL program will result. The IPT then needs to work on a continuous basis to ensure primary stakeholders are on board with the team’s approach and strategies.

Champions
Successful PBL programs rely on champions to support the PBL efforts. To succeed in PBL, senior leadership from the customer and the organic or commercial support supplier should be fully engaged with their respective organizations to drive towards a true win-win PBL business model. In addition, the champions from both organizations should be strong advocates for the need to change from legacy thought patterns and transactional logistics. It is important to remember that the PBL business model is different; often the change management is the biggest obstacle organizations face.

While the many senior officers and executives across all services support PBL approaches to weapons systems support, research has shown that there are fewer champions at the next level down and within the programs. Champions are often program-specific, with some programs having a great deal of support and others more or less marching forward in an effort to “comply” with PBL without really having a strong leadership commitment guiding their teams.

Champions need to come from the various disciplines that PBL may impact. Specifically, many PBLs push the envelope regarding contracting, supply management and financial statutes and policy and optimal PBL implementation may require changes in process and current procedures in these areas. Accordingly, champions in these areas need to support the Program Teams effort in working through the issues encountered.

  • Tenet #3 - Cross Cutting Integration

Organizational alignment is a strategically focused approach that looks to synchronize from the shop floor to the top leadership across both customer and supplier organizations.

Lack of organizational alignment can sometimes be found when a program looks to implement a public-private partnership. In some cases, there is “focused advocacy” where a small number of leaders within an organization are actively driving their organization toward a strategic approach for PBL. The highest level of the depot may champion PBL, while the lower levels may be less than enthusiastic. Situations like this can become emotionally charged, and a concerted effort to align all parties involved in the execution of the strategy pays big dividends in execution results in a win-win proposition for the entire team.

Neither side is “right” in circumstances like the one outlined above. There are public policy goals that must be respected and core capabilities protected in the organic structure. At the same time, work needs to go where it can be pest performed and misaligned organizational structures ultimately degrade support for the warfighter.

OSD provides very specific guidance, directing that “Sustainment strategies shall include the best use of public and private sector capabilities through government/industry partnering initiatives, in accordance with statutory requirements.” (DoD Directive 5000.01) There is no default decision: the support infrastructure should be in integrated across all sources of support and work structured to deliver best use in support of the warfighter, subject to statutory constraints.

The most successful PBL programs are those with a common vision from both organizations and were thus able to jointly drive towards a true win-win PBL business model at all levels of both organizations. Aligning incentives between customers (weapons system users) and support suppliers (OEMs, third party logistics (3PL), organic) can lead to a higher level of performance at a lower cost of ownership. As mentioned previously, a PBL business model is based on achievement of desired outcomes, not based on performing transactions. The best practice PBL programs establish a true partnership mentality with a desire to develop a “win-win” business model based on mutual self-interest that focused on total system value proposition anchored in total ownership costs.

The PBL effort is not focused on reducing the price of the transactions, but on physically eliminating non-value added transactions, reducing support requirements, and implementing new business models. In essence the PBL business model should be deployed to reward suppliers, whether contractor or organic support, for their innovation in improving both reliability and affordability; with the government sharing in the benefits and savings through lower total ownership costs.

High performing programs using PBL develop a win-win PBL business model. In a win-win business model, the government and suppliers need to agree on price, risk premium, contract terms, and re-allocation of asset ownership/control. The business model needs to take into consideration three key drivers—contractual drivers, managerial decisions and exogenous factors. Internal and external alignment from top to bottom of the organization is part of the glue used to form a strong PBL foundation.

  • Tenet #4 - Workload Allocation and Scope

PBL programs that develop a strategy and propose outcomes designed to leverage the entire industrial capability have the greatest success. Workloads are distributed to the most effective providers consistent with statutory guidelines, with a conscientious effort to focus on best competencies, best value, and effective use of Public-Private Partnership (PPP) solutions.

Many programs get caught up in the oversight process and opt to tell the suppliers how support is to be performed, rather than describing the desired outcomes. In a traditional approach, the government provides a Statement of Work (SOW) that outlines in detail the various activities that the support provider should perform. Typically, many of these activities are priced per transaction and may not define performance targets.

In a PBL approach, the work is captured in a performance-based Statement of Objectives (SOO). The SOO focuses on the “what” and not the “how.” This transfers authority and flexibility to the support provider, which can foster the development of innovative solutions designed to most efficiently and effectively achieve the customer’s desired outcomes. The SOO is in essence a summary of key goals and/or outcomes which are incorporated into the PBL agreement.

Unfortunately, PBL programs are often misunderstood as “outsourced” efforts or “Contractor Logistics Support (CLS)” with minimal emphasis on best value and best competencies in placement of workloads. When a depot is performing organic workload for sustainment, a common misunderstanding is that PBL will automatically result in the redistribution of work from the depot to the contractor. In fact, PBL can result in additional work at the depots. Teaming relationships are central to PBL—and Title 10 clearly emphasizes the importance of PPPs.

PPPs are an effective tool for balancing workload allocation around best value solutions. PBL does not pre-ordain CLS or organic support structures. Rather, PBL gives all stakeholders the opportunity to compete for and earn business in line with their core competencies and value proposition.

  • Tenet #5 - Supply Chain Integration

The traditional approach for a contract has been to manage the supply chain by commodities or services; the approach has necessarily been focused on optimizing the achievement of end-to-end process effectiveness. Best practice PBL programs demonstrate development of a formal supply chain management strategy that focuses on maximum integration for end-to-end supply chain effectiveness. This approach means supply chain components need to be integrated and align to optimize the end-to-end process. Internally stove-piped supply chain processes must be reduced or eliminated. For some programs, this has led to co-location of the program team, so the support provider and the government – especially the depot - work side by to facilitate cohesive, comprehensive and coordinated customer and supplier involvement.

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 Success Factor #2: Contract Structure

 

The Program Manager (PM) is assigned Life Cycle Management responsibility and is accountable for the implementation, management, and oversight of all activities associated with development, production, sustainment, and disposal of a system across its life cycle. As part of this, the PM has the responsibility to develop an appropriate sustainment strategy to achieve effective and affordable operational readiness consistent with the Warfighter resources allocated to that objective. The PM‘s responsibilities for oversight and management of the product support function are typically delegated to a Product Support Manager (PSM) who leads the development, implementation, top-level integration, and management of all sources of support to meet Warfighter sustainment and readiness requirements.

The contract structure is a visible manifestation of the PSM’s implementation responsibility, and nothing is more important than formulating the appropriate contract structure and the resulting contract, or the product support agreements for arrangements within the government. A PBL solution is not wed to any particular contract type or incentive plan, as long as it supports an outcome-based approach. However, good to robust best practices typically includes a form of incentive for achieving performance and cost savings targets. When a service provider meets expectations, they can be rewarded with financial incentives, such as performance bonuses, gain-sharing bonuses, or extended contract lengths. In the case of a Firm Fixed Price (FFP) contract, the contractor could harvest improved profit margins as improvements take hold during the period of performance.

Striking the right balance of contract type and incentives are discussed in the three tenets discussed below.

  • Appropriate Risk and Asset Management
  • Contracting Environment
  • Funding

While this discussion centers on a government perspective on the relationship specified in a contract, the concepts are applicable to all organizations and agreement types. The tenets are applicable and adaptable to public-private partnerships and agreements between government entities serving as the PSM, PSI, or the Product Support Providers (PSP). Each tenet is discussed below.

  • Tenet #6 - Appropriate Risk and Asset Management

Robust best practice PBL programs include a focus on total program risk reduction along with appropriate off-ramps exit criteria that are captured at the onset of the contract execution. These programs balance risk with a mitigation strategies that account for all parties in the relationship, while paying specific attention to harmonizing supplier accountability and authority. By moving some risk to the support provider, and aligning incentives to stimulate program effectiveness, the PBL business model can remove risk from the total system. It isn't just about moving risk to the supplier - it’s about realigning the incentives to reduce total program risk.

The importance of exit criteria that leave both sides whole cannot be overstated. Best practice PBL programs actively address off-ramps that balance the needs of the contractor, the customer, and the organic support structure. Traditional outsourcing arrangements often have termination for convenience clauses, but this has not been found to be sufficient. PBL contracts should include detailed criteria to assure that the program can continue sustainment efforts should the need to exit the arrangement arise. Some common off-ramp criteria are as follows:

  • Acquisition, transfer, or use of necessary technical data and support/tooling equipment should the relationship cease to exist
  • Conversion training required to reconstitute or recompete the support workload
  • Transfer or disposition of assets – Managing of asset liability is typically addressed in terms of advanced notification timelines, and required transfer/disposition requirements
  • Section H – Special Contract Requirement clauses allow tailoring and/or exclusions as a form of off ramps

Managing risk associated with asset ownership in a PBL arrangement is key concern during the development of a risk mitigation strategy, and during the development of specific contract language. Under traditional sustainment models, the government customer often owns and manages the resources associated with the program, including spares, repair facilities, etc. CLS arrangements will often shift responsibility for managing most aspects of resources to the supplier, but associated risk remains with the government customer because ownership of the asset remains with the customer. This is less than ideal, as the support provider does not have “skin” in the game. As cited in the TheTenets of PBL, Second Edition, A Guidebook to the Best Practices Elements in Performance-Based Life Cycle Product Support Management, when support providers are asked “What are your inventory turns?”, the answer was often “I don’t know—it’s not my inventory.”

While there is much debate about whether a supplier should own the assets or the government should own the assets, research performed for the comprehensive PBL Guidebook referenced above shows that programs are more apt to achieve desired performance when the supplier owns the assets. Additionally, research at the Wharton School strongly suggests that best practice is to have full asset management control, including ownership, shifted to the supplier and the associated risks for asset performance accepted by the supplier. Their findings, published in Management Science, were that the optimal business arrangement was when the contractor owned the assets. Under a PBL program, the supplier is accountable to meet service levels at a fixed price. When a supplier owns the assets, they have an inherent incentive to reduce the cost of asset ownership and keep the level of inventory at the lowest possible level, while still allowing them to meet performance targets.

  • Tenet #7 - Contracting Environment

Setting a sound contractual PBL foundation requires a creative environment that allows for the development of tailored pricing models, incentives, and contract lengths that accounts for the funding types available and facilitates a win-win situation for all parties. These elements of the contracting environment are discussed below.

Pricing Model 
One of the most challenging elements of a contracting strategy is developing the pricing and incentives structure: the “pricing model.” The pricing model is made up of two key elements: contract type and incentive type. Incentives are optional, but structures that provide incentives for “good behavior” are desired in all contracts.

There are two basic types of contracts: fixed price and cost plus. Generally, the optimal contract type for a PBL effort is a fixed price vehicle, which uses a per unit or per unit throughput basis. In fact, direction from the Office of the Secretary of Defense states that the desired PBL pricing approach is a fixed price model. “When robust competition already exists, or there is recent competitive pricing history, expect components to be predisposed toward Firm-Fixed-Price (FFP) type contract arrangements. FFP should also be used to the maximum extent reasonable when ongoing competition is utilized in multiple award contract scenarios.” 
 

FFP contracts are a natural fit for buying designated performance outcomes as they build in an inherent incentive for the service provider to be efficient and meet profitability levels at the fixed price rate. In essence, the support provider increases their profit as they get more efficient. Having a fixed price agreement on a per unit or throughput basis allows for fluctuating volumes. In addition, pricing models also may have “volume bands” to allow for different pricing at different levels of volume.

While a fixed price model provides inherent incentives, it is usually necessary to begin with cost reimbursement (or cost plus) contracts in the early phases of PBL implementation while the appropriate cost and resource baselines are maturing. It is rare that a program matures to the point where all elements appropriate for cost plus elements are eliminated, and it is risky to implement fixed price agreements without first understanding the baseline performance and cost of the existing business model. Greater maturity allows the program to develop realistic cost and performance profiles. This maturity l

Award Winning PBL Programs
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Award Display at the Pentagon

Secretary of Defense Performance Based Logistics: The Gerald R. Beck Memorial PBL Award

 

The Late Gerald "Jerry" Beck Shares Perspectives on the PBL Value Proposition (2:28)
 

Nomination Memo: Under Secretary of Defense 2023 PBL Award Call for Nominations Memo New!
 
 

DoD PBL Annual Award Winners

Below is a consolidated list of the system, subsystem, and component level winners of the Secretary of Defense Performance Based Logistics (PBL) Award since its inception in 2005. To facilitate the sharing of lessons learned, best practices, and initiatives that led to each of these programs being selected as the best PBL program in the Department of Defense that year, the name of each program is hyperlinked to its respective award nomination package (through 2017; there were no awards for 2018). Beginning in 2019, the award nomination packages are included as part of the award memo.

 

2022 Awards List
2021 Awards List
2020 Awards List
2019 Awards List
2018 Awards List
  • No 2018 Awards
2017 Awards List
2016 Awards List
2015 Awards List
2014 Awards List
2013 Awards List
2012 Awards List
2011 Awards List
2010 Awards List
2009 Awards List
2008 Awards List
2007 Awards List
2006 Awards List
2005 Awards List

 

Discussions / Performance Based Logistics

Open Seats - PBL Workshop, 29-31 Aug 23
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QUESTION SCENARIO
QUESTION

​Please refer to the WSL 001 workshop description in the iCatalog and sign up through your Service or agency training request system. Learn first-hand how to plan and manage PBL support strategies for DoD systems!

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New CON 0170, Contracting for Repair Services
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QUESTION SCENARIO
QUESTION

​DAU has deployed a new online training course for contracting officers which includes considerations for PBL. Read Bill Kobren's blog here.

SCENARIO
Updated LOG 2350 online course deployed!
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QUESTION SCENARIO
QUESTION

​Looking for an engaging online course on PBL? Look no further than the recently updated LOG 2350 course. To read about the updates, check out this blog post.

SCENARIO
2022 DoD PBL Award Winners announced
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QUESTION SCENARIO
QUESTION

​Please see Bill Kobren's blog about the 2022 winners and navigate to the Awards page in this community to read the winning citations.

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DoD Maintenance Symposium - Registration is Open!
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​The DoD Maintenance Symposium will be held 12-15 Dec 22 at the Orange County Convention Center, Orlando, Florida, and features the theme "Next Generation Materiel Readiness Forged Through Data Advantage, Technology, and Innovation." Registration is now open.  You can find the links to the SAE site to register and view the agenda at the DASD(MR) webpage, https://www.acq.osd.mil/log/MR/maintenance_symposium.html.  

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PBL Open Workshop (WSL 001)
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The next PBL Workshop is 7-9 Feb 23.  Target attendees are DoD members in any career field that are interested in planning or managing effective Performance Based Logistics support strategies for defense systems.  The workshop is held virtually, 4 hours/day for 3 days.  For more info check out the  iCatalog, https://icatalog.dau.edu/onlinecatalog/courses.aspx?crs_id=1611.

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2022 SECDEF PBL Awards Announcement
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​The 2022 Annual SECDEF Performance Based Logistics (PBL) Awards announcement memo was signed out by the USD(A&S) on June 13, 2022. 

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Director's Blog, Hot Topics: PBL
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​Check out Bill Kobren's latest PBL Blog post, providing an updated list of policies, guidance, training, and additional resources for PBL practitioners or those who want to learn more about PBL.  See the post at: DAU News - Hot Topics (Part 10): Performance Based Logistics.

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Community Announcement / Performance Based Logistics
Introducing the NEWLY REDESIGNED PBL CoP!
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UNDER CONSTRUCTION! Wanted to make practitioners aware that we are in the process of rebuilding the PBL Community Site after the transition to our new DAU.edu platform. If there is a particular resource you are looking for from the legacy site, please use the search feature in the upper right of the page. If you still can't find what you are looking for, please contact the Community leader, [email protected] and include your contact information and the details of your request. 

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PBL Overview

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Strategic Imperative

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. 

"To maximize competition, innovation, and interoperability, acquisition managers will consider and employ performance-based strategies for acquiring and sustaining products and services.  "Performance-based strategy" means a strategy that supports an acquisition approach structured around the results to be achieved as opposed to the manner by which the work is to be performed.  This approach will be applied to all new procurements and upgrades, as well as re-procurements of systems, subsystems, and spares that are procured beyond the initial production contract award.  Product support strategies (PSS) will be informed by a business case analysis conducted pursuant to Section 4324 (formerly 2337) of Title 10, U.S.C.  The PSS is designed to facilitate enduring and affordable sustainment consistent with warfighter requirements.  Support metrics will be established, tracked, and adjusted where needed to ensure product support objectives are achieved and sustained over the system life cycle.  PSS include the best use of public and private sector capabilities through government and industry partnering initiatives, in accordance with statutory requirements. The Program Manager is accountable for achieving program life-cycle management objectives throughout the program life cycle.  Planning for operations and support will begin at program inception, and supportability requirements will be balanced with other requirements that impact program cost, schedule, and performance.  Performance based life-cycle product support implements life-cycle systems management." (Source: DoD Directive 5000.01, para 1.2k through 1.2m, 9 Sep 2020)  

 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 the Defense Acquisition Guidebook (rescinded in 2022) 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.  

In addition to the DoD PBL Guidebook and DoD Product Support Manager (PSM) Guidebook, the following resources are also available to familiarize you with PBL product support strategies, including:

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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, 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.

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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.

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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.

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. As expressed in the former Defense Acquisition Guidebook (DAG), "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 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 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, 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:

  • Operational requirements
  • Life cycle phase
  • Available resources
  • Current support infrastructure
  • Service guidance
  • Business Case Analysis

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:

Reality DoD Directive 5000.01 requires that "product support strategies include the best use of public and private sector capabilities through government and 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:

  • Title 10 U.S.C. § 2474 (CITEs)*
  • Title 10 U.S.C. § 2563 (Sales to Non-DoD Entities)*

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:

  • Title 10 U.S.C. § 2464 (Core)*
  • Title 10 U.S.C. § 2466 (50/50)*

These partnering arrangements can encompass several of the cooperative relationships that follow:

  • Organic Organization as Subcontractor*
  • Work Share*
  • Joint Use*
  • Mixed Production*

*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

Work Share consists of a partnership in which a government buying activity, in collaboration with a contractor and a depot maintenance activity, determines the best mix of work capitalizing on each partner's capabilities.  The workload is then allocated to each partner.  The contractor is funded through a contract, and the organic activity is funded through a project or work order (in the case of depot maintenance).  The partnering agreement between the contractor and organic activity focuses on the roles and responsibilities of each partner.  The partners work jointly to accomplish the overall requirement.
 

*Joint Use

Joint use consists of depot maintenance personnel working side by side with commercial contractors within a Government facility.

*Mixed Production

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 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 over a 10-year period exceeded 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.

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Key Stakeholders

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Warfighter

Combatant Command warfighters operate and, to varying degrees, repair and maintain our national defense systems.  Their need for new or upgraded warfighting capability drives government and industry’s iterative requirements generation, acquisition, and product support processes, per Chairman of the Joint Chiefs of Staff Instruction 5123.01H and DoD 5000-series policies.  The Services ensure that warfighter requirements for the sustainment performance and cost-affordability related characteristics of systems are specified in design-quantitative terms and tied to discrete development, test, and fielded performance metrics. 

These warfighter technical parameters requirements for sustainment-related system capability and their measurement metrics constitute the “performance based” prerequisite for all life-cycle sustainment strategies and subsequent organic and industry contractual arrangements, such as PBL. The term "Warfighter"  is intended to be neutral regarding military service, branch, and service status. It is frequently used in DoD memos or directives which are intended to apply to all services equally.

The term warfighter is also often used more broadly to refer to any individual, regardless of rank or position who is responsible for making decisions that affect combat power.  A warfighter can be then involved in a wide variety of functions, including those directly related to the battlefield such as movement and maneuver, intelligence, command and control, and protection, and also including those functions related to product support, sustainment, maintenance, supply and logsitics support.

Understanding warfighter requirements in terms of performance and affordability is an essential initial step in developing a meaningful product support strategy. (DoD Directive 5000.01) Representatives of the operational commands and organizations that support the warfighting combatant commanders are generally the PM’s primary customers, and thus key stakeholders on any PBL effort. For a graphical illustration of the desired linkages between the Program Manager/Product Support Manager and Warfighter product support requirements and desired outcomes, see the DoD Product Support Business Model (PSBM) ACQuipedia article or read more about it in the DoD Product Support Manager (PSM) Guidebook

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Program Manager (PM)

The PM is designated with the overall responsibility and authority to direct the development, production, and initial deployment (as a minimum) of a new defense system. The PM is accountable for cost, schedule, and performance reporting to the Milestone Decision Authority (MDA). The PM's role, then, is to be the primary agent within the defense acquisition system to ensure the warfighter's modernization requirements are met efficiently and effectively, in the shortest possible time.

Additionally, according to the DoD Product Support Manager (PSM) Guidebook, the effective PM should have the "big picture" perspective of the program, including in-depth knowledge of the interrelationships among its elements. An effective PM:

  • Serves as a leader and a manager, not primarily a task "doer";
  • Understands the requirements, environmental factors, organizations, activities, constraints, risks, and motivations impacting the program;
  • Knows and is capable of working within the established framework, managerial systems, and processes that provide funding and other decisions for the program to proceed;
  • Comprehends and puts to use the basic skills of management-planning, organizing, staffing, leading, and controlling, so people and systems harmonize to produce the desired results;
  • Coordinates the work of defense industry contractors, consultants, in-house engineers and logisticians, contracting officers, and others, whether assigned directly to the program office or supporting it through some form of integrated product team or matrix support arrangement;
  • Builds support for the program and monitors reactions and perceptions that help or impede progress; and
  • Serves both the military needs of the user in the field and the priority and funding constraints imposed by managers in the Pentagon and military service/defense agency headquarters.

Per DoD Instruction 5000.02 Operation of the Adaptive Acquisition Framework, the PM also is also required to work with the user community to document performance and sustainment requirements in performance agreements such that the program clearly specifies objective outcomes, measures, resource commitments, and stakeholder responsibilities. The PM is required to employ effective PBL planning, development, implementation, and management. It is important to note that the Product Support Manager (PSM) reports directly to the PM for ACAT I programs, and is responsible for developing and implementing the program’s PBL strategy.

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Product Support Manager (PSM)

According to the DoD Product Support Manager (PSM) Guidebook, “DoD recognizes that the Program Manager (PM) has life cycle management responsibility. In 2009, Congress officially established the PSM as a key leadership position, distinct from the PM, who reports directly to the PM. The PM is charged with delivering Warfighter required capabilities while the PSM, working for the PM, is responsible for developing and implementing a comprehensive product support strategy and for adjusting performance requirements and resource allocations across Product Support Integrators (PSIs) and Product Support Providers (PSPs) as needed to implement this strategy. Furthermore, the PSM‘s responsibility carries across the life cycle of the weapon system by requiring the revalidation of the business case prior to any change in support strategy or every five years, whichever occurs first. The PSM must be a properly qualified member of the Armed Forces or full-time employee of the Department of Defense.”

PSM roles, responsibilities and positional requirements were established in Public Law 111-84, Section 805, and implemented in Directive Type Memorandum (DTM) 10-015 Requirements for Life Cycle Management and Product Support. Extensive related information, including Service implementation policies, processes, presentations, articles, and links to related information are also available on the DAU Logistics Community of Practice (LOG CoP) and the Logistics Director’s Blog. Key enablers include, but are by no means limited to:

The Product Support Business Model “provides the PSM a common and consistent product support language and guidance on how to develop and execute product support...”, “provides a clearly delineated description of the roles, relationships, accountability, responsibility and business agreements among the managers, integrators, and providers of product support” and “...effectively describes the methodology by which DoD intends to ensure achievement of optimized product support through balancing maximum weapon system availability with the most affordable and predictable total ownership cost.” It also graphically illustrates the relationship between the PSM and other key stakeholders including the Warfighter, the Program Manager, the Product Support Integrator(s), and the Product Support Provider(s). Under the PSBM, the PSM leverages Product Support Arrangements to achieve the desired product support outcomes. According to the PSM Guidebook, “a Product Support Arrangement (PSA) is a contract, task order, or any type of agreement or non-contractual arrangement within the Federal Government, for the performance of sustainment or logistics support required for major weapon systems, subsystems, or components. The term includes arrangements for any of the following including performance based logistics, sustainment support, contractor logistics support, life cycle product support, and weapon systems product support.”

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Product Support Integrator (PSI)

The Fiscal Year 2013 National Defense Authorization Act (NDAA) Conference Report describes the role as follows: -–"The term 'Product Support Integrator' means an entity within the Federal Government or outside the Federal Government charged with integrating all aspects of product support, both private and public, defined within the scope of a product support arrangement."

The DoD Product Support Manager (PSM) Guidebook, provides amplifying information, stating that a PSI is an entity who performs as a formally bound agent (e.g., under a contract, Memorandum of Agreement (MOA), Memorandum of Understanding (MOU) or Service-Level Agreement (SLA)) charged with integrating all sources of support, public and private, defined within the scope of PBL agreements to achieve the documented outcomes.

The PSM, while remaining accountable for system performance, effectively delegates the responsibility for delivering warfighter outcomes to the PSI. In this relationship, and consistent with 'buying performance,' the PSI has considerable flexibility and latitude in how the necessary support is provided, so long as the outcomes are accomplished. The PM or PSM selects a PSI from DoD or the private sector. Activities coordinated by support integrators can include, as appropriate, functions provided by organic organizations, private sector providers, or a partnership between organic and private sector providers. The PM/PSM ensures that the product support concept is integrated with other logistics support and combat support functions to provide agile and robust combat capability. The PM/PSM invites the Services' and Defense Logistics Agency (DLA) logistics activities to participate in product support strategy development and IPTs. These participants help to ensure effective integration of system-oriented approaches with commodity-oriented approaches, optimize support to users, and maximize total logistics system value.

The role of the PSI can be narrow or broad, as directed and designed by the PSM.

  • At one end of the spectrum, a single PSI could be assigned with the responsibility for entire system level outcomes (e.g., Operational Availability, Materiel Availability). This approach has the advantages of clearly assigning responsibility (and visibility) of Warfighter outcomes to a single point of responsibility and provides for a comprehensive and horizontally integrated support solution that accounts for all the product support elements.
  • Alternately, the PSM can assign top level PSI roles for major subsystems; the most prevalent example would be dual PSIs for an aircraft system, with a PSI designated for the airframe and a PSI designated for the propulsion system.
  • Devolving further, PSIs could be assigned for multiple major subsystems that comprise a larger platform system capability, such as a naval vessel.

The determination of the number, designation, and responsibilities of the PSIs comprising a product support strategy framework will result from both the Business Case Analysis (BCA) process as well as the PSM‘s consideration of the operational mission role, environment, and support requirements of the objective system.

The PM or PSM selects a PSI from DoD or the private sector. Activities coordinated by support integrators can include, as appropriate, functions provided by:

  • Organic organizations;
  • Private sector providers; and/or
  • Partnership(s) between organic and private sector providers.

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Product Support Provider (PSP)

From the National Defense Authorization Act (NDAA) Conference Report, the term ‘Product Support Provider’ refers to an entity that provides product support functions. The term includes entities within the DoD, an entity within the private sector, or a partnership between such entities.

The DoD Product Support Manager (PSM) Guidebook adds that PSPs are assigned responsibilities to perform and accomplish the functions represented by the Integrated Product Support (IPS) elements which, in accordance with the BCA outcomes and consistent with statute and policy, comprise the range of best value or statutorily assigned workloads that achieve the required Warfighter support outcomes. This can be done at the program, portfolio, or enterprise level.

A primary objective of the BCA process is to determine the optimum sources of support depending on capabilities, competencies, best value, and the efficiency and effectiveness of support. For each of the IPS elements there will be logical candidates, both public and private, to accomplish the required product support. Within each of those IPS element support functions, the work will be further delineated into technical, hands-on, management, and quality tasks. The PSM may elect to assign support integration responsibilities to one or more PSIs who will be assigned specified performance or support outcomes and, consistent with that assignment, given authority to manage the PSP and functions necessary to achieve those outcomes.

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Life Cycle Logistician

The Life Cycle Logistics career field spans the entire system life cycle, encompassing both life cycle logistics and sustainment activities, and includes professionals responsible for planning, development, implementation, and management of effective and affordable product support strategies.

Life cycle logisticians perform a principal joint and/or DoD component logistics role during both the acquisition and operational phases of a system’s life cycle to: ensure product support strategies meet program goals for operational effectiveness and readiness; ensure supportability requirements are addressed consistently with cost, schedule, and performance; ensure supportability considerations are implemented during systems design; meet system materiel availability, materiel reliability, operations and support cost, and mean down time objectives; and deliver optimal life cycle product support. To be successful, they must therefore be proficient in the following competency areas:

  • Design influence
  • Integrated Product Support (IPS) Planning
  • Product Support and Sustainment
  • Configuration Management
  • Reliability and Maintainability Analysis
  • Technical/Product Data Management
  • Supportability Analysis

Life cycle logisticians ultimately must pursue two primary objectives, namely to ensure that weapons systems are designed, maintained, and modified to continuously reduce the demand for logistics; and to ensure effective and efficient logistics support. The resources required to provide product support must be minimized while meeting warfighter needs and ensuring long-term affordable materiel readiness.

Life cycle logisticians achieve these objectives by ensuring the integration of the Integrated Product Support (IPS) elements to maximize supportability, reliability, availability, maintainability, and mission effectiveness of the system throughout its life cycle. They influence system design and provide effective, timely product support capabilities that drive effective, best value product support planning and execution. Emphasis is placed on ensuring materiel readiness at optimal life cycle costs and integrating life cycle management principles by designing and implementing performance-based life cycle product support strategies to provide effective system support. Life cycle logisticians can work directly in a program management office, in support of the program manager, or in other supporting and sustainment logistics activity offices. Level III certified life cycle logisticians can also serve as DoD Product Support Managers (PSM) responsible for:

  • Providing weapon systems product support subject matter expertise to the Program Manager (PM) for the execution of the PM’s duties as the Total Life Cycle Systems Manager;
  • Developing and implementing a comprehensive, outcome-based product support strategy;
  • Promoting opportunities to maximize competition while meeting the objective of best-value, long-term outcomes to the warfighter;
  • Seeking to leverage enterprise opportunities across programs and DoD Components;
  • Using appropriate analytical tools and conducting appropriate cost analyses, to determine the preferred product support strategy;
  • Developing and implementing appropriate product support arrangements;
  • Assessing and adjusting resource allocations and performance requirements for product support to meet warfighter needs and optimize implementation of the product support strategy;
  • Documenting the product support strategy in the Life Cycle Sustainment Plan (LCSP); and
  • Conducting periodic product support strategy reviews and revalidating the supporting business case analysis.

Thus, life cycle logisticians and product support managers are ultimately responsible for designing, developing, implementing, and sustaining tailored life cycle product support that optimizes affordability, materiel readiness and joint warfighter requirements, and provides the nation an enduring strategic advantage over its adversaries.

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Contracting Officer

Individuals delegated authority by the head of the agency to enter into and administer contracts are Contracting Officers. Only these designated individuals are authorized to obligate funds and commit the Government contractually. This authority is vested in the individual. Some authorities are unlimited; others are limited to specific dollar amounts, or to specific functions, such as pre-award, administration, and termination. The extent of authority is expressly defined in "warrants" or other instruments of delegation, such as orders or certificates of appointment. While these agents of the Government receive advice from specialists in law, audit, engineering, transportation, finance, or other functions, they remain the ones who are responsible and accountable for the contracts.

Standards for serving as a Contracting Officer are demanding and called out in detail in the Federal Acquisition Regulation (FAR) and Defense Acquisition Regulation Supplement (DFARS). The standards include education and professional training requirements, as well as specified contracting experience, depending on the dollar value and complexity of the contracts to be awarded or administered in the position.

The term Contracting officer also includes certain authorized representatives acting within the limits of their authority as delegated by the Contracting Officer.  You may hear the following terms to further describe types of Contracting Officers:

  • Procurement Contracting Officer (PCO) - Generally performs pre-award functions prior to contract award.  A PCO may be responsible for performing both pre-award and post-award duties.  After award, however, the DoD PCO normally delegates certain contract administration functions to an Administrative Contracting Officer (ACO) at the Defense Contract Management Agency DCMA (see more information below)  
  • ACO - Refers to a contracting officer who is administering contracts. (FAR 2.101)
  • Termination Contracting Officer (TCO) - refers to a contracting officer who is settling terminated contracts. (FAR 2.101)
  • Corporate Administrative Contracting Officer (CACO) - refers to an ACO who is assigned to a specific contractor’s location.  Contractors with more than one operational location (e.g., division, plant, or subsidiary) often have corporate-wide policies, procedures, and activities requiring Government review and approval and affecting the work of more than one ACO. In these circumstances, effective and consistent contract administration may require the assignment of a CACO to deal with corporate management and to perform selected contract administration functions on a corporate-wide basis. (FAR 42.601)

Because a well-crafted arrangement is the key to PBL success, it is critical to have a Contracting Officer in a key role on the PBL Integrated Product Team (IPT). Decisions regarding vehicle type (e.g., Firm Fixed Price (FFP), Cost Plus Award and/or Incentive Fee (CPAF, CPIF), Fixed Price Incentive Firm (FPIF), or Cost Plus Fixed Fee (CPFF) etc.), contract length, performance metrics and monitoring techniques are just some of the decisions that must be made by or with a Contracting Officer.

Because planning and implementing a PBL arrangement is often a complex and novel endeavor to many of those involved, it is best to have a Contracting Officer who is both experienced and flexible. A Contracting Officer who is well versed in the "art of the contractually possible" AND one who can support the goal of crafting a tailored PBL arrangement will contribute substantially to the team’s PBL efforts. Conversely, working with an inexperienced Contracting Officer and/or one who is reluctant to move beyond traditional transaction-based support arrangements can mean a death knell to the most promising of PBL endeavors.  By working proactively with Contracting Management to assist in educating and exposing contracting personnel to PBL early in the acquisition process, through planning, requirements, and strategy development, it can greatly enhance the final product and result in a PBL contract that is aligned with the agency’s mission and goals.

Another contributor to the PBL contracting endeavors may be representatives from DCMA.  DCMA is the DoD component that works directly with Defense suppliers to help ensure that DoD, Federal, and allied government supplies and services are delivered on time, at projected cost, and meet all performance requirements.

DCMA professionals serve as "information brokers" and in-plant representatives for military, Federal, and allied government buying agencies -- both during the initial stages of the acquisition cycle and throughout the life of the resulting contracts.

Before contract award - DCMA provides advice and information to help construct effective solicitations, identify potential risks, select the most capable contractors, and write contracts that meet the needs of our customers in DoD, Federal and allied government agencies. 

After contract award - DCMA monitors contractors' performance and management systems to ensure that cost, product performance, and delivery schedules are in compliance with the terms and conditions of the contracts.

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Systems Engineer

Mr. Stephen P. Welby, former Assistant Secretary of Defense for Research and Engineering, stated  “My primary goal is to ensure that the DoD's systems engineering capabilities are focused on providing the technical insight required to support knowledge-based decision making throughout the acquisition process.” The importance of systems engineering to PBL cannot be overestimated.

Logisticians must work closely with Systems Engineers as early in the program life cycle as possible. Initially, the focus will be on affecting overall weapon system Reliability, Availability, Maintainability, and Supportability (RAMS) in the design. Designing in RAMS early in the life cycle of a weapon system usually costs far less than trying to improve it later; however, a properly constructed PBL approach may help to incentivize improvements in RAMS concerns over time. The Systems Engineers can help to identify specific components for monitoring throughout the system's life cycle. Done right, this approach will help focus the PSI or PSP on the targeted weapon system improvement that can enhance system performance and reduce support costs.

The PBL IPT must continually assess the actual levels of support achieved based on proposed system concepts and technological applications, and Systems Engineering representation is crucial to these ongoing assessments.

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 Test & Evaluation

T&E individuals are engineers, scientists, operations research analysts, system analysts, computer scientists and other degree-holding technical personnel who plan, perform, and manage T&E tasks in support of acquisition. They can be T&E team members, T&E leads for programs or Service, Agency, and Facility T&E managers. Individuals in T&E positions are subject matter experts who will plan, monitor, manage, and conduct T&E of prototype, new, fielded, or modified system. They analyze, assess, and evaluate test data and results and prepare assessments of system performance and reports of T&E findings. T&E participation with the PBL IPT is focused on ensuring that efficient and executable test strategies are included in the sustainment approach, where appropriate.

Per the T&E Enterprise Guidebook, testing must extend over the entire acquisition cycle of the system and be carefully planned and executed to ensure the readiness and supportability of the system. T&E representatives on the PBL IPT can assist in focusing testing on the support arrangement’s RAMS

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Foundational PBL Tenets

The 10 DoD Tenets of PBL are identified in Table 1-1 (and Appendix A) of the DoD PBL Guidebook, as follows:
 

Tenets of PBL Description
Tenets Tied to Arrangements 1.      Acquire clearly defined Warfighter-relevant outcomes, not just sustainment services or replacement equipment
2.      Use measurable and manageable metrics that accurately assess the product support provider's performance against delivery of targeted Warfighter outcomes
3.      Provide significant incentives to the support provider that are tied to the achievement of the outcomes (for aspects of performance that are within their control)
4.      Firm Fixed Price (FFP) contracts are generally the preferred contract type (Fixed Price Incentive Firm (FPIF) and Cost Plus Incentive Fee (CPIF) may be effective)
5.      Provide sufficient contract length for the product support provider to recoup investments on improved product (e.g., Mean Time Between Failure (MTBF) and sustainment processes (e.g., manufacturing capabilities)
Tenets Tied to Organization 6.      PBL knowledge and resources are maintained for the Government team and product support providers
7.      Leadership champions the effort throughout their organization(s)
8.      Everyone with a vested interest in the outcome is involved
9.      Supply chain activities are aligned to the desired PBL outcome versus disparate internal goals
10.   Risk management is shared between the Government, customer, and support provider
 

 

NOTE: The following additional tenets are provided for information.  Inclusion of this information is for Defense Acquisition Workforce information purposes and does not imply DoD or DAU endorsement of any particular authors, organizations, or recommendations. 
 

Success Factor #1 Alignment 

  • Tenet #1 - PBL Knowledge and Resources
  • Tenet #2 - Organizational Support for PBL
  • Tenet #3 - Cross Cutting Integration
  • Tenet #4 - Workload Allocation and Scope
  • Tenet #5 - Supply Chain Integration

Success Factor #2: Contract Structure

  • Tenet #6 - Appropriate Risk and Asset Management
  • Tenet #7 - Contracting Environment
  • Tenet #8 – Funding

Success Factor #3: Performance Management 

  • Tenet #9 - Establish and Align Top Level Desired Outcomes
  • Tenet #10 - Performance Reporting and Continuous Improvement Focus 

References & Detailed Information Behind These Three Success Factors & Ten Foundational PBL Tenets 

Primary Source:  The Tenets of PBL, Second Edition, A Guidebook to the Best Practices Elements in Performance-Based Life Cycle Product Support Management (©2012 The University of Tennessee, and Supply Chain Visions), was prepared by the University of Tennessee under contract to the United States Air Force. Used with Permission.


Success Factor #1: Alignment

Before starting down the path to Performance Based Life Cycle Product Support (also referred to as Performance Based Logistics or PBL), it is important to ensure both the government and the support provider have synchronized around the idea PBL is truly a business model shift. The goal of PBL is achieving desired outcomes—not simply negotiating Product Support Arrangements (PSA) or squeezing the support provider for the lowest cost per transaction. While it is possible to have a PBL business arrangement without a respectful and trusting relationship, this is similar to building a house with no foundation: during the first major storm, the entire structure is likely to collapse.

The foundational Alignment factor includes five tenets. These tenets are designed to help programs build strong linkages between PBL constituents and program outcomes and include the following:

  • Developing and Maintaining PBL Knowledge and Resources
  • Acquiring Organizational Support for PBL both internal and external
  • Designing for Cross-Cutting Integration
  • Appropriate Workload Allocation and Scope
  • Maximizing Supply Chain Integration

Each tenet is discussed below.

  • Tenet #1 - PBL Knowledge and Resources

The most successful PBL programs are those where both the government organization and the support provider have a comprehensive knowledge of and experience in performance-based concepts, tenets, business models, and implementation strategies at the beginning of their program efforts. The very best programs tend to assemble a team from both the government and the support provider with at least 1-2 people on the PBL IPT who have successfully managed a PBL program before.

Having a team with representatives from both sides with PBL experience enables these leaders to guide the rest of the team through challenges more easily than teams without PBL experience. The teams that do not include PBL-experienced staff at the onset often struggle with issues that seem to “take two steps forward and one step back” every time they move forward.

The Tenets of PBL, Second Edition, A Guidebook to the Best Practices Elements in Performance-Based Life Cycle Product Support Management (©2012 The University of Tennessee, and Supply Chain Visions), was prepared by the University of Tennessee under contract to the United States Air Force. Its purpose was to provide touchstones and operating principles for the successful implementation of PBL, and thus to help deliver affordable weapons system support to the warfighter. Their research uncovered a secret weapon for successful PBL organizations—establishing a PBL Knowledge Base. A knowledge base of PBL resources and information can be an effective tool in helping the organization and the PBL IPTs ramp up on PBLs in an effective and rapid manner. Unlike in the past, there is now a broad set of reference materials available from DoD.

DAU advocates care in the construction of a program culture that taps into the most skilled in PBL to help lead and teach those on the team that are new to PBL programs. Unfortunately, it is not unusual for PBL teams to be assembled with little practical experience, foundation, and/or resources such as reference documentation, guidebooks, lessons learned, etc. Program offices and support providers alike have the ability to leverage the experience they have garnered with previous programs and should actively seek to use it.

The most successful programs make a concerted effort to get the team smart on the fundamentals of PBL. In fact, most of the largest support providers invest heavily in educating their employees about the basics of PBL by encouraging their employees to complete the DAU on-line or classroom training, or and other available training, such as PBL training offered by the University of Tennessee.

To be successful, PBL education must be approached from a cross-functional perspective. The teams that achieve the highest return on investment from PBL training are those that approach it from a team perspective. Having an entire program team participate in PBL training in a hands-on group “workshop” environment tends to provide the biggest bang per training buck.

The very best organizations have a “PBL Center of Excellence” where a formal process exists to collect and leverage knowledge and resources across all PBL programs. Often the companies with PBL programs have more than one—and the best practice organizations have a formal PBL benchmarking program that exists to facilitate speedy ramp up of new PBL teams. Repeatable and measurable processes enable companies to have a more efficient approach in terms of cost and time to implement their PBL programs.

Unfortunately, many organizations reinvent the wheel for every new PBL excursion. There is a need to tailor every PBL strategy to fit the circumstance, but that does not mean starting at the beginning with each new start. This problem compounds for many large organizations both - private and public – because the organizations are “siloed” and there is little proactive sharing of PBL knowledge across programs. The Army, Navy and Air Force all have de facto centers of excellence at the Army Aviation and Missile Life Cycle Command (AAMCOM), the Naval Inventory Control Point (NAVICP) and the Air Force Life Cycle Management Center (AFLCMC), respectively.

  • Tenet #2 - Organizational Support for PBL

After deciding to proceed with a PBL-oriented business model, it is important that the cross-functional IPT identify all stakeholders and the PBL champions throughout the organization, and to involve them in PBL activities as early in the process as possible. The goal of the IPT should be to drive strong consensus and participation across all stakeholders toward common support strategy objectives. Research found that not having the appropriate stakeholders and champions on board was one of the biggest challenges to an efficient PBL implementation.

Research has found that many programs attempting to implement PBL product support strategies do not do an adequate job of developing a comprehensive stakeholder analysis, and do not have a solid plan to leverage known champions or build new ones, as the case requires. The very best programs focus heavily on identifying both stakeholders and champions.

Stakeholders
The first step in a rigorous stakeholder analysis is to identify the relative “power” of each of the stakeholders. After the team identifies all possible stakeholders, the team should determine the power of the stakeholders using the two defined variables below:

Influence
The first variable the team should consider is the relative amount of influence a stakeholder has. Influence is defined as “the extent to which a stakeholder is able to act on project operations and therefore affect project outcomes.” Each stakeholder is given an influence rating, a measure of the power of the stakeholder. Factors include:

  • Extent of control over the project funding
  • Extent to which the stakeholder informs decision-making around investments in technology and workplace productivity.

Importance
The second variable is importance, or the extent to which a stakeholder’s problems, needs, expectations and interests will be affected by the PBL project. As with influence, the stakeholder is given a rating on their potential importance.
Using these two factors, the IPT can determine the ‘Power Score’ of each stakeholder by simply multiplying the importance and influence scores. The goal is to determine the importance and influence of certain individuals or stakeholders in order to understand whether or not they will be “key or primary stakeholders” for the project as a whole.

The second step is to develop a plan that addresses each stakeholder’s needs to the fullest extent possible, and then to get stakeholders involved with the team as early as possible. Without the explicit support or involvement of the stakeholder community, it is unlikely that a successful PBL program will result. The IPT then needs to work on a continuous basis to ensure primary stakeholders are on board with the team’s approach and strategies.

Champions
Successful PBL programs rely on champions to support the PBL efforts. To succeed in PBL, senior leadership from the customer and the organic or commercial support supplier should be fully engaged with their respective organizations to drive towards a true win-win PBL business model. In addition, the champions from both organizations should be strong advocates for the need to change from legacy thought patterns and transactional logistics. It is important to remember that the PBL business model is different; often the change management is the biggest obstacle organizations face.

While the many senior officers and executives across all services support PBL approaches to weapons systems support, research has shown that there are fewer champions at the next level down and within the programs. Champions are often program-specific, with some programs having a great deal of support and others more or less marching forward in an effort to “comply” with PBL without really having a strong leadership commitment guiding their teams.

Champions need to come from the various disciplines that PBL may impact. Specifically, many PBLs push the envelope regarding contracting, supply management and financial statutes and policy and optimal PBL implementation may require changes in process and current procedures in these areas. Accordingly, champions in these areas need to support the Program Teams effort in working through the issues encountered.

  • Tenet #3 - Cross Cutting Integration

Organizational alignment is a strategically focused approach that looks to synchronize from the shop floor to the top leadership across both customer and supplier organizations.

Lack of organizational alignment can sometimes be found when a program looks to implement a public-private partnership. In some cases, there is “focused advocacy” where a small number of leaders within an organization are actively driving their organization toward a strategic approach for PBL. The highest level of the depot may champion PBL, while the lower levels may be less than enthusiastic. Situations like this can become emotionally charged, and a concerted effort to align all parties involved in the execution of the strategy pays big dividends in execution results in a win-win proposition for the entire team.

Neither side is “right” in circumstances like the one outlined above. There are public policy goals that must be respected and core capabilities protected in the organic structure. At the same time, work needs to go where it can be pest performed and misaligned organizational structures ultimately degrade support for the warfighter.

OSD provides very specific guidance, directing that “Sustainment strategies shall include the best use of public and private sector capabilities through government/industry partnering initiatives, in accordance with statutory requirements.” (DoD Directive 5000.01) There is no default decision: the support infrastructure should be in integrated across all sources of support and work structured to deliver best use in support of the warfighter, subject to statutory constraints.

The most successful PBL programs are those with a common vision from both organizations and were thus able to jointly drive towards a true win-win PBL business model at all levels of both organizations. Aligning incentives between customers (weapons system users) and support suppliers (OEMs, third party logistics (3PL), organic) can lead to a higher level of performance at a lower cost of ownership. As mentioned previously, a PBL business model is based on achievement of desired outcomes, not based on performing transactions. The best practice PBL programs establish a true partnership mentality with a desire to develop a “win-win” business model based on mutual self-interest that focused on total system value proposition anchored in total ownership costs.

The PBL effort is not focused on reducing the price of the transactions, but on physically eliminating non-value added transactions, reducing support requirements, and implementing new business models. In essence the PBL business model should be deployed to reward suppliers, whether contractor or organic support, for their innovation in improving both reliability and affordability; with the government sharing in the benefits and savings through lower total ownership costs.

High performing programs using PBL develop a win-win PBL business model. In a win-win business model, the government and suppliers need to agree on price, risk premium, contract terms, and re-allocation of asset ownership/control. The business model needs to take into consideration three key drivers—contractual drivers, managerial decisions and exogenous factors. Internal and external alignment from top to bottom of the organization is part of the glue used to form a strong PBL foundation.

  • Tenet #4 - Workload Allocation and Scope

PBL programs that develop a strategy and propose outcomes designed to leverage the entire industrial capability have the greatest success. Workloads are distributed to the most effective providers consistent with statutory guidelines, with a conscientious effort to focus on best competencies, best value, and effective use of Public-Private Partnership (PPP) solutions.

Many programs get caught up in the oversight process and opt to tell the suppliers how support is to be performed, rather than describing the desired outcomes. In a traditional approach, the government provides a Statement of Work (SOW) that outlines in detail the various activities that the support provider should perform. Typically, many of these activities are priced per transaction and may not define performance targets.

In a PBL approach, the work is captured in a performance-based Statement of Objectives (SOO). The SOO focuses on the “what” and not the “how.” This transfers authority and flexibility to the support provider, which can foster the development of innovative solutions designed to most efficiently and effectively achieve the customer’s desired outcomes. The SOO is in essence a summary of key goals and/or outcomes which are incorporated into the PBL agreement.

Unfortunately, PBL programs are often misunderstood as “outsourced” efforts or “Contractor Logistics Support (CLS)” with minimal emphasis on best value and best competencies in placement of workloads. When a depot is performing organic workload for sustainment, a common misunderstanding is that PBL will automatically result in the redistribution of work from the depot to the contractor. In fact, PBL can result in additional work at the depots. Teaming relationships are central to PBL—and Title 10 clearly emphasizes the importance of PPPs.

PPPs are an effective tool for balancing workload allocation around best value solutions. PBL does not pre-ordain CLS or organic support structures. Rather, PBL gives all stakeholders the opportunity to compete for and earn business in line with their core competencies and value proposition.

  • Tenet #5 - Supply Chain Integration

The traditional approach for a contract has been to manage the supply chain by commodities or services; the approach has necessarily been focused on optimizing the achievement of end-to-end process effectiveness. Best practice PBL programs demonstrate development of a formal supply chain management strategy that focuses on maximum integration for end-to-end supply chain effectiveness. This approach means supply chain components need to be integrated and align to optimize the end-to-end process. Internally stove-piped supply chain processes must be reduced or eliminated. For some programs, this has led to co-location of the program team, so the support provider and the government – especially the depot - work side by to facilitate cohesive, comprehensive and coordinated customer and supplier involvement.

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 Success Factor #2: Contract Structure

 

The Program Manager (PM) is assigned Life Cycle Management responsibility and is accountable for the implementation, management, and oversight of all activities associated with development, production, sustainment, and disposal of a system across its life cycle. As part of this, the PM has the responsibility to develop an appropriate sustainment strategy to achieve effective and affordable operational readiness consistent with the Warfighter resources allocated to that objective. The PM‘s responsibilities for oversight and management of the product support function are typically delegated to a Product Support Manager (PSM) who leads the development, implementation, top-level integration, and management of all sources of support to meet Warfighter sustainment and readiness requirements.

The contract structure is a visible manifestation of the PSM’s implementation responsibility, and nothing is more important than formulating the appropriate contract structure and the resulting contract, or the product support agreements for arrangements within the government. A PBL solution is not wed to any particular contract type or incentive plan, as long as it supports an outcome-based approach. However, good to robust best practices typically includes a form of incentive for achieving performance and cost savings targets. When a service provider meets expectations, they can be rewarded with financial incentives, such as performance bonuses, gain-sharing bonuses, or extended contract lengths. In the case of a Firm Fixed Price (FFP) contract, the contractor could harvest improved profit margins as improvements take hold during the period of performance.

Striking the right balance of contract type and incentives are discussed in the three tenets discussed below.

  • Appropriate Risk and Asset Management
  • Contracting Environment
  • Funding

While this discussion centers on a government perspective on the relationship specified in a contract, the concepts are applicable to all organizations and agreement types. The tenets are applicable and adaptable to public-private partnerships and agreements between government entities serving as the PSM, PSI, or the Product Support Providers (PSP). Each tenet is discussed below.

  • Tenet #6 - Appropriate Risk and Asset Management

Robust best practice PBL programs include a focus on total program risk reduction along with appropriate off-ramps exit criteria that are captured at the onset of the contract execution. These programs balance risk with a mitigation strategies that account for all parties in the relationship, while paying specific attention to harmonizing supplier accountability and authority. By moving some risk to the support provider, and aligning incentives to stimulate program effectiveness, the PBL business model can remove risk from the total system. It isn't just about moving risk to the supplier - it’s about realigning the incentives to reduce total program risk.

The importance of exit criteria that leave both sides whole cannot be overstated. Best practice PBL programs actively address off-ramps that balance the needs of the contractor, the customer, and the organic support structure. Traditional outsourcing arrangements often have termination for convenience clauses, but this has not been found to be sufficient. PBL contracts should include detailed criteria to assure that the program can continue sustainment efforts should the need to exit the arrangement arise. Some common off-ramp criteria are as follows:

  • Acquisition, transfer, or use of necessary technical data and support/tooling equipment should the relationship cease to exist
  • Conversion training required to reconstitute or recompete the support workload
  • Transfer or disposition of assets – Managing of asset liability is typically addressed in terms of advanced notification timelines, and required transfer/disposition requirements
  • Section H – Special Contract Requirement clauses allow tailoring and/or exclusions as a form of off ramps

Managing risk associated with asset ownership in a PBL arrangement is key concern during the development of a risk mitigation strategy, and during the development of specific contract language. Under traditional sustainment models, the government customer often owns and manages the resources associated with the program, including spares, repair facilities, etc. CLS arrangements will often shift responsibility for managing most aspects of resources to the supplier, but associated risk remains with the government customer because ownership of the asset remains with the customer. This is less than ideal, as the support provider does not have “skin” in the game. As cited in the TheTenets of PBL, Second Edition, A Guidebook to the Best Practices Elements in Performance-Based Life Cycle Product Support Management, when support providers are asked “What are your inventory turns?”, the answer was often “I don’t know—it’s not my inventory.”

While there is much debate about whether a supplier should own the assets or the government should own the assets, research performed for the comprehensive PBL Guidebook referenced above shows that programs are more apt to achieve desired performance when the supplier owns the assets. Additionally, research at the Wharton School strongly suggests that best practice is to have full asset management control, including ownership, shifted to the supplier and the associated risks for asset performance accepted by the supplier. Their findings, published in Management Science, were that the optimal business arrangement was when the contractor owned the assets. Under a PBL program, the supplier is accountable to meet service levels at a fixed price. When a supplier owns the assets, they have an inherent incentive to reduce the cost of asset ownership and keep the level of inventory at the lowest possible level, while still allowing them to meet performance targets.

  • Tenet #7 - Contracting Environment

Setting a sound contractual PBL foundation requires a creative environment that allows for the development of tailored pricing models, incentives, and contract lengths that accounts for the funding types available and facilitates a win-win situation for all parties. These elements of the contracting environment are discussed below.

Pricing Model 
One of the most challenging elements of a contracting strategy is developing the pricing and incentives structure: the “pricing model.” The pricing model is made up of two key elements: contract type and incentive type. Incentives are optional, but structures that provide incentives for “good behavior” are desired in all contracts.

There are two basic types of contracts: fixed price and cost plus. Generally, the optimal contract type for a PBL effort is a fixed price vehicle, which uses a per unit or per unit throughput basis. In fact, direction from the Office of the Secretary of Defense states that the desired PBL pricing approach is a fixed price model. “When robust competition already exists, or there is recent competitive pricing history, expect components to be predisposed toward Firm-Fixed-Price (FFP) type contract arrangements. FFP should also be used to the maximum extent reasonable when ongoing competition is utilized in multiple award contract scenarios.” 
 

FFP contracts are a natural fit for buying designated performance outcomes as they build in an inherent incentive for the service provider to be efficient and meet profitability levels at the fixed price rate. In essence, the support provider increases their profit as they get more efficient. Having a fixed price agreement on a per unit or throughput basis allows for fluctuating volumes. In addition, pricing models also may have “volume bands” to allow for different pricing at different levels of volume.

While a fixed price model provides inherent incentives, it is usually necessary to begin with cost reimbursement (or cost plus) contracts in the early phases of PBL implementation while the appropriate cost and resource baselines are maturing. It is rare that a program matures to the point where all elements appropriate for cost plus elements are eliminated, and it is risky to implement fixed price agreements without first understanding the baseline performance and cost of the existing business model. Greater maturity allows the program to develop realistic cost and performance profiles. This maturity l

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Award Winning PBL Programs

Award Display at the Pentagon

Secretary of Defense Performance Based Logistics: The Gerald R. Beck Memorial PBL Award

 

The Late Gerald "Jerry" Beck Shares Perspectives on the PBL Value Proposition (2:28)
 

Nomination Memo: Under Secretary of Defense 2023 PBL Award Call for Nominations Memo New!
 
 

DoD PBL Annual Award Winners

Below is a consolidated list of the system, subsystem, and component level winners of the Secretary of Defense Performance Based Logistics (PBL) Award since its inception in 2005. To facilitate the sharing of lessons learned, best practices, and initiatives that led to each of these programs being selected as the best PBL program in the Department of Defense that year, the name of each program is hyperlinked to its respective award nomination package (through 2017; there were no awards for 2018). Beginning in 2019, the award nomination packages are included as part of the award memo.

 

2022 Awards List
2021 Awards List
2020 Awards List
2019 Awards List
2018 Awards List
  • No 2018 Awards
2017 Awards List
2016 Awards List
2015 Awards List
2014 Awards List
2013 Awards List
2012 Awards List
2011 Awards List
2010 Awards List
2009 Awards List
2008 Awards List
2007 Awards List
2006 Awards List
2005 Awards List

 

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PSM Resources
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Results and Successes
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Documents / Performance Based Logistics

DoD PBL Award Winners - 2013 - Component (F414)
Document Type:
Document
Modified: Changed by Thomas, Leesa - CTR on
Summary

These files are the detailed nominatin packages for the 2013 PBL award winners.

DoD PBL Award Winners - 2013 - Component (Patriot)
Document Type:
Document
Modified: Changed by Thomas, Leesa - CTR on
Summary

These files are the detailed nominatin packages for the 2013 PBL award winners.

DoD PBL Award Winners - 2013 - Sub-System
Document Type:
Document
Modified: Changed by Thomas, Leesa - CTR on
Summary

These files are the detailed nominatin packages for the 2013 PBL award winners.

DoD PBL Award Winners - 2013 - System
Document Type:
Document
Modified: Changed by Thomas, Leesa - CTR on
Summary

These files are the detailed nominatin packages for the 2013 PBL award winners.

DoD PBL Award Winners - 2012 - Component
Document Type:
Document
Modified: Changed by Thomas, Leesa - CTR on
Summary

These files are the detailed nominatin packages for the 2012 PBL award winners.

DoD PBL Award Winners - 2012 - System
Document Type:
Document
Modified: Changed by Thomas, Leesa - CTR on
Summary

These files are the detailed nominatin packages for the 2012 PBL award winners.

DoD PBL Award Winners - 2012 - Sub-System
Document Type:
Document
Modified: Changed by Thomas, Leesa - CTR on
Summary

These files are the detailed nominatin packages for the 2012 PBL award winners.

DoD PBL Award Winners - 2011 - Sub-System
Document Type:
Document
Modified: Changed by Thomas, Leesa - CTR on
Summary

These references are the detailed nomination packages for the 2011 PBL award winners.

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