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  3. Performance-Based Logistics—Strategies, Solutions, and Arrangements

Performance-Based Logistics—Strategies, Solutions, and Arrangements

Performance-Based Logistics— Strategies, Solutions,  and Arrangements

by Lisa P. Smith, Deputy Assistant Secretary of Defense for Product Support


Lisa P. Smith, Deputy Assistant Secretary of Defense for Product SupportDoD program managers (PMs) and product support managers (PSMs) have at their disposal a range of sustainment strategy options to deliver affordable and effective product support to Warfighters. The options often include performance-based arrangements, transactional arrangements, or a mix of the two approaches. It is important to differentiate between performance-based logistics (PBL) strategies or solutions and associated PBL arrangements that may be used in securing support from product support providers. 

This distinction is captured in DoDI 5000.91, Product Support Management for the Adaptive Acquisition Framework (AAF): 

At the program level, all product support solutions will be performance based. They will include an appropriate mix of product and process metrics with threshold values to monitor performance and be adjusted as needed to satisfy warfighter requirements. While performance-based arrangements may be a key component of a program’s Performance Based Life Cycle Product Support solution, this does not mean that all arrangements with industry will be performance based. Instead, performance-based logistics contracts are utilized when analysis indicates they can effectively reduce cost and improve performance. They will be structured to specific program needs and may evolve throughout the life cycle. (p. 16) 

Performance-based arrangements center on pursuing performance outcomes, whereas transactional arrangements consist, for example, of paying for maintenance or supply services in terms of “eaches” (each part, each repair, etc.). Arrangements may be made through a memorandum of understanding or memorandum of agreement in government or through contracts with commercial industry. 

PBL solutions have been utilized successfully for more than two decades, which is a tribute to the staying power of this approach. In his book, Getting Defense Acquisition Right, former Under Secretary of Defense for Acquisition, Technology and Logistics (AT&L) Frank Kendall wrote that PBL arrangements “reward companies for providing higher levels of reliability and availability to our Warfighters.” In other words, PBL providers find ways to increase system reliability through component modifications or improved product support practices, thereby reducing the demand for logistics. Reliability improvements keep parts and components “on wing” longer, reducing downtime and demand on supply and transportation resources.

PBL product support providers also reap the benefits, typically in terms of cost sharing with the government via incentives. Kendall commented that “if well-written and properly executed, PBL arrangements provide cost savings and better results.” He added that “we are going to increase the use of this business approach.” Fast forward a decade, and astute observers will note that the Office of the Under Secretary of Defense for Acquisition and Sustainment, which is one of the organizations that replaced AT&L, continues to promote PBL and recognizes DoD PBL award-winning programs annually for performance improvements and cost savings at the system, subsystem, and component levels.

Why are PBLs so important to the sustainment of DoD systems? One need look no further than our capstone strategy document, the National Defense Strategy (NDS). The NDS calls for action to “build enduring advantages across the defense ecosystem, which includes the DoD, the defense industrial base, and private sector enterprises” that “sharpen the Joint Force’s technological edge.” 

While the DoD sharpens the force’s technological edge through recapitalization programs to acquire new aircraft, ships, combat vehicles, and missiles with increased capabilities, we in the Life Cycle Logistics, product support, and sustainment communities are also laser-focused on sustaining the force-in-being: our legacy fleets. These fleets, many of them deployed around the world, will provide the capability to “fight tonight” if needed. PBL arrangements, for many of those weapon systems, particularly at the subsystem level, provide reliable and available weapon system support.

PBL Guidebook Updates—New Considerations for PMs and PSMs

My office recently published an update to the DoD PBL Guidebook to reflect recent changes in statute, policy, and the national security environment. While the guidebook still focuses on the basic “blocking and tackling” of the 12-step product support strategy process model documented in the DoD PSM Guidebook, the recent updates add context for PMs and PSMs to consider. Two significant updates are: (1) integrated deterrence and contested logistics, and (2) the AAF pathways.

The NDS describes integrated deterrence as using “every tool at the department’s disposal, in close collaboration with our counterparts across the U.S. Government and with allies and partners, to ensure that potential foes understand the folly of aggression.”

The NDS calls for DoD to align policies, investments, and activities to sustain and strengthen such deterrence. PBL serves as a tool that aligns Warfighter outcomes to the sustainment approach by incentivizing PBL product support providers to invest in improvements that make our systems more reliable, available, and cost-effective to sustain. Without such investment and incentive, the demand for logistics may grow, increasing both the logistics footprint of deployed forces and the requirements for transporting replenishment spares and equipment, and retrograde of unserviceable parts. In a contested environment, those effects can greatly complicate things and introduce significant operational risk.

The term “contested logistics environment” is defined in Title 10 U.S.C. § 2926(h) as “an environment in which the armed forces engage in conflict with an adversary that presents challenges in all domains and directly targets operations, facilities, and activities in the United States, abroad, or in transit from one location to the other.” 

In today’s contested logistics environment, PBL arrangements must deliver the required agility, and (if applicable) surge capacity to meet Warfighter requirements. PBL arrangements must incentivize outcomes such as on-time delivery, reduced or eliminated backorders, and increased fill rates for mission-critical parts. PBL arrangements for deployable or forward-based weapon systems must consider the attributes of responsiveness, simplicity, flexibility, economy, attainability, sustainability, survivability, and visibility.

PBL serves as a tool that aligns Warfighter outcomes to the sustainment approach by incentivizing PBL product support providers to invest in improvements that make our systems more reliable, available, and cost-effective to sustain. 

The Warfighter needs PBL arrangements that support surge operations and theater-specific performance that results in agile delivery of product support. Contested logistics also requires identifying and mitigating supply chain risks, ensuring the required level of supply chain visibility, and utilizing secure logistics information technology systems to prevent or lessen the impact of kinetic and nonkinetic disruptions.

Assistant Secretary of Defense for Sustainment Christopher J. Lowman recently unveiled a new Regional Sustainment Framework (RSF) that also highlights the importance of PBL arrangements. The RSF is a “structured strategy for the U.S. and its allies to achieve increased Maintenance, Repair, and Overhaul (MRO) (e.g., depot) activity in a contested logistics environment.” 

The RSF vision is a globally connected, agile, and resilient defense ecosystem that leverages the strengths of allies, partners, and industry. It tackles the challenges of long over-ocean retrograde timelines for repair and maintenance by distributing heavy maintenance capabilities forward. Its goals include increasing the effectiveness and efficiency of product support solutions. PBL is just such a tool for the job. For example, in response to increasing Great Power Competition, the United States is pursuing RSF objectives with international partners and allies in specific regions. Where host-nation, in-theater sources of repair exist for aircraft and ships, the DoD is exploring options to expand certain PBL contracts for overseas repair of common weapon system components such as those for rotary-wing aircraft. 

The updated PBL Guidebook also discusses at which echelons PBLs may be effective. The term “echelon” has several meanings, including: (1) forward or rear operations; (2) organizational level (e.g., corps/division/brigade); or (3) level of indenture (e.g., system, subsystem, or component).

When examining PBL opportunities, it is important for PMs and PSMs to discuss with their Warfighter customers which echelons would be best suited. For example, to include all three aspects, a PBL strategy might consider forward deployed brigade-level (field-level) support for a ground combat vehicle engine subsystem. Echelon alternatives should also be a factor in the PBL business case and include sensitivity analysis of various combinations. Use of Digital Product Support methodologies, such as Discrete Event Simulation, may be appropriate to support such analyses.

Regarding the AAF pathways, the PBL Guidebook, like all other guidebooks published prior to 2018, focused on the Major Capability Acquisition pathway used by most acquisition programs. To reflect the establishment of the AAF in DoD policy and increased use of the other five pathways, the guidebook now includes considerations for PBL approaches across the AAF. For example, the Urgent Capability Acquisition (UCA) and Middle Tier of Acquisition (MTA) pathways emphasize speed, so PBL may not (unless analysis demonstrates otherwise) be an appropriate strategy early in the life cycle. However, at certain decision points, such as a UCA Disposition Determination to transition to sustainment or an MTA Outcome Determination transition to sustainment, a PBL (when analysis demonstrates) may prove the best-value, outcome-driven solution.

Intellectual Property and PBL

The PBL Guidebook update retained much of the earlier content on intellectual property (IP) considerations, which is worth summarizing here. First, IP requirements such as technical data, computer software, and license rights, should be identified early in the Acquisition Strategy and IP Strategy. The IP approach will significantly influence the flexibility of sustainment arrangements available to the program, particularly the ability to compete sustainment or perform sustainment organically.

PBL business case analyses should include IP considerations to weigh, for example, increased investment up front against increased flexibility and potential savings (e.g., through incentive-based cost sharing) in the future. And, with today’s systems in operation for decades, the payback period could be short compared to the overall service life or economic useful life.

The PBL Guidebook presents two noteworthy IP sections, including “IP in the Spotlight” and the “IP Decision Tree.” The spotlight section includes a number of cost and strategy considerations where the government “owns” (less often the case) or has license rights to (more often the case) the necessary IP, or where it has neither (the least desirable case). The decision tree assists practitioners in determining if a particular PBL course of action is considered “viable” for the purposes of further evaluation in a PBL business case analysis. During a recent DAU web event on IP Considerations for PBL, two military services’ PBL subject matter experts described how they utilized IP considerations in determining the best PBL approach for their systems that were last year’s DoD-level award winners. 

Where securing IP license rights is difficult, combining a Public-Private Partnership (PPP) with a PBL can be an effective strategy. A PPP is a cooperative arrangement between an organic product support provider and one or more private sector entities to perform defense-related work, utilize DoD facilities and equipment, or both. An example would be a depot partnering with an industry provider, such as an original equipment manufacturer (OEM), in either direct sales or a workshare arrangement with the program office. In many of these PBL-PPP arrangements, the depot provides touch labor while the OEM provides engineering and parts support. Again, no one-size-fits-all solution exists, but adding a PPP often can help overcome IP challenges. 

U.S. Army Soldiers assigned to C Company, 87th Division Sustainment Support Battalion, 3rd Division Sustainment Brigade, fuel and perform a maintenance check on the M1300 tractor and M1302 trailer enhanced heavy equipment transporter system in Pabrade, Lithuania, prior to a mission to move M1 Abrams tanks, Jan. 10, 2024. The 3rd Infantry Division’s mission in Europe is to engage in multinational training and exercises across the continent, working alongside NATO allies and regional security partners to provide combat-credible forces to V Corps, America’s forward deployed corps.

U.S. Army Soldiers assigned to C Company, 87th Division Sustainment Support Battalion, 3rd Division Sustainment Brigade, fuel and perform a maintenance check on the M1300 tractor and M1302 trailer enhanced heavy equipment transporter system in Pabrade, Lithuania, prior to a mission to move M1 Abrams tanks, Jan. 10, 2024. The 3rd Infantry Division’s mission in Europe is to engage in multinational training and exercises across the continent, working alongside NATO allies and regional security partners to provide combat-credible forces to V Corps, America’s forward deployed corps. 
Source: U.S. Army Sgt. 1st Class Jason Hull 
Photo cropped to show detail.

Implications and Closing Thoughts

In today’s national security environment of contested logistics, challenges in sustaining our legacy fleets while they are being recapitalized amid ongoing budget pressures point to the need for innovative, effective, and affordable product support solutions. PBL, when supported by a business case analysis, offers great potential for increased performance and reduced costs. PBL is both a strategy and a solution. Whereas in transactional arrangements, product support providers profit from an increased demand for logistics, with PBLs, providers profit by reducing the demand for logistics.

PSMs, in support of their PMs, should periodically reevaluate product support arrangements for PBL potential. Often the transition to sustainment, a major subsystem modification, or a legacy system experiencing sustainment performance and/or operating and support cost increases represent targets of opportunity for this proven product support strategy. PBLs are often not easy to establish based on the analysis and negotiation required, but as Kendall stated more than a decade ago, if well-written and properly executed, PBLs provide cost savings and better results.

I encourage you to explore the full range of PBL policy, guidance, training, and tools hosted or provided by DAU. Courses include online training, instructor-led training, and mission assistance workshops. DAU provides helpful articles, job support tools, and a community of practice with related resources and a discussion forum to assist practitioners in evaluating the feasibility of establishing PBL arrangements.

If looking for assistance with IP-related matters, I encourage you to contact the Office of the Secretary of Defense IP cadre or your Service IP cadre and to explore the new Life Cycle Product Support Planning: Intellectual Property as a Key Enabler Toolkit available on milSuite for authorized users.

Finally, if you are a successful PBL practitioner, I encourage you to share your best practices and lessons learned with others across your command, Service, and the broader DoD enterprise. In addition, consider submitting a nomination for the annual DoD PBL awards to showcase your results and benefits to the Warfighter. While PBL is not a one-size-fits-all solution, what you have established may help a DoD teammate on their PBL journey. Let’s collaborate and “build enduring advantages” as stated in the NDS … I’m counting on you! 


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SMITH is the Deputy Assistant Secretary of Defense for Product Support and the principal advisor to the Office of the Secretary of Defense (OSD) leadership on readiness and sustainability of major weapon systems. She is responsible for developing and implementing acquisition and sustainment strategies that provide the Warfighter with
cost-effective weapon system readiness across the life cycle. Smith has held leadership positions in the OSD and the Department of Air Force.

The author can be contacted at: [email protected] 


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