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2014 LOA PBL Page 1 Lockheed Martin Corporate Engineering, Technology, & Operations Logistics & Sustainment 10530 Rosehaven St., Ste. 600 Fairfax, VA 22030.

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Presentation on theme: "2014 LOA PBL Page 1 Lockheed Martin Corporate Engineering, Technology, & Operations Logistics & Sustainment 10530 Rosehaven St., Ste. 600 Fairfax, VA 22030."— Presentation transcript:

1 2014 LOA PBL Page 1 Lockheed Martin Corporate Engineering, Technology, & Operations Logistics & Sustainment 10530 Rosehaven St., Ste. 600 Fairfax, VA 22030 Instructor: Michael D. “Bo” Gourley mike.gourley@lmco.com (703) 434-0396

2 2014 LOA PBL Page 2 Session 1: PBL Background and History Session 2: PBL Basics Levels Scope PBL Application Model Session 3:PBL Contracts & PSAs Session 4: PBL Roles Session 5:PBL Depot Involvement Session 6:S&RP for PBL Session 7:PBL Enablers and Barriers Session 8:Summary

3 2014 LOA PBL Page 3 Performance Based Logistics (PBL) has become the preferred life cycle product support strategy for U.S. Department of Defense (DoD) systems and International customers, and as such offers significant business opportunities matched to customers’ outcomes needs. The objective of PBL is to improve weapons system readiness by procuring top level performance outcomes while optimizing support cost by capitalizing on integrated logistics chains and public-private partnerships.

4 2014 LOA PBL Page 4 Know the history of PBL Understand the fundamental concepts of PBL arrangements Recognize the attributes of successful PBL strategies Describe the levels and scope of PBL application Identify the current laws, policies, and directives that impact PBL implementation and execution Describe the Standard and Repeatable Processes (S&RP) that facilitate effective performance-based Product Support Arrangements (PSAs) Understand the constraints and enablers influencing development and execution of PBL strategies

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6 2014 LOA PBL Page 6 Legacy:Performance Based Logistics Emerging:Performance Based Lifecycle Product Support “PBL is synonymous with performance-based lifecycle product support, where outcomes are acquired through performance-based arrangements that deliver Warfighter requirements and incentivize product support providers to reduce costs through innovation. These arrangements are contracts with industry or intragovernmental agreements.”1

7 2014 LOA PBL Page 7 An outcome based product support strategy that plans and delivers an integrated, affordable performance solution that optimizes weapon system readiness. https://acc.dau.mil/CommunityBrowser.aspx?id=527144#definition

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9 2014 LOA PBL Page 9 Aircraft Tires PBL –Scope: Availability of Naval aircraft tires –Outcomes Availability: 95% Delivery: 2 days CONUS; 4 Days OCONUS Army HIMARS PBL –Scope: Availability of HIMARS Rocket Launcher System –Outcomes Availability: 92% Delivery: 24 hours CONUS; 96 Hours OCONUS Repair Turnaround: 5 days Field; 45 days Vendor H-60 “Tip to Tail” –Scope: Depot-Level Repair/Overhaul –Outcomes Fill Rate: 88% (vs. 80% contract requirement) High priority SMI supply response time: 100% All-time low backorders on 1,286 components: 24

10 2014 LOA PBL Page 10 A more effective system sustainment approach was required! Situation with U.S. military systems, mid-1990s –Aging weapon systems Procurement decline following Cold War Fewer new systems, keeping old ones longer –Aging systems need more support Fixed Defense Budget Sustainment was rising as a total life cycle cost percentage –No strategy to correct the downward spiral DoD lacked funds to invest in modernization or replace systems Systems were never ‘designed for supportability’ –A crisis was clearly imminent U.S. Congress mandated action

11 2014 LOA PBL Page 11 NDAA: DoD must report to Congress on Product Support Reengineering PSAT Implementation F-117 APU 1998 Product Support Reengineering Report to Congress 30 RTOC Pilot Programs 1999 QDR Mandates PBL: (First official use of the term) DoD Program Managers Guidebook published 2001 DoD 5000 policy: PBL is DoD’s preferred Product Support Strategy ACAT 1 &2: Use PBL or justify why not 2003 Revised DoD 5000.2 is released Product Support Assessment Team launched 2008 DoD Weapon System Acquisition Reform Product Support Assessment DoD WSAR- PSA implement- ation 2009 Sustainment Quad Chart “Proof Point” phase I 2010 PSM, BCA, ILA Post-IOC review “Proof Point” phase II 2011 NextGen 2012

12 2014 LOA PBL Page 12 2012 Endorsement of Next Generation PBL Strategies “A recently completed study by ASD(L&MR) provided compelling evidence that properly constructed and executed performance-based product support strategies (commonly referred to as PBLs) deliver best-value weapon system support.”

13 2014 LOA PBL Page 13 2012 2013 Endorsement of Next Generation PBL Strategies “A recently completed study by ASD(L&MR) provided compelling evidence that properly constructed and executed performance- based product support strategies (commonly referred to as PBLs) deliver best-value weapon system support.” “The PM shall employ effective Performance-Based Life-Cycle Product Support (PBL) planning, development, implementation, and management. Performance-Based Life-Cycle Product Support represents the latest evolution of Performance- Based Logistics.” DoDI 5000.02 26 Nov 2013

14 2014 LOA PBL Page 14 2012 2013 Endorsement of Next Generation PBL Strategies “A recently completed study by ASD(L&MR) provided compelling evidence that properly constructed and executed performance- based product support strategies (commonly referred to as PBLs) deliver best-value weapon system support.” “The PM shall employ effective Performance-Based Life-Cycle Product Support (PBL) planning, development, implementation, and management. Performance- Based Life-Cycle Product Support represents the latest evolution of Performance- Based Logistics.” AT&L(M&R) 22 Nov 2013 “CAEs, PEOs, and PMs will emphasize through appropriate communication vehicles the importance of pursuing performance based product support strategies.” Performance Based Logistics Comprehensive Guidance

15 2014 LOA PBL Page 15 2012 2013 Endorsement of Next Generation PBL Strategies “A recently completed study by ASD(L&MR) provided compelling evidence that properly constructed and executed performance- based product support strategies (commonly referred to as PBLs) deliver best-value weapon system support.” “The PM shall employ effective Performance-Based Life-Cycle Product Support (PBL) planning, development, implementation, and management. Performance- Based Life-Cycle Product Support represents the latest evolution of Performance- Based Logistics.” Better Buying Power 2.0 Achieving Greater Efficiency and Productivity in Defense Spending AT&L 24 Apr 2013 “The Department will broadly implement effective PBL strategies. PBL’s success, however, is dependent on ensuring the workforce has the expertise and support to properly develop and implement PBL arrangements.”

16 2014 LOA PBL Page 16 2012 2013 Endorsement of Next Generation PBL Strategies “A recently completed study by ASD(L&MR) provided compelling evidence that properly constructed and executed performance- based product support strategies (commonly referred to as PBLs) deliver best-value weapon system support.” “The PM shall employ effective Performance-Based Life-Cycle Product Support (PBL) planning, development, implementation, and management. Performance- Based Life-Cycle Product Support represents the latest evolution of Performance- Based Logistics.” “CAEs, PEOs, and PMs will emphasize through appropriate communication vehicles the importance of pursuing performance based product support strategies.” “The Department will broadly implement effective PBL strategies. PBL’s success, however, is dependent on ensuring the workforce has the expertise and support to properly develop and implement PBL arrangements.”

17 2014 LOA PBL Page 17 May “PBL has been the preferred sustainment strategy since the 2001 Quadrennial Defense Review.” “The policies governing these strategies have gone through several iterations since 2001, but the intent has remained the same...” “INCREASE THE USE OF PBL” September ASD(L&MR) “Recent studies point to additional opportunity to be realized through more broadly applying properly structured and executed PBL arrangements.” “When properly established and effectively executed, PBL is an effective way to balance cost and performance regardless of whether industry or the government is providing the logistics service. If industry is the provider, PBL also provides explicit productivity incentives and ensures the best value for the DoD, particularly for service contracts such as maintenance and support contracts. We believe there is opportunity for more progress in expanding the use of PBL, and it will be receiving additional emphasis and management attention going forward.” PBL G UIDEBOOK

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21 2014 LOA PBL Page 21 CAEs will provide a summary of their PBL implementation efforts to the Business Senior Integration Group (B-SIG) on an annual basis. Continue to provide sustainment quad charts for DAB and DAE summary reviews. Ensure PMs list specific PBL arrangements.

22 2014 LOA PBL Page 22 The Product Support Quad Chart is a recent addition to formal program review process The Chart are required for Defense Acquisition Board reviews for major programs The four reportable quadrants are: – –Product Support Strategy – –Sustainment Schedule – –Metrics Data – –O&S Data

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25 2014 LOA PBL Page 25 Contract Scope Level 2 Level 3 Delivery Speed Operational Availability Material Availability Logistics Chain Services Whole System Availability Level 1 Distribution Performance Supply Chain Services

26 2014 LOA PBL Page 26 Contract Scope Performance Outcomes… Delivery Speed Distribution Performance Supply Chain Services Level 1

27 2014 LOA PBL Page 27 Situation prior to PBL contract – –Supply Availability 81% – –Aircraft tires treated as commodity, bought in bulk, stored until needed Large on-hand 365 day inventory (wholesale and retail) Use of organic (DoD) distribution system; delivery times as long as 60 days May or may not have right mix of tires Supply Chain Services

28 2014 LOA PBL Page 28 Navy awarded a $260M PBL contract in 2001 to supply Naval Aircraft Tires – –5 year Fixed Price base with two 5 year option periods Contractor role: Supply Chain Management – –Demand forecasting, order fulfillment – –Warehousing, inventory Contractual Goals – –95% on-time fill rate – –Delivery: 2-day CONUS; 4-Day OCONUS Supply Chain Services

29 2014 LOA PBL Page 29 Contractor actions – –Contractors own the entire wholesale/retail tire inventory – –Sub-contract let for warehouse services – –Modeled several warehouse configurations to balance transportation costs against on-time delivery Selected 2 warehouse sites: Charlotte NC and Sacramento CA – –Distribution One for international shipments One primarily for for CONUS shipments FEDEX supplements Supply Chain Services

30 2014 LOA PBL Page 30 Results – –Supply availability 98% over contract term – –Deliveries average 32.5 hours CONUS & 58.25 hours OCONUS – –Reduced warehouse inventory level from 365 days to 90 days – –Virtually eliminated retail inventories (4769 reduced to 1626) – –On track to a projected $48M 15-year savings Learning Point: Good business opportunities even in lower level PBLs Supply Chain Services

31 2014 LOA PBL Page 31 Contract Scope Delivery Speed Material Availability Logistics Chain Services Distribution Performance Supply Chain Services Performance Outcomes… Level 2 Level 3Level 1

32 2014 LOA PBL Page 32 Situation prior to PBL contract – –Supply Availability 65% – –APUs were aging; support costs escalating Reliability and Availability declining; no funding to modernize Contractual Goals – –Supply and delivery response time: 90% on-time – –Reliability guarantees ranging from 25% to 300% improvement

33 2014 LOA PBL Page 33 Navy awarded a $189M 10 Yr PBL contract – –Subsequently expanded to $500M covering APUs across 6 platforms – –FAR Part 12 (commercial) Fixed Price per flight hour Contractor role – –Total system performance (availability and reliability) – –Supply chain management, configuration management, tech insertion

34 2014 LOA PBL Page 34 Contractor actions – –Sub-contract for Supply Chain Management – –Partnered with Fleet Readiness Center – East (Naval Depot (NADEP) Cherry Point) NADEP Cherry Point a ‘subcontractor’ to Prime Contractor – –Cherry Point does depot overhaul. – –Contractor ensures they have parts and technical support (on-site)

35 2014 LOA PBL Page 35 Results – –Supply availability 97% over contract term – –25% inventory reduction – –Reliability improvements up to 300% – –Gainsharing provision when reliability improvements > 25% – –On track to a projected $70M savings Learning Point: Public-Private Partnerships Work!

36 2014 LOA PBL Page 36 Contract Scope Delivery Speed Operational Availability Material Availability Logistics Chain Services Whole System Availability Distribution Performance Supply Chain Services Performance Outcomes… Level 2 Level 3Level 1

37 2014 LOA PBL Page 37 U.S. Army awarded a 4-year (1 base year, 3 option years) $55M Fixed Price PBL contract – – Contingency support is CPFF 3 Metrics: 3% positive (meet/exceed metrics) and 3% negative (do not meet metrics) incentive structure – –System Status Readiness: 92% target – –Mission Capable (MICAP) deliveries: 24 hour CONUS; 96 hours OCONUS – –Repair TAT: 5 day average – on site repair; 45 day average – vendor repair

38 2014 LOA PBL Page 38 Contractor role – –Supply: manage wholesale spares inventory – –Maintenance: ICS Depot Level maintenance with a plan to transition to a Partnership with an Army Depot – –Sustaining Engineering, Training, Technical Data, Configuration Management, Obsolescence Management

39 2014 LOA PBL Page 39 PBL Contract Results – –Successful System Status Readiness every quarter since contract award – –MICAPs: No launcher has been down for 24 hours due to PBL components since contract awarded – –Repair TAT has been 2 days (vs. 5 day goal) for on-site repair and 34 days (vs. 45 day goal) for vendor repair – –Cost savings predictions are $400M+ over contract term Learning Point: OEMs can deliver system-level performance!

40 2014 LOA PBL Page 40 SingleMultipleAll System Level Single element for an entire system Multiple elements for entire system All elements for entire system Sub-System Level Single element for a single sub-system Multiple elements for sub-system All elements for sub-system Component Level Single element for a single component Multiple elements for a single component All elements for a single component PBL can be implemented at any “Level” of end item… PBL can be implemented at any “Level” of end item… EXAMPLE: Aircraft Tires EXAMPLE: Auxiliary Power Unit EXAMPLE: F117 Aircraft

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42 2014 LOA PBL Page 42 PBL contracts will be different than “traditional” sustainment contracts PBL metrics are specific to outcome needs Outcomes can be achieved by properly assessing the IPS areas, and aligning the range of the scope with desired outcomes and contract metrics

43 2014 LOA PBL Page 43 (Through 2009)

44 2014 LOA PBL Page 44 Performance Based Lifecycle Product Support “The term “product support” means the package of support functions required to field and maintain the readiness and operational capability of major weapon systems, subsystems, and components, including all functions related to weapon system readiness.” Title 10, USC 2337 defines “product support”

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46 2014 LOA PBL Page 46 575 pages

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48 2014 LOA PBL Page 48 99%+ of all PBL contracts include Supply Chain Management (including PHS&T) – –Availability of spares, components, or subsystems Next highest included element is Maintenance, Repair, & Overhaul – –A critical part of the DoD/Defense Supply Chain (primary source of inventory replenishment)

49 2014 LOA PBL Page 49 SingleMultipleAll System Level Single element for an entire system Multiple elements for entire system All elements for entire system Sub-System Level Single element for a single sub-system Multiple elements for sub-system All elements for sub-system Component Level Single element for a single component Multiple elements for a single component All elements for a single component Integrated Product Support Elements

50 2014 LOA PBL Page 50 Component Subsystem Component Subsystem SYSTEM Long-term PBL strategy

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52 2014 LOA PBL Page 52 PBL: Simple in concept; more complex in application. The solution varies depending on: ­ ­ the Level of implementation (Component, Subsystem, or System/Platform) ­ ­ the scope of implementation ­ ­The 12 Integrated Product Support (IPS) Elements ­ ­ the Outcome Metrics ­ ­ the Life Cycle Phase of the objective system ­ ­Early (immature data), Later (mature data)? ­ ­ the constraints that prescribe how maintenance workload is allocated and performed   Title 10 US Code, Military Department policies

53 2014 LOA PBL Page 53 REPAIRS SPARES -Availability -Reliability -Response times -Supply chain -Maintenance and repairs - Smaller Footprint …at an affordable cost Traditional Strategy (Non-PBL) PBL Strategy SUPPLIES Repairs Spares PHS&T

54 2014 LOA PBL Page 54 Traditional Strategy REPAIRS SPARES SUPPLIES “Bottom-Up”

55 2014 LOA PBL Page 55 The historic DoD approach Non-integrated, stove-piped support Does not enable the critical inter-relationships across the product support elements o A negative action in Supply Chain Management (e.g., poor demand forecasting) has significant impacts on maintenance, transportation, etc.) o Sub-optimizes within stovepipes The PM “hopes” that the sum total of support will meet the warfighter readiness requirements o Reality says it seldom does... o... nor is it affordable It is a “Win-Lose” construct o The worse performance gets, the more customer pays, a portion of which goes to industry. “Bottom-Up”

56 2014 LOA PBL Page 56 Is reactive, not proactive –Its goal is to repair or replace things that break, not prevent them from breaking. Lacks an inherent improvement component –Factors that increase failure (decreasing reliability, obsolescence) must be initiated and funded externally; They are not inherently initiated. –Over time, performance declines and cost rises. “Bottom-Up”

57 2014 LOA PBL Page 57 Contractor Logistics Support (CLS) –The traditional historic CLS approach was and is transactional. –By design beginning in a program’s overall Acquisition Strategy, the contractor provides lifetime support. –The contractor will be responsible to: –Develop the support –Acquire maintenance capability –Provide the necessary support resources –PBL is not CLS! “Bottom-Up”

58 2014 LOA PBL Page 58 Assumes all risk for: o right parts o right repairs o right time o right quantities Forecast requirements Specify buy quantities Pay for each spare part and repair on a Unit Price basis Forecast requirements Specify buy quantities Pay for each spare part and repair on a Unit Price basis The more I sell, the more profit I make! The more I sell, the more profit I make! Military Customer Responsibilities “Bottom-Up”

59 2014 LOA PBL Page 59 0 0 0 0 0 0 0 0 “In transactional sustainment arrangements, the incentives are neutral at best and more likely tilted against the military Services and Defense Logistics Agency. Compounding this problem is that essentially all financial and performance risks reside with the Services.” “Bottom-Up” November 30, 2011

60 2014 LOA PBL Page 60 (The PBL system outcome view) System-level availability focus Outcome-based Natural “Win-Win” construct is mutually beneficial to customer and contractor ­Needs of customer are met ­Needs of contractor (to include profit opportunity) Continuous Process Improvement is inherent

61 2014 LOA PBL Page 61 The less I use, the more profit I make! The less I use, the more profit I make! Specify Performance Outcomes Forecast requirements Specify buy quantities Pay for each on a Unit Price basis Assume all risk for: right parts right repairs right time right quantities Forecast requirements Specify buy quantities Pay for each on a Unit Price basis Assume all risk for: right parts right repairs right time right quantities Improve Reliability Improve Repair processes Motivated to: Military Customer Responsibilities

62 2014 LOA PBL Page 62 Project “Proof Point” November 30, 2011 Sustaining weapon systems, subsystems, and major components via Performance Based Logistics arrangements deliver improved readiness at reduced life cycle costs when compared to traditional, transactional sustainment arrangements.

63 2014 LOA PBL Page 63 1,246 pages Defense Acquisition Guidebook –“The essence of PBL is buying performance outcomes…versus individual parts and repair actions” –“This is accomplished through a business relationship that is structured to meet the warfighter's requirements” –...(while) “continually improving the cost-effectiveness of logistics products and services”

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65 2014 LOA PBL Page 65 COST AVAILABILITYRELIABILITY Time

66 2014 LOA PBL Page 66 COST AVAILABILITY RELIABILITY Fixed Price Contract Time Who benefits from PBL?

67 2014 LOA PBL Page 67 The contractor Opportunity to improve product reliability Opportunity to improve process efficiency Opportunity to decrease costs Opportunity to increase profit The customer Increased availability of system Increased reliability of: Systems Processes Decreased Program costs Confidence in achieving desired outcomes Other programs Freed-up capacity Lessons learned

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69 2014 LOA PBL Page 69 Characteristics of a “PBL” contract: – –Incentivizes contractor achievement of specified ‘outcomes’ – –Contractor is financially at risk for performance – –Contractor receives positive financial (and other) benefits for positive performance – –Contractor suffers tangible negative consequences for non- performance – –Contractor has broad flexibility in ‘how’ to achieve the ‘what’ specified by the contract – –Contractor either manages, performs, or has strong agreements in place over those support functions leading to achievement of the specified outcomes

70 2014 LOA PBL Page 70 CPFF Cost Plus Fixed Fee CPAF Cost Plus Award Fee CPIF Cost Plus Incentive Fee FPI Fixed Price Incentive Fixed Price Award Fee Firm Fixed Price FPAF FFP Early PBL Robust PBL Not PBL

71 2014 LOA PBL Page 71 –Firm Fixed Price –Fixed Price Incentive –Fixed Price Award Fee –Cost Plus Incentive Fee –Cost Plus Award Fee –Cost Plus Fixed Fee High Low ContractorRisk ContractorProfitOpportunity Low

72 2014 LOA PBL Page 72 DoD Lifecycle Management Framework IOC Technology Maturation & Risk Reduction Production & Deployment Operations & Support FOC Materiel Solution Analysis Program Initiation B A C Engineering and Manufacturing Development

73 2014 LOA PBL Page 73 } Systems Acquisition Pre-Planning Cost Plus (CPAF or CPIF) Fixed Price; or CP with Cost Targets Collect Supply Data Collect Repair Data Compile Cost Baseline Apply Initial Metrics Apply Initial Incentives Assess Results Finalize Metrics Final Incentives Assess Results }} Acquisition Milestones Transition to FP when pricing risk is acceptably low IOC Technology Maturation & Risk Reduction Production & Deployment Operations & Support FRP Decision Review FOC Materiel Solution Analysis Materiel Development Decision Program Initiation BA C Engineering and Manufacturing Development Post-CDR Assessment Post PDR Assessment Forecast Supply Data Forecast Repair Data Forecast Cost Baseline Develop Initial Metrics Develop Initial Incentives Sustainment

74 2014 LOA PBL Page 74 Component Subsystem Component Subsystem SYSTEM Long-term PBL strategy MSA TM & RR E&MD P&D O&S A B C IOC FOC CPFF CPAF CPIF FPAF CPIF FPIF FFP FPn

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76 2014 LOA PBL Page 76 Component Subsystem Component Subsystem SYSTEM Long-term PBL strategy MSA TM & RR E&MD P&D O&S A B C IOC FOC CPFF CPAF CPIF FPAF CPIF FPIF FFP FPn

77 2014 LOA PBL Page 77 Product Support Arrangements (PSAs) are implemented by Product Support Agreements “Product Support Arrangement” is a generic term that includes a wide range of relationships between organizations associated with product support. https://acc.dau.mil/CommunityBrowser.aspx?id=454907

78 2014 LOA PBL Page 78 The Contract MOA – Memorandum of Agreement – –Parties to the agreement are dependent on actions by the other party MOU – Memorandum of Understanding – –Parties to the agreement are not dependent upon actions by the other party CSA – Commercial Services Agreement – –Agreement between a Contractor and DoD entity that provides for a Contractor to buy DoD goods and services SLA – Service Level Agreement – –Used in commercial processes more than in DoD systems; primarily used in software-related relationships

79 2014 LOA PBL Page 79 Even beyond the contract, the Product Support Agreements are critical elements in implementing PBL ­ ­ Define expectations of Force Provider ­ ­ Define roles and responsibilities ­ ­ Define range of support requirements ­ ­ Basis for negotiating support contracts ­ ­ Ensure accountability in meeting Warfighter requirements Getting them right is critical! Clarify Support Expectations!

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81 2014 LOA PBL Page 81 Warfighter Product Support Manager Product Support Integrator Product Support Providers  Program Manager

82 2014 LOA PBL Page 82 PM PSI PSPs Inherently Government Could be Government or Contractor

83 2014 LOA PBL Page 83 Top-level Government accountability and Product Support management role Retains Product Support Integrator roleRetains Product Support Integrator role Recognizes possibility of multiple PSIsRecognizes possibility of multiple PSIs Retains Product Support Integrator roleRetains Product Support Integrator role Recognizes possibility of multiple PSIsRecognizes possibility of multiple PSIs

84 2014 LOA PBL Page 84 Any supplier, public or private, that provides products or services in the sustainment of a DoD system Supply/ Warehousing Depot Repair Contract Support Common Commodities Transportation Maintenance

85 2014 LOA PBL Page 85 “The PSI is an entity performing as a formally bound agent (e.g., contract, MOA, MOU) charged with integrating all sources of support, public and private, defined within the scope of the Performance-Based Logistics agreements to achieve the documented outcomes” (DoD Product Support Guide) “An entity within the Federal Government or outside the Federal Government charged with integrating all sources of product support, both private and public, defined within the scope of a product support arrangement” (2010 NDAA, Section 805) PSIs are RESPONSIBLE and ACCOUNTABLE for delivering the designated PERFORMANCE OUTCOMES to the Warfighter customer PSI

86 2014 LOA PBL Page 86 Industry –OEM usually default choice Has knowledge of system; technical data, proprietary rights & licenses; unique parts; maintenance expertise Example: LM for F-117 aircraft – 3PL (Third Party Logistics Provider) Not OEM, but has required integration/other expertise Examples: –LM contract with DLA as broad scope parts supplier –LM partner with Michelin for Aircraft tires contract Government (Organic) –Program Management Office, Depot, Inventory Control Point Growing impetus for Government to assume PSI role Example: Navy Subsystem/Component PBLs

87 2014 LOA PBL Page 87 Title 10 USC 2337: “The Secretary of Defense shall require that each major weapon system be supported by a product support manager” “... ensure achievement of desired product support outcomes through development and implementation of appropriate product support arrangements” “...use appropriate predictive analysis and modeling tools that can improve material availability and reliability, increase operational availability rates, and reduce operation and sustainment costs” PSM

88 2014 LOA PBL Page 88 PM Supply/DLA Contractor Support Transportation Warfighter Outcomes Product Support Agreement Contract Product Support Providers Depot Repair Delivers Outcomes Contracts or Performance Based Agreements PSM Product Support Integrator Program Office

89 2014 LOA PBL Page 89 Logistics & Sustainment

90 2014 LOA PBL Page 90 In major weapons systems, long-term depot-level maintenance is going to be a major factor Government maintenance depots and commercial maintenance facilities may be able to perform the system’s depot-level tasks The Government PM, PSM, and the support contractor will play a role in determining where this kind of activity will occur

91 2014 LOA PBL Page 91 PBL gives significant top-level integration responsibility to the Product Support Integrator The PSI has great latitude in determining how the support will be provided to achieve the outcomes

92 2014 LOA PBL Page 92 HOWEVER, DoD is governed by statutes, policy, and formal guidance that significantly bound where, and by whom workloads can be performed

93 2014 LOA PBL Page 93 Statutory Requirements Title10 DoD Policy Best Value WorkloadAllocationAgreements Statutory Requirements Title10 DoD Policy Best Value What the program WANTS to do What the Program MUST do Planning Process Sequence 1 2 3 4 WorkloadAllocationAgreements

94 2014 LOA PBL Page 94 CONTRACTOR ORGANIC Organic Support Contractor Support Transaction Based Support Performance Based Support Best Mix Determined by: Title 10 US Code Partnering Opportunities Service Policies OSD/Service Guidance Existing Infrastructures Best Competencies & Value 1. Best mix of Public/Privatecapabilities Public/Privatecapabilities 2. Maximize use of Performance Based strategies 2. Maximize use of Performance Based strategies Determined by: DoD 5000-series Policy DoD Guidance Service Policies & Guidance Business Case Analysis Need to Optimize Performance

95 2014 LOA PBL Page 95 Public-private partnerships for depot-level maintenance shall be employed whenever cost-effective in providing improved support to the warfighter, and to maximize the utilization of the government’s facilities, equipment, and personnel at DoD depot-level maintenance activities. Performance-Based Logistics implementation strategies shall consider public-private partnerships...

96 2014 LOA PBL Page 96 DLM Definition of Depot-Level Maintenance & Repair Reporting Commercial or Industrial type functions: Required studies and reports before conversion to contractor performance Core Core Logistics Capabilities 50/50 Limitations on the performance of Depot-Level maintenance of material $3M Rule Requirements of competition for contracts to perform workloads previously performed by Depot- Level activities of the DoD Procedures Use of competitive procedures formerly performed at certain military installations Authority DLM – Authority to compete for other Federal Agency workload Lease of Excess Material2471 Persons outside the DoD: Lease of excess Depot- level equipment and facilities End Strength Management of Depot-Level employees Public-Private Partnering Centers of Industrial and Technical Excellence (CITEs) / Designation of PPPs BRAC Base Realignment and Closures WCF Working Capital Funds

97 2014 LOA PBL Page 97 DoD must maintain a core logistics capability that is Government-owned and Government-operated – –To ensure effective and timely response to a mobilization, national defense contingency situations, and other emergency requirements

98 2014 LOA PBL Page 98 At least 50% of the money allocated annually for depot-level maintenance and repair must be performed by a Government organic entity – –no more than 50% can be “contracted out” Computed annually at the Military Department level – it is not weapon system specific – –Calculated based on FUNDS, not MANHOURS

99 2014 LOA PBL Page 99 Authorizes the Designation of Depot Maintenance activities within the Military Departments “as a Center of Industrial and Technical Excellence (CITE) in the recognized core competencies of the designee” – –also authorizes partnering Section 2474 CITEs & Partnerships

100 2014 LOA PBL Page 100 Workshare Direct Sales

101 2014 LOA PBL Page 101 Government Buying Activity Contractor USG Depot$$$ $$$ Agreement Workshare (10 USC 2474) Each is paid separately Contractor and Depot establish a partnering agreement May engage in a “teaming” arrangement Contract Government Buying Activity Contractor USG Depot $$$ $$$ “Subcontract” (CSA) Direct Sales (10 USC 2563) Contractor ‘subcontracts’ with Depot USG Depot does overhaul o Compliance with Core, 50-50 o Paid by Contractor Contractor is ‘accountable’ for end item in PBL contract Depot accountable via ‘Hold Harmless’ Contract ‘Hold Harmless” not applicable unless inserted in partnering agreement

102 2014 LOA PBL Page 102 “Defense acquisition policy requires PMs to develop and implement performance-based logistics (PBL) strategies that include the best use of public and private- sector capabilities through government- industry partnering initiatives.”

103 2014 LOA PBL Page 103 The Guidebook (Section 3) lists case studies: Sniper Pod Warner Robins ALC / Lockheed Martin F404 Engine Fleet Readiness Center / GE M1 Abrams Anniston Army Depot / GD Land-Honeywell F-35 Lightning II Fighter USAF/USN/USMC / Lockheed Martin – Pratt & Whitne y Rock Island Arsenal Rock Island Arsenal / BAE Systems HMMWV DLA/Army TACOM / AM General

104 2014 LOA PBL Page 104 Logistics & Sustainment

105 2014 LOA PBL Page 105 “A gap identified by DoD through the course of the OSD-charted PBL Study (Proof Point) was the need for standardized repeatable processes to facilitate effective performance-based Product Support Arrangements.”

106 2014 LOA PBL Page 106 The “12-Step Model” stages ­Foundation ­Planning ­Execution ­Oversight PBL Guidebook: Figure 4. the DoD Product Support Strategy Process Model

107 2014 LOA PBL Page 107 It is not intended to be a rigid one-size-fits-all process chart It can be used as a checklist of things to consider It is intentionally flexible, to be tailored to the needs of the specific program The “steps” do not need to be performed sequentially

108 2014 LOA PBL Page 108 “The PM/PSM should coordinate with Warfighter representatives to ensure product support requirements are identified/ documented and threshold values are established/updated.” - PBL Guidebook 2.1.3

109 2014 LOA PBL Page 109 JROC requires a sustainment KPP JROC – Joint Requirements Oversight Council KPP – Key Performance Parameter A M - Materiel Availability The Materiel Availability KPP is a de facto requirement. Of the four mandatory KPPs, there is one that specifically addresses sustainment: A M PBL Guidebook: Figure 5: Relationship between AO and AM Operational Availability (A O ) can apply all the way down to the LRU level. A M is a fleet-level metric.

110 2014 LOA PBL Page 110 A collaboration of key functional areas o Lifecycle Logistics o Engineering o Finance o Contracting o Legal o Others, as deemed relevant by PSM Other consultants could also be used Can include Contractor and Government personnel

111 2014 LOA PBL Page 111 PBL Guidebook - Figure 6: Product Support Management IPT

112 2014 LOA PBL Page 112 Assess the “as-is” state of the system For a new system, engineering and supportability data must be developed. For active, fielded “legacy” systems, inventory of assets, assessment of services, and understand current process and availability metrics is key. ­MTBF, RTAT, CWT, Fill Rates, OTD, NMCS, NMCM, etc.

113 2014 LOA PBL Page 113 Establish outcome goals In a PBL Arrangement in particularly, establishing outcome-base metrics is key Establish at what level(s) within the system should be addressed (component, subsystem, system)

114 2014 LOA PBL Page 114 May include trade-off analyses, cost:benefit analysis, product support analysis, analysis of alternatives, economic analysis, etc. The intent is to identify a best value support solution, balancing desired outcomes with associated costs A best practice is to ensure consideration of Public-Private Partnerships

115 2014 LOA PBL Page 115 The analysis of product support alternatives includes both financial and non-financial considerations. Programs may assign weights relative to cost, benefits, and risk with product support alternatives ­The weighting of these three criteria is critical to the decision-making process\ ­A PBL Leading Practice is to use modeling and simulation to give insight

116 2014 LOA PBL Page 116 The PSMIPT will engage in structuring an appropriate support strategy Assess product support work scope relative to ­Product components ­Product Support Elements Consider the scope and kinds of relevant product support metrics to be used Develop a performance-based contracting strategy and plan

117 2014 LOA PBL Page 117 Consider the complexity of the program being supported, and the complexity of the supportability itself If the use of the PSI concept is in order, select from relevant ones. Typical candidates include ­The system’s Prime Contractor/OEM ­The system’s own Logistics organization ­A third-party logistics (3PL) provider from the private sector ­An organic agency (e.g., DLA, Depot, ICP, et al)

118 2014 LOA PBL Page 118 Define the scope of support Communicate with all stakeholders to generate a mutual understanding of support requirements. Document the warfighter and stakeholder support requirements Clearly identify the specific items to be covered Align PSP requirements to current and future support posture Define configuration control Begin DMS/MS planning, to include obsolescence Plan for lifecycle cost considerations Ensure compliance with statutory requirements (i.e., Title 10 USC 2464, 2466, etc.)

119 2014 LOA PBL Page 119 PBL Guidebook Figure 21 Alternatives to Fund a PBL Contract Effective PBL arrangements require active PSM involvement in establishing long-term financial planning A best practice is to for the PSM to maintain continual interaction with a Program’s Financial Officer

120 2014 LOA PBL Page 120 Effective Product Support Arrangements include: ­Objective and measurable outcome- focused product support work description  Outcomes-focused contracting strategy  Contract type  Contract length  Pricing strategies ­Outcomes-focused metrics, few in number ­Incentives to achieve and improve outcome objectives ­Consideration given to lifecycle cost reductions ­Shared risks and rewards with Government and commercial PSIs and PSPs

121 2014 LOA PBL Page 121 Tracking performance is integral to a PBL arrangement Best practices include: ­Operating with a Quality Assurance Surveillance Plan (QASP) ­Routine reviews ­Continual performance monitoring ­Close collaboration with stakeholders ­Continual alignment with evolving warfighter requirements

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123 2014 LOA PBL Page 123 Logistics & Sustainment

124 2014 LOA PBL Page 124 PBL has been in the DoD inventory for over 15 years There are factors that enhance PBL’s probability of success There are factors that inhibit PBL

125 2014 LOA PBL Page 125 Defense Acquisition Research Journal “Scholarly peer-reviewed journal published by DAU. All submissions receive a blind review to ensure impartial evaluation.” Research asked the question, “What factors impact PBL?” 1.Funding 2.Statutory-Regulatory Requirements 3.Cultural Paradigms 4.Existing Infrastructure or Organization 5.Tech Data Rights 6.PBL Awareness and Training 7.Incentives/Awards 8.Supply Chain Management 9.Strategic Alliances/Partnerships 10.Performance Based Contracting 11.Performance Metrics 12.TLCSM 13.Adoption of COTS 14.Total Ownership Costs

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128 2014 LOA PBL Page 128 Barriers Enablers CULTURE WARFIGHTER

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130 2014 LOA PBL Page 130 Logistics & Sustainment

131 2014 LOA PBL Page 131 Defense Acquisition PBL resource

132 2014 LOA PBL Page 132 Defense Acquisition PBL resource http://www.dau.mil Online Continuous Learning Modules

133 2014 LOA PBL Page 133 Defense Acquisition PBL resource Online Continuous Learning Modules

134 2014 LOA PBL Page 134 Defense Acquisition resource PBL Community of Practice Improving DoD Materiel Availability and Reliability While Reducing O&S Costs and Mean Down Time

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