1. PBL Support Alternatives
Most DoD support workloads are performed by a
combination of DoD and contractor providers
More DoD
More Commercial
DoD
Contractor Support
CONTRACTOR
DoD Support
MIX
Traditional
DoD Support
Environment
Public/Private
Partnering
Opportunities
Contractor
Responsible
For Majority
of Support
The use of PBL allows us to construct a sustainment strategy that can fall anywhere along this continuum…from wholly DoD to wholly Contractor, with an unlimited number of “mixed” support in-between.
Remember…PBL is NOT Outsourcing.
Challenge: Find right “mix” to support the system

2. Workload Allocation Planning
Objective is to identify BEST support alternatives
Comply with law (USC Title 10)
Comply with DoD policy (Public-Private Partnering)
Performance
Capability
Skills, Infrastructure
Cost
Flexibility
An effective support plan considers “best competencies” and partnering opportunities
Best
Value
Said another way, the objective is to consider and identify the BEST support alternative, considering LAW, POLICY and BEST VALUE, and then structure the most appropriate and effective agreement to support your strategy.
BEST VALUE is the expected outcome that, in the Department’s consideration, provides the greatest overall benefit in response to requirements. The assessments will include cost per output, performance measures, capitalization/asset ownership, size of footprint, reliability growth, life cycle costs, Diminishing Manufacturing Sources (DMS) management, obsolescence/obsolescence mitigation plan, technology insertion, and risk management. The value added in terms of benefits and outcomes of all services and activities will be identified. (source: PBL Product Support Guide)
Where will the work be done? Who will do it?

3. Support Workload Allocation
Statutory
Requirements
Title 10
DoD Policy
Best Value
What you WANT
to do
What you HAVE
to do
Structure
Agreements
The main statutory sections that will impact workload allocation planning are found in Title 10 USC, and are identified here. We will be covering each of these in detail and show how they can exert a strong influence on your planning and execution.
Planning Process
Statutory
Structure
Requirements
DoD Policy
Best Value
Agreements
Title 10

4. Workload Allocation Restrictions & Opportunities
Workload Allocation Planning
US Code
Title 10
Subtitle A
Part IV
Chapter 146
Section xxxx
Applicable Sections:
2460: Definition of Depot Level Maintenance
2464: CORE Logistics Capability
2466: Depot Level Maintenance Limitations
2469: $3M Rule (Competition)
2474: Centers of Industrial and Technical Excellence
The main statutory sections that will impact workload allocation planning are found in Title 10 USC, and are identified here. We will be covering each of these in detail and show how they can exert a strong influence on your planning and execution.
Workload Allocation Restrictions & Opportunities

5. 2460: Definition of Depot-Level Maintenance and Repair
“Material maintenance or repair requiring overhaul, upgrading, or rebuilding of parts, assemblies, or subassemblies, and the testing and reclamation of equipment, regardless of the source of funds or the location at which the maintenance or repair is performed.”
READ EXCERPT FROM SECTION.
Section 2460 defines the term “depot-level maintenance and repair”, broadly as material maintenance or repair involving:
Overhaul
Rebuilding
Testing
Upgrading
Reclaiming
Maintenance of software
It also includes interim contractor support, contractor logistics support, or any similar contractor support, to the extent that such support is for the performance of services described above.
Each military service manages and operates its own organic depot-level maintenance infrastructure

6. 2460: Definition of Depot-Level Maintenance and Repair cont.
Excludes procurement of major modifications or upgrades
Does not address non-maintenance logistics functions such as:
Technical data
Engineering
Configuration Management
Supply Support
While it is important to understand what 2460 has to say regarding depot-level maintenance and repair, it is equally important to understand what is not included.
Major modifications or upgrades, and nuclear refueling of an aircraft carrier are excluded and this type of work could continue to be performed by private or public sector activities.
More importantly, especially as it relates to PBL, the statute does not include any non-maintenance logistics functions, such as technical data, engineering, Configuration Management or Supply Support. These functions can be carried out by either a commercial or organic activity. There is nothing in 2460 that requires these activities to be performed by an organic entity.

7. 2464: Core Logistics Capabilities
“Performance of workloads necessary to maintain a core logistics capability that is Government owned and operated (including personnel, equipment and facilities).”
“SECDEF…shall assign such facilities sufficient workload to ensure cost efficiency and technical competence in peacetime while preserving surge capacity and reconstitution capabilities…”
Services have flexibility to define Core workload
Usually by weapon system or major commodity group
Services determine when Core requirement has been met
Bottom line: A portion of CORE workload will always be performed by government personnel
The amount, if any, that can be contracted out will depend on Service assessments
READ EXCERPT FROM SECTION.
While 2464 directs the establishment of the CORE LOGISTICS CAPABILITY, it does not require that a specific weapon system be maintained in Government Owned, Government Operated depot. The CORE LOGISTICS WORKLOAD must be the equal to the minimum required to ensure the repair capability exists and satisfies the requirement. Anything above the minimum workload CAN be maintained elsewhere.
As an example, let’s look at the T-700 engine workload.
The T-700 engine workload is performed at Corpus Christi Army Depot (CCAD).
The T-700 engine is common among the Army, Navy and commercial sector.
The Army uses the T700-GE-7xx series engines in the H-60 and AH-64 helicopters.
The Navy uses T700-GE-4xx series engines in the H-60, AH-1Wand UH-1Y helicopters.
The T-700 commercial designation is the CT7-x series of turbo shaft and turbo prop engines.
The number of engines repaired at CCAD may be enough to satisfy the DoD requirement for engine repair. There is no need for the Navy to develop its own internal capability, and workload over and above the minimum required to support CORE LOGISTICS WORKLOAD may be repaired commercially.
Example: 60% of Army T700 engine workload accomplished organically at an Army Depot may be sufficient to satisfy CORE workload for all Army T700 engines

8. 2464: Core Logistics Capabilities cont.
Core Logistics Capability
Maintain and repair systems identified by SECDEF as necessary to fulfill the strategic and contingency plans
Must be in place NLT 4 years after Initial Operational Capability
Exceptions: Commercial Items, Special Access Programs, Nuclear Aircraft Carriers
Core Logistics Workload
”Depot workload needed to maintain DoD Core Logistics Capability”
Sufficient workload to ensure cost efficiency and technical competence in peacetime
Preserve surge capacity and reconstitution capabilities necessary to support DoD strategic and contingency plans
Section 2464 establishes the requirement for the existence of a CORE LOGISTICS CAPABILITY.
There are three major definitions that are critical to understanding the context of the other applicable sections.
ESSENTIAL SYSTEM: systems identified by SECDEF as necessary to fulfill the strategic and contingency plans of the JCS
CORE LOGISTICS CAPABILITY: the requirement for DoD to maintain and repair ESSENTIAL SYSTEMS. The capability must be established NLT 4years after Initial Operational Capability.
CORE LOGISTICS WORKLOAD: requires the organic depot to maintain CORE LOGISTICS CAPABILITY. This is necessary to ensure cost efficiency and a ready technical competence within DoD.
DoD identifies both core logistics capabilities and the workload required to maintain those capabilities

9. 2466: Limitations on Performance of Depot-Level Maintenance
“Not more than 50 percent of the funds in a fiscal year to a military department or a Defense Agency for depot-level maintenance and repair workload may be used to contract for the performance by non-Federal Government personnel”
PBL Workload Allocation Impact:
Limits funds spent on depot-level maintenance and repair by non-Federal Government employees to 50%
By fiscal year
Calculated at Service or military agency (not program) level
Applies to depot maintenance, not other ILS elements
READ EXCERPT FROM SECTION.
Section 2466, commonly referred to as the “50/50 rule”, sets limits to the amount of funds spent on depot-level maintenance and repair. It caps the amount of dollars for workload performed by non-Federal Government (e.g., Contractor) employees to 50% of the total annual spending.
The spending limits are computed on a FY basis, and they are calculated at the Service or military agency level. This amount applies to workload as previously defined in Section 2460, i.e., touch labor only for those activities specifically related to depot-level maintenance and repair.
The use of depot-level maintenance and repair within the context of a PBL contracting strategy must be concerned with the implications of this statute.

10. 2474: Centers of Industrial and Technical Excellence (CITE)
“The Secretary concerned, or the Secretary of Defense in the case of a Defense Agency, shall designate each depot-level activity of the military departments and the Defense Agencies…as a Center of Industrial and Technical Excellence in recognized core competencies”
PBL Workload Allocation Impact:
After CITE designation, the Secretary may authorize and encourage Center to enter into public-private cooperative arrangements
Referred to as a '‘Public-Private Partnerships”
Excluded from Service’s (10 USC 2466) calculation if:
Depot designated as a CITE
Work pursuant to partnership, AND
Is performed at depot by industry personnel
READ EXCERPT FROM SECTION.
Section 2474 requires the Secretary of Defense designate organic depot activity as a Center of Industrial and Technical Excellence. The designation is based on the activity’s core competency. The designation as a CITE can be based on specific equipment or a specific weapon system.
Some examples:
Tobyhanna Army Depot: CITE for Electronics, Avionics and Missile Guidance and Control Systems
Naval Aviation Depot Jacksonville: CITE for Electro-optical and infra-red systems
Portsmouth, Norfolk, Puget Sound, and Pearl Harbor Naval Shipyards: CITE for the maintenance, repair, modernization, inactivation, disposal and emergency repair of ships, systems and components.
Odgen Air Logistics Center (OO-ALC): CITE for Composites; Landing Gear, Wheels and Brakes; Instrument and Display Indicators; Photographic Equipment.
Red River Army Depot: CITE for Tactical Wheeled Vehicles: Bradley Fighting Vehicles
Section 2474 acts as the impetus to the establishment of Public-Private Partnerships.

11. Depot Partnering: Enabled by Sections 2474 and 2563
Section 2474: Centers of Industrial and Technical Excellence (CITE)
The basic ‘enabling’ statute for public/private depot maintenance partnering
Objectives of statute:
Maximize utilization of CITEs
Reduce CITE cost of ownership
Leverage private sector investments in plant and equipment
Promote undertaking of commercial ventures at a CITE
Foster cooperation between DoD and private industry
PPPs have a number of potential benefits as seen here.
It allows for the Government to make maximum use of underutilized capacity.
It helps to reduce overall costs, and more efficiently manage operations.
It enables private sector investment in plant and equipment recapitalization.
It increases the cooperation between the Services and the private sector.
NOTE: All DoD depots have been designated as CITEs

12. Depot Partnering: Enabled by Sections 2474 and 2563
Section 2563: Sales of Articles or Services
The Secretary of Defense may sell … to a person outside the Department of Defense articles and services…that are not available from any United States commercial source.
Can include articles manufactured or services performed by working-capital funded industrial facility
Provides the basis for a Depot activity serving as a sub-contractor to a Commercial “Prime” contractor (i.e., Product Support Integrator)
PBL Context – Organic Accountability: Purchaser (i.e. PSI) agrees to hold Government harmless except in the case of:
Government willful misconduct or gross negligence
Failure of the Government to comply with quality, schedule, or cost performance requirements
READ EXCERPT FROM SECTION.
Section 2563 (formerly Section 2553) allows the Secretary of Defense to sell articles and services not available from any U.S. commercial source to a person outside DoD. This can include articles and services performed by working capital funded facilities, such as organic depots.
Section 2563 serves as the basis for Teaming Agreements.

13. 2469: Requirement for Competition “The $3 Million Rule”
“The Secretary of Defense shall ensure that performance of a depot-level maintenance and repair workload…is not changed to performance by a contractor or by another DoD depot-level activity…”
PBL Workload Allocation Impact:
Competition required if transferring DoD depot workload
That is currently performed at a Depot
Valued at $3M per year or greater [for shared workloads (a portion is contracted out) applies only to that portion currently performed at the depot]
Includes labor and material costs
Applies to both CORE and non-CORE workload
READ EXCERPT FROM SECTION.
Section 2469 deals with the requirement to compete any current organic depot-level repair that exceeds $3M prior to transferring the workload either to another Government depot or a commercial depot.
The $3M includes both the cost of repair (labor) and material, and is applicable to both CORE and non-CORE workload.
The competition requirements vary slightly:
To move it from on organic depot to another, merit-based competition procedures are used.
To move it to a commercial depot, the competition is conducted using competitive procedures and includes the public and private sector.

14. US Code Title 10 Summary
Self-explanatory.

15. Depot Workload Allocation
Service designates
Organic % to maintain
CORE capability
YES
Is the
workload
designated
Core? 1 NO
Does
contract
$$ breach
50/50? 2
YES
Revise % of
DoD Depot workload
NOTE: DoD Depot % could
increase (will not decrease) NO
Does
workload value
exceed
$3M? 3
YES NO
Compete workload
among Depots or
public/private sources
Apply DoD policy
& best value

16. Workload Allocation Planning
Government/Industry Partnering
Public-Private Partnerships (PPP)
Best Practices
Funding Types & Limitations
DoD Policy, as we discussed briefly in the previous Case Study, emphasizes the use of Government-Industry partnering, namely through the development of Public-Private Partnerships. The policy also recommends the use of best practices (mostly drawn from the commercial sector). The types of funding and the associated limitations (single-year vs. multi-year) can also influence how you proceed in workload allocation planning.

17. Public-Private Partnering
DoD Policy: “Sustainment strategies shall include the best use of public and private sector capabilities through government / industry partnering initiatives, in accordance with statutory requirements.” (Source: DoDD , paragraph E1.17, dated 12 May 2003)
Definition: A public-private partnership for depot maintenance is an agreement between an organic depot maintenance activity and one or more private industry or other entities to perform work or utilize facilities and equipment. (Source: JDMAG Report on Partnerships for Depot Level Maintenance, dated July 2004)
One way to effect the workload allocation strategy is to make use of public-private partnering, as was identified in the most recent version of DoD Directive (ref: E1.17 Performance-Based Logistics. PMs shall develop and implement performance-based logistics strategies that optimize total system availability while minimizing cost and logistics footprint. Trade-off decisions involving cost, useful service, and effectiveness shall consider corrosion prevention and mitigation. Sustainment strategies shall include the best use of public and private sector capabilities through government/industry partnering initiatives, in accordance with statutory requirements.)
JDMAG (Joint Depot Maintenance Activities Group), in a thorough report on the use of partnering throughout DoD, defines a PPP as seen here.
The use of PPP can enable Industry to perform depot-level maintenance and repair on CORE systems through their relationship with the DoD depot-level activities.
Enables industry to manage depot-level
maintenance & repair on Core systems

18. Public/Private Competencies
JOINT
Program Management
Transportation
Supply Chain Management
Depot-Level Maintenance
GOVERNMENT
Depot-Level Maintenance
Existing infrastructure
Marginal workloads
O-level Maintenance
Service preference
DoD Transportation System
In-theater
Configuration Control
INDUSTRY
Product Support Integrator
Production/Manufacturing
Depot-Level Maintenance
Partnerships
Non-Core
Contractor Field Teams
Sustaining Engineering
Configuration Management
Tech Data Management
Subcontractor Management
Information Networking
Here is a notional representation of some potential competency alignments based on requirements and expertise. While the Government may want to or be required to maintain various maintenance capabilities, and be responsible for in-theater transportation of materials, there may be an opportunity for Industry to assume responsibility for Sustaining Engineering and Tech Data Management, while acting as the PSI. Jointly, the “team” may be responsible for overall PBL Program Management and Supply Chain Management.
NOTE TO INSTRUCTOR: Depot-level maintenance is cited in all three circles. While the overall “JOINT TEAM” will maintain the responsibility for the d-level maintenance, the actual workloads may be performed by the Government depot using existing tools, equipment and people, and may also repair workloads considered “marginal”, i.e., not profitable in the private sector. Conversely, Industry may be responsible for developing the partnership required, and may want to handle the workload for non-CORE items/workload.

19. Remember: The PSI Integrates System Support
Depot Repair
Contract Support
Supply/DLA
Transportation
Common
Commodities
Risk
O-Level Maintenance
One of the key components of a PBL strategy is the establishment of a Product Support Integrator
Under TLCSM, the PM is responsible for life cycle management, including sustainment
As you can see, this is a very complex and difficult responsibility; there are a range of support sources and support functions, few of which are integrated
The PM office seldom has the resources to handle this broad range of responsibility
Which is why…
Program
Manager
PSI
“The PSI is…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” - Defense Acquisition Guidebook, Para

20. PBL Partnering Opportunities
Contractor/Depot
personnel sharing
workloads
Organic Depot
as Subcontractor
to Industry PSI
Subcontractor
Industry Prime Vendor
(Product Support Integrator)
Subcontractor
Subcontractor
DoD Depot
(Subcontractor)
Contractor utilizing
Depot facilities for
Work sharing

21. PBL Partnering Steps 1 2 3
Service designates “core” capability and workloads (minimum workload level of that must be performed by DoD depots)
Industry PSI and DoD identify potential DoD depot-level maintenance and repair partnering opportunities
PSI negotiates with DoD to identify specific DoD depot(s) as partner(s) for maintenance and repair 4 5
PSI negotiates Performance Based Agreements (contracts) with DoD depot(s)
PSI provides workload oversight in partnership with DoD depot(s)

22. Workload Allocation Planning
WHAT: Logistics Elements
WHO: Product Support Integrators/Providers
After reviewing the statutes and policy, the process can now consider best value, where applicable. The best value should focus on the WHAT, WHO and HOW of sustainment.
WHAT focuses on the logistics elements: WHAT responsibilities do I want to allow the Contractor to assume, and what will/must the Government maintain?
WHO focuses on the activities providing the services: WHO will be responsible for Product Support Integration, and WHO will be responsible for providing the Product Support?
HOW focuses on the means: What type of agreement should we use, and what type of funding sources are available to support our decision?
Best Value should always focus on the CAPABILITY, SKILLS, INFRASTRUCTURE, COST AND FLEXIBILITY of each of the potential partners, in order to maximize the support at the most affordable cost.
Capability, Skills, Infrastructure, Cost, Flexibility …

23. Other PBL Workload Allocation Considerations
Logistics Support Elements (What, Who, Where)
Maintenance Planning
Technical Data
Facilities
Design Interface
Training & Training Support
Manpower & Personnel
Supply Support
Support Equipment
PHS&T
Computer Resources
Policy & Preferences
Contractors on the battlefield
Retrograde management
DSOR/SORAP
In-theater distribution
Surge
DMI Evaluation
Best Competencies, Partnering Opportunities, & Support Options
Artisan skills
Affordability
Infrastructure
Public/Private flexibility
NOTE: DSOR = Depot Source of Repair; SORAP (USAF Term only) = Source of Repair Approval Process; DMI = Depot Maintenance Interservice
As we move forward in the workload allocation process, we are going to look in greater detail at some of the key areas.
Looking at each of the logistics elements (all 10 are listed here), who is required to provide the support, and what is the best option for the balance.
Are there specific military policies and doctrines that we need to consider? One major issue impacting today’s strategies involve Contractors on the Battlefield, and the related liability and command issues associated with having civilians in high-risk combat areas under a military commander.
Finally, once we clear the statutory requirements and service policies, what other issues should we be considering as we move forward? Does the capability we require already exist? What about trained artisans and other support infrastructure? Are there some options that are more affordable, or more efficient than others?
NOTE: DMI applies to:
New Acquisitions (including modification programs) Requiring Depot Maintenance
Depot Repair Programs Transitioning from Contract to Organic or Organic to Contract
Depot Repair Program Changes Requiring Capital Investment exceeding $1.5M
Depot Repair Program Relocation (Capital Investment exceeding $1.5M)

24. Workload Allocation Planning
HOW:
DoD Funding Sources
Performance Based Agreements
Contract (Fixed-Price & Cost-Plus)
Memorandum of Agreement (MOA)
Service Level Agreement (SLA)
When we have completed all of those determinations, we can now look to structure our Performance Based Agreements (PBAs). We are defining PBAs as ANY agreement that has performance-based language. So the PBA can exist between Program Manager and Industry, between Industry and Organic Entities, and describe a number of other relationships.
We also have some flexibility in the type of contract we use. In certain situations, we may want to use a fixed-price contract, while in others we may choose a cost-plus arrangement. We will discuss these in greater detail later.
A PBA is any agreement with performance-based language

25. Working Capital Funds (WCF)
WCF vs Appropriated Funds
Why Working Capital Funds?
How the WCF Operates
Navy WCF and PBL
Additional WCF Resources
NAVICP has had a good record of success is using the Navy Working Capital Fund to resource their PBL contracts. The reason the Navy has had success is because they manage their WCF at a higher, centralized level allowing for greater budgetary and execution flexibility. While the Air Force WCF is similar in size to the Navy’s (Note: Data will be shown in a subsequent slide) the Air Force decentralizes their account and manages it at a lower level. This reduces the Air Forces flexibility.
Here we’re going to provide an overview of the Working Capital Fund process and relate that to weapon system sustainment.

26. Logistics Support Funds Comparison
Appropriated
Working Capital Fund
Type
Operations & Maintenance -O&M
Procurement
RDT&E
MILCON
Revolving fund for military service
Uses
All ILS elements
Supply management
Depot-Level Maintenance
Transportation
Restrictions
O&M – one year funds
Procurement – 3 year funds
RDT&E – 2 year
MILCON – 5 year
Can only be used to fund activities associated with supply, depot maintenance and transportation
PBL Impact
Funds Expire
Cannot guarantee availability of funds beyond appropriation limits
“Multi-year” agreements achieved through series of 1-year contracts subject to availability of funds
Funds do not expire
Can be used to award true “multi-year contracts
Must get appropriated funds from other resource sponsors to fund additional logistics support elements
Self-explanatory.
IMPORTANT NOTES:
NWCF can only fund specific activities.
Appropriated funds expire; NWCF does not.

27. Why Working Capital Funds ?
US Code
Title 10
Subtitle A
Part IV
Chapter 131
Section 2208
Defense WCF established by statute
Working Capital Funds are used to:
Finance purchase of material
Finance DoD and commercial industrial
services, including depot-level repair of
components and platform maintenance
Supply
The WCF was established by statute (Title 10, Section 2208). Section 2208 allows the WCF to finance inventories of supplies and support industrial-type activities such as depot-level maintenance.
An important note: the WCF is a revolving account. It is not allowed to either make or lose money. Prices are adjusted on a yearly basis to compensate for the previous year “profit” or “loss”.
The revolving nature of the account requires that an equal value remain in the account. This means that the value of the account is comprised of dollars and material. Any time material is removed from the account, it must be replaced by dollars. Similarly, any time WCF is used to purchase spare parts, the value of the parts replaces the dollars spent.
Maintenance

28. Defense Working Capital Funds
Congress
Revolving
Fund
Appropriation
Initially ”Capitalizes” Fund
Customer
Annual Appropriation
Of Support
Funds $$
Payment
Goods or
Services
Provided $$
Reimbursement
Support
Provider
Order

29. Navy WCF & PBL
Navy Working Capital Fund has been used by the NAVICP to fund PBL sub-system contracts
Materiel
Repair
Supply infrastructure
Obsolescence management
WCF is replenished through sales of goods and services funded by warfighter O&M dollars
Enables WCF revolving fund to maintain solvent
Must break-even – neither makes a profit nor incurs a loss
This chart provides a brief explanation on how NAVICP executes the WCF in support of PBL.
By definition, WCF can be used to purchase inventory or industrial services, such as depot-level maintenance. Also, remember that the WCF is allowed to recover the cost of conducting business, or “overhead”. In that regard, it represents a prime funding option for PBL, and can be used to address such issues as repair of material and supply infrastructure, such as warehousing and transportation, and obsolescence.
Since the WCF can neither decrease nor increase in value, it is replenished through the sale of PBL material, which the customer funds through the use of appropriated O&M dollars.
ALSO NOTE THAT SINCE THE ACCOUNT MUST REMAIN BALANCED (SOLVENT), ALL COSTS ASSOCIATED WITH EXECUTION OF THE PBL MUST BE RECOUPED. This may occur in the current year, or through adjustments made in the next (subsequent) years. THE FULL ANNUAL COST OF THE PBL MUST BE RECOUPED IN THAT YEAR. IF COSTS EXCEED OR ARE LESS THAN PROJECTED, PRICE ADJUSTMENTS ARE MADE IN SUBSEQUENT FYs.
INSTRUCTOR ONLY INFORMATION…THIS SLIDE WAS OMITTED SINCE IT PROVIDED A LEVEL OF DETAIL BEYOND WHAT WAS INTENDED FOR THIS EXERCISE…THE SLIDE FOCUSED ON HOW THE WCF RECOUPS ITS MONETARY INVESTMENT.
How can PBL be funded through the Working Capital Fund?
Determine existing WCF cost (demand X unit price)
Negotiate accurate demand forecast
Set Fixed Price resulting in “cost neutral” or better cost impact on the WCF
Reverse calculate unit price under PBL
Total Contract Cost divided by forecasted demand = unit sales price to customer
No “demand” quantities are specified in contract
Pay PBL contract out of WCF
Under normal demand, sales recoup total contract cost
If demand decreases, contractor (fixed price contract) can generate additional profit

30. How The NWCF Funds PBL Contracts
PSI
NWCF
Fund Contract
“Sell”
Serviceable
Items
“Buy”
REIMBURSEMENT
TO NWCF
DEPOT REPAIR
NAVY DEPOT
SUBCONTRACTOR
Unserviceable
Items
CUSTOMER

31. Additional WCF Resources
Primer on Defense Working Capital Fund
OSD on-line tutorial about Defense Working Capital Funds is available at:
Provide students with copy of the Working Capital Fund Primer.

32. DoD Contract Categories
Fixed-Price
Cost-Plus
Maximum risk on Contractor
Contractor has greater incentive
to control costs
Minimal risk on Contractor
Government pays allowable
costs incurred by contractor.
Use when support requirements
and resources are well-defined
Use when requirements are less
defined (baseline not yet firm)
Award Fee or Incentive Fee
- Metrics related to performance,
schedule, and/or cost
- Metrics usually based on cost
targets
FAR Part 12 and 15
FAR Part 15 only
Minimizes administrative burden
on both parties
Increased administrative burden on both parties
Government must establish
price reasonableness
Government obtains full
Contractor cost information
This chart provides a very top-level overview of the differences between Fixed-Price and Cost-Plus contracts.
IMPORTANT NOTES:
The use of FP contracts is most appropriate when the requirement is well-defined, whereas CP contracts are more appropriate when the requirements are not well-defined. An example might be for a new weapon system PBL. Without any hard failure information and only engineering data to support your requirements, it would be difficult and risky to pursue that PBL under a FP vehicle. You may want to consider a CP vehicle until such time as the data exists to support a FP, and then move to FP.
CP is not applicable for use in FAR Part 12 procurements. FAR Part 12 and FAR Part 15 are explained in two slides.

33. Got off the deck
Highlight that important step in PBL Implementation process is complete … but additional challenges are ahead to execute and manage PBAs

34. Take Aways PBL Workload Allocation
Statutory requirements have significant impact on depot workload and PBL support strategy
Most DoD support workloads are performed by a combination of DoD and commercial providers
Multiple DoD funding sources must be considered
Contract type can help mitigate risk
Public Private Partnerships consider best use of both public and private sector capabilities
Title 10, Sections 2460, 2464, 2466, 2469, 2474 and 2563 play a significant role in defining your depot workload allocation options and your eventual PBL support strategy.
Many of the current PBLs have some type of shared “partnership” between Government and Industry and the resultant workload covered under PBL is performed by a combination of both sectors.
The use of PPPs allows for statutory compliance as well as enabling the best use of capabilities within the public and private sectors.
Various contract types can be used to support PBL…the selection of the correct type of vehicle (CP or FFP) and incentives (award-fee, fixed fee, incentive fee, award-term) can help mitigate risk to your PBL program.
PBL workload allocation is ‘best value’
IAW statutes, policy, and guidance

35. Next…
Performance Measures

36. LOG235B Schedule Monday Tuesday Wednesday Thursday Friday New System
Student
Read
Ahead
USAF C-21 Case
PSI Whitepaper
Navy F-18 Case Parts I & II
Title 10 Primer
WCF Primer
Navy F-18
Case Part III
Army M109
Case
Joint Strike Fighter Case
PBL Questions
EOC Survey AM
Course Introduction
PBL Refresher
Exercise
DAU Resources
PBL Critical Thinking Exercise PM
New
System
Level PBL
Strategies
Supply
Chain
Opportunities
Performance
Measurement
Highlight guest speakers or other enhancements
Workload
Allocation
Legacy
Support
Strategies
Business
Case
Analysis

37. Wednesday Student Preparation
Performance Measures
Navy F/A-18 Case Part III
PBL Performance Measures
Performance Assessment Plan
Business Case Analysis
Army M109 Case