Defense Acquisition University

A PBL BLUEPRINT Implementing Performance Based Logistics Defense Acquisition University A premier corporate university serving DoD Acquisition, Technology, and Logistics Jerry Cothran, Program Director PBL DAU – Capital NE

Why We Must Buy Performance OLD NSS Model POST-2000 Model Static Threats GWOT Protect and Defend Engage and Destroy! Mass Logistics Agile Mobility Time to Fix Constant Readiness

The Ability to Move and Fight Requires Reliable, Supportable Systems

PBL Facilitates and Incentivizes: • Reliability • Minimizing repairs and spares increases profit • Supportability • Ease of support minimizes logistics footprint, personnel, equipment, tools, and other support resources • Readiness • PBL pays for PERFORMANCE, not support transactions • Priority for the Warfighter • PBL is vertically (weapon system) optimized • Battlefield Results • The level, quantity, resources, and cost of support is transparent to the warfighter – PBL is predicated on PERFORMANCE OUTCOMES! MODERN WARFARE = PBL

The Fundamental PBL Tenets • Total Life Cycle System Management (TLCSM) • Buy performance as a package, vice transactional goods and services • Document performance and support requirements as metrics in Performance Based Agreements (PBAs) • Establish a Product Support Integrator (PSI) to integrate and manage all (contract and organic) sources of support • Establish incentives to promote “win-win” relationships and achievement of performance outcomes • Public-Private partnering – make best use of commercial and organic capabilities in a long term “arm-in-arm” vs. “arms length” relationship; Trust and Teamwork

DOD 5000 Policy “PMs shall develop and implement performance-based logistics strategies that optimize total system availability while minimizing cost and logistics footprint.” 5000 Series

Deputy Secretary of Defense 4 Mar PBL Memo “I direct the USD(AT&L)…to issue clear guidance on purchasing using performance criteria. I direct each Service to provide a plan to aggressively implement PBL…” Paul Wolfowitz Deputy Secretary of Defense

OK, But How Do I Get TO THERE? FROM HERE Performance Based Support Strategy Traditional Support Strategy

The PBL Blueprint Implementing PBL

Key Activities • Early Activities • Establish the PBL Team • Baseline your System • Develop Performance Outcomes/Metrics • Select a Product Support Integrator • Developing the Strategy: Workload Allocation/Sourcing • Develop the Supply Chain Management Model • Accomplish the Business Case Analysis • Establish Performance Based Agreements • Accomplish Contracts • Implement and Manage • Provide Continuing Oversight

PBL IMPLEMENTATION MODEL Early Activities Form the PBL Team Baseline The System Develop Performance Outcomes Oversight: Manage and Revise Select PSI Implement Support Strategy Workload Allocation Strategy Accomplish Contracts Establish PBAs Business Case Analysis SCM Model

Early Activities • EXIT:Requirements Based Procurement • ENTER:Capabilities Based Acquisition(JCIDS) • Focuses on CAPABILITIES versus REQUIREMENTS • A capability is performance in an operational environment that is reliable, transportable, supportable, and affordable • Spiral (iterative) Development versus Linear (sequential) Acquisition • Incremental useable capabilities vice “ultimate” systems Warfighters need real capabilities that can perform NOW!

A Comprehensive Guide • The new “TLCSM Supportability and Assessment Guide: A Guide to Increased Reliability and Reduced Logistics Footprint” is available for use at: • http://www.acq.osd.mil/log/logistics_materiel_readiness/organizations/lpp/html/new_lro.html • It provides comprehensive guidance on the key logistics activities throughout the 5000 life cycle process model Supportability Planning is no longer deferred!

Establish the PBL Team • Program Office (Chair) • Customers/Users • Owners/Operators • OEMs/Contractors • Organic Support Organizations PBL changes the public/private relationship – from “arms length” to “Arm in Arm” Cultural Change

JSTARS Integrated System Support Division Example Example LK ESC/JS 57 Government -2 LKK Matrix -3 FM -1 LG Matrix IM CSE 51 Government LKS Northrop Grumman 8 Lead 12 Systems Mgt 15 Direct Wing Support 35 NGC Joint STARS Integrated System Support Division SSM CSSM Northrop Grumman Corporation Plans and Business Operations Branch LKSB Engineering and Technical Support Branch LKSE Sustainment ManagementBranch LKSS Systems ManagementNGC Program Mgr Direct Wing SupportNGC Program Mgr Training & T.O.sNGC Program Mgr System Mgt Supply Chain Mgt Config/Eng Aircraft Depot Mx Software Mx PME Mx Supply Chain Integration Plans & Program Spt Fin Mgt Admin Engineering Tech Orders OSS&E Config Mgt Field Service Reps Training & T.O.s LKC - Program Control LYPH LKK- Contracting DCMA - Defense Contract Management Command LYSK - JSTARS and GPS Software LKS Personnel NGC Personnel Indirect Support Dual Reporting Chain Side by Side Teaming – Not “Arms Length”

Define and DocumentSystem Baseline • Scope (Resources, Equipment, Location) • Stakeholders • Owners/Operators • Users/Customers • Program Office • Support Providers • Service Corporate Structure • Current Performance Shortfalls • Performance Goals/Objectives • Operating and Support Costs • Refine as necessary over time You can’t get to where you want to go, until you know where you are now!

TOW Improved Target Acquisition System (ITAS) One for One Replacement of the Ground TOW 2 (M220A2) System Modified ITAS (MITAS) Example Units Fielded • 82D Airborne Division Combat • IBCT 1 Deploying • 101st Airborne Division (AASLT) (Partial) Combat • 2D Infantry Division • 10th Mountain Division (Partial) Combat • IBCT 2 • 25th Infantry Division (Partial, June 03) Deploying

TOW/ITAS System Overview TOW 2 ITAS Better Performance Equals More Kills and Greater Soldier Survivability Example • TARGET ACQUISITION SUBSYSTEM INTEGRATED SIGHT • 2nd GEN FLIR Detector (w/Monitor) - SADA II • Laser Range Finder • Direct View Optics • FIRE CONTROL SUBSYSTEM • Embedded Training Cards • Missile Guidance • BIT/BITE 4 LRU’s • TRAVERSING UNIT MODS • Brake • Pistol Grip • New TAS Mount • Ground Mounted w/Tripod • POWER SUPPLY/BATTERY BOX • Dismounted Power • Power Conditioning • Built-In Battery Charger Time “In the Pits” is Reduced • ITAS Designed to Improve Performance • PBL Designed to Increase System Availability and Reduce Ownership Cost

Identify Performance Outcomes and Metrics • Top Level – What does the Warfighter Need? • System Level: Availability, up-time, etc. • Lower Level • Component: MTBF, MTBCF, MT… • Identify Critical Driving Metrics • Not Mission Capable – Supply (NMCS) • Depot cycle time • Deficiency Reports • Similar…

Example F-117 Performance Targets

Statement of WorkforDirect Vendor Deliveryof AN/ALR-67(V)3 Radar Warning System Example • [C] Performance Metrics • The following three metrics form the basis of the DVD performance • on the equipment; • Minimum on-time delivery of requisition, with orders filled as they come in; • Minimum system Mean Flight Hours Between Failures (MFHBF), • with annualized growth over contract period; • Maximum transit time for the Navy retrograde to Raytheon. • The contractual requirements on these metrics are: • 1) Availability: On-time fill of requisition <=5 working days; 90%; Raytheon • 2) Reliability: System MFHBF • a) DVD Year 1 >= 300 hours (Raytheon) • b) DVD Year 2 >= 323 hours • c) DVD Year 3 >= 383 hours • d) DVD Year 4 >= 443 hours • e) DVD Year 5 >= 475 hours • f) DVD Year 10 >= 600 hours • *3) Retrograde Transit time from requisition (<= 30 calendar days) > = 90% • NAVICP to arrival @ Raytheon Continuous Improvement!

Navy APU TLS (PBL) Metrics • Provides Support for APUs used on the C-2, F/A-18, S-3, C-130 and P-3 • Navy’s First Public / Private Partnership • NADEP Cherry Point... Touch Labor • Honeywell... Program Management • 10 Year Performance Based Contract, Firm Fixed Price (5 Year Base & 5 One-year Incentive Terms) • Reliability Increase Guarantees • 45% for F/A-18 • 25% for S-3 • 15% for C-2 • 390% for P-3 • Delivery Guarantees... 2 Days (IPG 1) • Priced by the Flight Hour • All Inclusive, “No Excuses” Contract • Obsolescence Management • Product Support Engineering • Surge Capability... 120% of Annual Flight Hours • Adding More APUs and Components to TLS Example

Program Manager The Need for a Product Support Integrator TLCSM Mandates the PM as “Life Cycle Manager, including Sustainment” Depot Repair Supply/DLA Contract Support Transportation Common Commodities Organizational Maintenance

Product Support Integrator Program Manager The PSI is a single focal point of responsibility for integrating all support Depot Repair Supply/DLA Contract Support Transportation Common Commodities Organizational Maintenance Risk

MORE LESS GOVERNMENT RISK PSI RESPONSIBILITY LESS MORE PSI Authority = PSI Responsibility Maintenance Supply Sub-Process Process Commodity Full System Subsystem SCOPE OF PSI SUPPORT

DOD 5000 Policy “Sustainment strategies shall include the best use of public and private sector capabilities through government/industry partnering initiatives, in accordance with statutory requirements.” 5000 Series

Developing your Strategy: Workload Allocation/Sourcing • Total System Support is comprised of many functions • An effective support strategy considers “best competencies” and partnering opportunities • And factors in Title 10 requirements…. • To identify what is BEST for EACH support function in terms of: • Capability • Skills • Infrastructure • Opportunities for partnering • Compliance with Title 10 • Public/Private flexibility • Affordability

Why Partner/Team? • It’s OSD Policy • Satisfies Title 10 Requirements (Encouraged in Section 2474, and others) • Depot Labor – Strike Proof, Skilled • DoD is a “Break even” partner–not profit driven • Ensures Stable Depot Workload • Shares Best Business Practices & Capabilities • Facilitates Continuous Technology Insertion • Facilitates Reliability Improvements • Improves Material Support – reduces Inventory • Avoids Unnecessary Industry Infrastructure Investment • And More…

Industry Partner Core Competencies include Production and Manufacturing Configuration Management Technical Data Package Management Subcontractor Management Technical Data Maintenance Information Networking Systems Engineering DoD Core Competencies include Existing Capital Investment in Logistics Infrastructure Skilled and Trained Workforce Ability to accomplish unique, marginal profit workloads not attractive to industry Significant opportunities for intra, inter-Service sharing of resources Identify Public/PrivateCapabilities & Competencies Must comply with the DSOR process!

P S PME MTS AMT FCTS IN FLIGHT TRAINER S S S S SMS MCTS MISSION CREW TRAINING MSS/TMSS G G S G JSTARS Workload Breakdown Structure Example Public/Private Partnering GOVERNMENT CORE GOVERNMENT PRIME CONTRACTOR PRIME WITH COMPETITION AT 2ND TIER PRIME CONTRACTOR VIA SLA TSSR AUTHORITY & OVERSIGHT G GC • Contracting • Budgets • Requirements • Engineering Authority/Accountability G Combine Best Public/Private Capabilities PRIME INTEGRATOR P Partnership Partnership GSS - Ground Support System MCTS - Mission Crew Training System AMT - Aircraft Maintenance Trainer MSS - Mission Support Subsystem TMSS - Transportable Mission Support Subsystem FCTS - Flight Crew Training System SMS - Software Maintenance Subsystem COMMON SPARES ENGINES G GC Partnership Partnership E-8C SPARES PME MAINTENANCE SOFTWARE * AIRCRAFT PDM FIELD SVC REPS SUSTAINING ENG TECH DATA P S P S P G P G P GC P S GC P S GSS *Includes OFP Mx and GSS Software Merge, Block 10 Baseline Prime Contractor Integrates Government/Industry Resources

Develop Supply Chain Management Model • Materiel Support is a critical link in supportability of weapon systems • All the skilled labor, advanced technology, and performance means little without the “right part at the right place at the right time” • A primary target area for utilizing Industry flexibility, capability, and proprietary spares support

Notional Supply Chain Management Model

93.0% Supply Availability DLA Role in F/A-18 E/F Integrated Readiness Support Team (FIRST) PBL • DLA transferred F/A-18 E/F unique consumable item management to Navy’s Boeing ICP after inventory was bought out • DLA is managing/supplying common consumable items coded to the F/A-18 E/F for I and O Level Navy/USMC Customers • 7,327 NSNs • $62.9M in inventory; $52.7M due in under contracts • $167.2M in sales last 24 months across all systems • Boeing plans to use DLA as source of supply for common consumable items when best value • To support depot level maintenance performed by Boeing, its subcontractors, and the 3 Naval Aviation Depots in the partnership

Business Case Analysis • BCAs required by Statute for all proposed “Prime Vendor” support arrangements; And by USD/ATL • Section 346, 1999 NDAA, as amended by Section 336, 2000 NDAA • 13 Feb 2002 USD/ATL Memo to Services re PBL Implementation Schedule • 23 Jan 2004 USD/ATL memo: BCA Guiding Principles • Used to assess and select best value support strategy • Initially developed prior to M/S B; based on metrics for logistics and performance requirements • Completed by M/S C or contract award • LCC, footprint, reliability, risk, obsolescence, performance metrics, supportability, et al

Business Case Analysis • BCAs have several uses in implementing PBL • “BIG” BCA • Assessing viability of overall strategy, workload allocation, and cost comparisons • “Specific Purpose BCAs” • Assessing discrete sub-system level proposed actions (e.g. PBL for modifications, sub-system components, processes (materiel management), and others

DOD 5000 Policy “The PM shall work with the users to document performance and support requirements in performance agreements specifying objectives outcomes, measures, resource commitments and stakeholder responsibilities.” 5000 Series

Performance Based Agreements • Performance Based Agreements are a Critical Element 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!

PM Warfighter/Force Provider PBA PBA Performance Based Agreements:Boundaries What the Warfighter Wants What the PBA Specifies Product Support Integrator • Availability • Readiness • Footprint • Responsive • Contractual • Measurable • Incentivized • Accountable METRICS • Not Mission Capable - Supply • Supply Issue Effectiveness • Repair Turnaround Time • Sortie Generation Rate • Ao • MTBMCF

100 80 60 40 20 0 Level of PSI Responsibility Range of Product Support Functions 0 20 40 60 80 100 PSI ResponsibilityCorrelation FCS/TSPR Responsibility For System Performance Metrics (%) OPTIMUM Scope of Support Work Performed (%)

PBA Metric Pyramid System Performance Metrics HIGH • Operational Availability (Ao) • Sortie Generation • Mission Reliability • Affordability…cost per hour Sub-System Performance Metrics PSI Scope of Responsibility • Reliability…Mean Time Between Failure (MTBF) • Weapons • Engines • Avionics • Mission Packages • Air Frame • Maintainability…Mean Time To Repair (MTTR) Support Enterprise Process Metrics • Customer Wait Time (CWT)…Mean Logistics Delay Time (MLDT) • Retail Material Availability…% Fill Rate • Availability degradation due to lack of spares (NMCS) LOW • Shipping Time • Repair Cycle Time • Source Availability

100 80 60 40 20 0 More Resources = Higher Metrics 0 20 40 60 80 100 PBA Metric Flexibility “Things Change” – avoid PBA rewrites Level of Performance Metric (e.g. Ao %) PBA needs to specify a range of support to accommodate changing priorities and resources available Amount of Resources Available (%)

Performance Based Agreements Examples Contract-based “This Contractor Logistics Support Operating Agreement (CLSOA) will serve as the document outlining the requirements and responsibilities of the government and contractor to provide support for TOW ITAS…the CLSOA is based on the FY02-06 CLS support contract between…and … The contract shall have legal precedence during any dispute.” Organic “This SLA defines the metrics that allow the E-3 System Program Office (SPO), the customer, and the Defense Logistics Agency (DLA) (E-3 supplier) to establish performance expectations for the support of the E-3 weapon system and enhance the understanding of E-3 operational/readiness requirements.” “This System Level Performance Based Agreement (PBA) sets forth the system performance and logistics support requirements as agreed to by Commander, Fleet Forces Command (CFFC), and the LPD 17 Ship Program Office (PMS 317).”

Defense Acquisition University