Twelfth PEO/SYSCOM Commanders Conference

1. Twelfth PEO/SYSCOM Commanders Conference The NAVSEA Perspective On Full Service Partnering Mr. John Goodhart Assistant Deputy Commander Fleet Logistics Support NAVSEA 04L November 20, 2002

2. Wall Street DoD/OSD DoN, SYSCOMS Shipbuilder w/ System Integrator as sub-contractor LPD-XX Viking System Integrator & Shipbuilder as sub PHOENIX CORTEZ DDG-XX Commercial full-service contracting company • CONTROL • Environment: Economics and Conflict • Politics: Local and National ORION Depots Congress In Service Engineering Warfighter Full Service Contracting WargameProduct Support Business Model Wargame Environment • Wargame Objectives • Define the scope of FSC • Identify critical areas of concern • Explore opportunities for change • Explore potential for cost reductions Simulated 3 Scenarios & Multiple Events over 3 Days

3. We Learned… • Should be Full Service Partnering – “FSP” • Phased approach for Legacy systems- Risk mitigation • Step-by-Step until FSP takes over whole ship/system • Allows both sides to assess true costs and opportunity to integrate • Government participation with contractor • More ambitious approach for cradle-to-grave projects • Need to understand what would be the best mix of organic NAVY and FSC assets that plays to strengths of each to overall benefit of the Navy. This begins to look like “PBL”.

4. PBL Background Information • PBL Mandated by • FY 2003-07 QDR. “Compress supply chain, eliminate non-value added steps, reduce TOC and improve readiness” • FY 2003-2007 Defense Planning Guide – Implement PBL to all new weapon systems and ACAT I and II fielded systems • DoDD 5000.1 (DRAFT) – “PM shall develop and implement performance-based logistics strategies…” • Navy PBL Implementation Plan - Issued by DoN 1 May 2002 listing 23 NAVSEA and PEO programs as pursuing PBL strategies. DoD Definition A strategy for weapon system product support that employs the purchase of support as an integrated, affordable performance package designed to optimize system readiness. It meets performance goals for a weapon system through a support structure based on long-term performance agreements with clear lines of authority and responsibility.

5. Best Value Support Solutions Balance is the Key Traditional Organic Support Commercial Business Practices Full Contractor Logistics Support Performance Based Logistics Mini Stock Point Public/Private Partnership Commercial NDI Legacy Tailored, affordable support options

6. The Benefits of Implementing PBL • Focus on Customer Service, Reduced Product Support Cost, Life Cycle Product Management and Effective Infrastructure. • TOC reduction of 20% and higher • Targeted reductions to ship and shore maintenance workload • Best Commercial Practices • Total Asset Visibility • Customer Service Center • Obsolescence Management • Life Cycle Warrantees • Surge Capacity up to 120% and higher • Availability Improvement – 24 hour parts response time War Fighter focused TOA reduction and performance improvement.

7. 80 Depot 67.2 70 Maintenance 65.6 64.4 62.5 63.1 61.8 59.2 59.3 58.4 Materiel 60 Management 50 Transportation $ in Billions 40 Operational Maintenance 30 Operational 20 Supply 10 Other 0 99 00 01 02 03 04 05 06 07 Expanding PBL Focus to Total Life Cycle Support Sustainment Cost* PBL SCN/OM,N WCF PBS Fiscal Year *Source: FY02 BES, TY Dollars

8. Near Term and Strategic Opportunities for Change • Vertical FSC stays the same for platform integration • Initiate Public / Private Partnership for horizontal integration FSC 1 FSC 2 FSC 3 FSC X LPD DDG CVN etc... HME SYSTEM Performance Based Public - Private COMBAT Partnership SYSTEM WEAPON SYSTEM COMM SYSTEM New NAVSEA organization facilitates cross platform integration

9. Infrastructure Fleet Warfighter PBA Core Big “L” Maintainer Operator “Strategic Business Analysis” Ao, TOC Manning The NAVSEA PBL Process Model NAVSEA PBL Core Focus Affordable Support Product Support Trades & BCA Metrics, ROI, Drivers Incentives Performance Based Contracting ORD, MNS, PPBS, CRD, APB Support Metrics Logistics Assessment/IOCSR Support Metrics CFFC Cost and Performance Benefits Build in Fleet-focused support from the start

10. 8 5 1 5 2 2 Summary • 23 NAVSEA ACAT I & II Programs • 28 Joint NAVSEA/NAVSUP PBLs • 19 Performance Based Support Services contract • Other NAVSEA PBLs: AEGIS Weapon System, ARCI, Q-70, AN/UYK-70, AN/BLQ-10, Towed systems, MK 48, 11 meter RIBs, and others. NAVSEA Performance Base Full Service Pilots • MCM/MCH Diesel Engines - Horizontal in-service PBL for main propulsion and electric generators. • Cooperative Engagement System – Horizontal PBL for new acquisition of an electronic system. • LPD 17 Electronic Systems – Vertical PBL for eight electronic equipments on a new acquisition. • ARCI/MFOP – Vertical PBL for in-service Submarine Sonar upgrades. • Other areas of Interest – Non Standard parts, Refrigeration & AC Plants, HP Air systems, LM-2500 and others.