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Breakout Session # 1608 Edward L. Will, NCMA Fellow

Contracting for Performance Based Logistics. Breakout Session # 1608 Edward L. Will, NCMA Fellow Director of Contracts for Acquisition & Logistics Policy Integrated Defense Systems, The Boeing Company April 25, 2007 10:40 – 11:40. Outline. Introduction

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Breakout Session # 1608 Edward L. Will, NCMA Fellow

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  1. Contracting for Performance Based Logistics Breakout Session # 1608 Edward L. Will, NCMA Fellow Director of Contracts for Acquisition & Logistics Policy Integrated Defense Systems, The Boeing Company April 25, 2007 10:40 – 11:40

  2. Outline • Introduction • What is Performance Based Logistics? • DOD PBL Policies • Business Case Analysis • Contracting Issues • Metrics and Incentives • Funding Issues • Public-Private Partnering • Summary

  3. Introduction • PBL is a strategy for life cycle support • To buy “readiness” • Used in commercial & military markets, both domestic & foreign • Look at trends within the DOD • Contracting issues are similar to Performance Based Services Acquisition

  4. What is Performance Based Logistics? • Section 5.3, Defense Acquisition Guidebook • Preferred approach for product support • For Systems, Subsystems or Major Assemblies • Buy performance outcomes instead of spares, repairs, tools and data • Based on “Performance Agreement” with stake-holders on desired outcomes, measures, resources and support requirements • DAU and other Universities have excellent PBL training and support

  5. DOD PBL Policies • Competitive Procurements • Seek to use FAR Part 12 where appropriate • Long-term contracts • Incentives tied to performance, including use of award term options & Supplier Diversity goals • Fixed-price preferred • For example, per flight or operating hour • But cost reimbursable appropriate where risk is high • PBL arrangements transparent to the users • Differences between Services in PBL practices and adoption • And in approaches for legacy versus new systems

  6. Business Case Analysis • ACAT I & II programs • Baseline product support approach vs. PBL, not public vs. private • BCA should consider: • Current level of performance • Baseline costs/estimates and escalation • Labor cost, including repair standards • Materiel costs, including acquisition & inventory • Actual/predicted spares/repairs activities • Impact of incentives or penalties • Enablers such as R&M improvements & tech insertion • “Hard” cost savings and “soft” cost avoidances

  7. Contracting Issues • Contract type – Fixed-Price/Price per Hour vs. Cost-Plus • Base years plus number of options • Payments, Incentives & Penalties • Debate on Supply vs. Services Contracts • Walsh-Healy vs. Service Contract Act • Clearly seems PBL for Major Weapons Systems should be “supply” • Risk of Maintenance Data Accuracy & Predictive Models • Disposition of pre-existing inventory • Subcontractor arrangements • Use of DLA and MILSTRIP by contractor • Cost data reporting requirements • Time to get a PBL in place, including time for BCA up front

  8. Metrics and Incentives • Preferred DOD metrics: • Operational availability • Operational (mission) reliability • Cost per unit of usage • Logistics footprint • Logistics response time • Incentives/Penalties • Award Fee and/or Award Term • Penalties for not meeting goals • Incentives tied to cost reductions or other improvements

  9. Funding Issues • Color of Money • Preferred would be “single line of accounting” • MID 917 – 6 pilot programs • Sentinel Radar System - TOW-ITAS • Expeditionary Fighting Vehicle – B-2 • ALQ-99 TRJS Pod - JSF • ILC proposal to permit R&M ECP’s funded by O&M accounts

  10. Public – Private Partnering • Public facilities may partner with private companies • “Work share” approach • “Direct Sales Agreement” • “Lease” for under-utilized capabilities • “Teaming” – other approaches • Treatment under “50/50” rule • Issues - Dispute resolution, penalties for non-performance, over-runs, incentives, etc.

  11. Summary • PBL is a best business practice • Enhances operational availability for war fighters • Very successful DOD implementations • Shifts more risk and opportunity to the private sector for life cycle support • Engages private sector with the public sector, leading to improved performance • Overall reduction in total cost of ownership

  12. References • M. Wynne Memo, Jan 23, 2004, PBL Business Case Analysis • M. Wynne Memo, May 28, 2004, PBL and BCA • Dept. of Navy, 30 Sep 2005, Guidebook for Developing PBL BCA • M. Wynne Memo, Aug 19, 2004, PBL Purchasing Using Performance Based Criteria • C. Bolton Memo, Sep 28, 2006, Army PBL Criteria and Reporting Requirement • DOD Management Initiative Decision (MID) 917, Oct 18, 2004 • Pete Aldridge Jr. Memo, 30 Dec 2002, Guidance on Public-Private Business Arrangements per 10 USC 2536 • Maj. Gen. A. Morrill III Memo, 29 Mar 2006, AFMC Public-Private Partnership (PPP) Guidance for Depot Maintenance • Defense AT&L Magazine, Sep-Oct 2005, p.29, “Over 10,000 Served – DAU PBL Resources,” by S. Brown & J. Cothran • Defense AT&L Magazine, Jul-Aug 2006, p.30, “PBL – Putting Rubber on the Ramp,” by D. Mahadevia, R. Engel & R. Fowler • ADM W. Massenburg Memo, 13 Feb 2006, (NAVAIR) PBL Policy

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