How to Tackle the Cost of Sustainment?

Performance-Based Logistics (PBL) contracts are an attempt to lower the cost of sustainment by giving vendors greater flexibility to use their business judgement to find ways to reduce costs and improve performance. The contractor is paid for meeting certain performance metrics – for example, keeping 80 percent of an air fleet in a ready-to-use state, but by doing so in a manner that they deem most efficient.

On October 16, the Defense-Industrial Initiatives Group released a study it has been working on for the past year entitled “Performance-Based Logistics: A Process Analysis for the Defense Logistics Agency." Prior research has established that PBL contracts can be effective in lowering cost and improving performance if used properly. This event focused on identifying best practices and potential pitfalls, as well as categories of sustainment that may be well suited to a PBL structure.

Conclusions were drawn from interviews with a range of government and industry practitioners, including those responsible for implementing similar arrangements in other countries. The analysis found that there are addressable markets within the Department of Defense’s sustainment contracting portfolio that are well suited to PBL contract structures. The report also recommends steps DoD could take to fulfill the Better Buying Power 3.0 mandate to “enhance effective use” of PBL. These recommendations are complemented by data on past and current DoD PBL efforts.

Featuring:

Lou Kratz
Vice President and Managing Director, Logistics and Sustainment, Lockheed Martin Corporation

Racheal Kuczma         
Chief Contracting Officer, Procurement and Contracting Support Branch, Australian Government Department of Defence