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Applying “Smart Competition” to Performance-Based Logistics

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Performance-based logistics agreements are flexible, allowing product support to be provided using a variety of different approaches: agreements with the Original Equipment Manufacturer (OEM), a third-party integrator serving as the execution lead, or organically through the DoD. Regardless of approach, PBL agreements can become very complex, so they must be skillfully structured in order to deliver the desired benefits. To ensure effective management, the DoD has adopted a product support strategy that generally assigns specific roles and responsibilities to its organic personnel, as well as its commercial service providers.

More recently, the DoD entered another period of sustained downward budgetary pressure. And, after extended operational commitments in Iraq and Afghanistan, the Department must find the means to recapitalize and modernize the existing force structure. It is vital that the DoD provide product support as efficiently and effectively as possible, lest the DoD enter a new “death spiral”. Despite the success record of PBL agreements in achieving cost savings, such arrangements have fallen out of favor within the DoD, for a variety of reasons. The DoD must work to reverse this trend.

As with any other procurement, appropriately structured competition for product support can result in many benefits. Potential benefits from competitive PBL agreements include: Innovation, Sustainment Performance Improvements, and Improved Product Quality.  However, competing too frequently can dis-incentivize contractors to invest in technology and processes that may produce savings over a longer period, as well as create other program inefficiencies.

This project was partially funded by the Lockheed Martin Corporation.

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