Top ten PBL lessons learned

Defense AT&L, May-June, 2007 by Ron Klein, Tim Stone, Mike Murphy

Performance-based logistics is a powerful tool to assist Defense Department logisticians in improving support activities. The preponderance of the weapon systems costs and--more important--the effectiveness of the warfighter are influenced more by logistics support than any other single factor. PBL has great potential, whether it is used to design new logistics support processes or to improve existing ones. As PBL initiatives become mainstream, it is appropriate to review the record and identify lessons learned. It is not our intent to exclude other lessons learned from this particular top-ten list; nor are the points listed in any priority order.

1. PBL is first and foremost a logistics study.

Costs are always relevant and need to be included in the business case analyses (BCAs). However, PBL is not a cost analysis by another name. If the question is, "What is the most cost effective means to perform a function?" (e.g., overhaul transmissions), then a cost analysis is the appropriate tool. If the question is, "How can we provide overhauled transmissions to maintenance soldiers in the manner that best meets their needs?" then logisticians are the best-qualified to answer. PBL is about how to improve logistics operations. Financial calculations alone will not provide the optimal solution.

While there is no standard BCA format, our experience demonstrates that the logistics or operational section should account for approximately 65 percent of the research and documentation, as well as the relative weighting considered in the recommendations. Risks should generally account for around 10 percent, and cost should be in the range of 25 percent of the study.

2. While the BCA sequence of events is standard, the effort varies greatly.

A good BCA is paramount. This is where the analysis is documented. Without a BCA, no one will be able to determine whether the PBL arrangement met the desired objectives. The sequence of events for the analyses and format of the BCA are now reasonably standardized (at least as much as they should be). However, the size of the BCA should vary, depending on the logistics function being assessed. For small processes that have an important but narrow impact and may result in moderate cost savings, a BCA might cost $8,000 and take three weeks to complete. At the other end of the spectrum, if one is evaluating the optimal means to provide all logistics support to a new, complex weapon system, it might cost $800,000 and take two years to complete the BCA.

Consider the cost of aircraft turbine engines at $750,000 each. If supply chain management practices can be implemented resulting in the Service's having to own 100 fewer engines, the inventory savings will be $75 million. This isn't to suggest that saving money is the primary objective, but that the resources expended should be commensurate with the potential improvement.

3. Don't turn over the leadership of the PBL or the BCA to outside consultants.

When the consultants are gone, the requirement to implement the recommendations will be with the government logisticians who have responsibility for the activity--and no one knows the needs and the constraints better than the long-time government logisticians. The likelihood of success increases dramatically if those who will be implementing the changes are the ones who developed the solution.

We don't mean to suggest that PBL consultants can't provide vital services. They can be especially valuable in structuring a plan; incorporating lessons learned; assisting in the difficult tasks of documenting best DoD and industry practices; providing precedents for desired policy waivers; developing complex funding and contractual means; organizing; facilitating brainstorming sessions; and providing other valuable assistance. But the consultants should be just that--consultants to government managers who have the authority and responsibility to provide the optimal logistics support to warfighters at reasonable costs.

4. Funding alternatives need to be understood and fully explained.

Funding is an aspect of DoD operations that presents challenges greater than those encountered in similar commercial process-improvement efforts. For example, a program office deals primarily with Army procurement funds. The limited Operations and Maintenance, Army (OMA) funds available are probably used for salaries. The Integrated Material Management Center manages the Army Working Capital Fund (AWCF). The Defense Logistics Agency and/or U.S. Transportation Command may have funding to perform aspects of the logistics support being evaluated.

[ILLUSTRATION OMITTED]

These various types of funds (often referred to as "color of money") present three challenges. One is that an agency is currently receiving these funds or, in the case of planned new systems, will receive them. Negotiations are difficult when requesting a portion of the funding in exchange for that agency's not having to perform the function. A second problem is that these funds have different restrictions with respect to use and expiration limits. Rarely can the funds be comingled. A third challenge is that study participants have a tendency to overlook the significant savings that may accrue to an agency other than their own.