Defining and implementing Performance-Based Logistics in government

Defense AR Journal, Dec, 2004 by David Berkowitz, Jatinder N.D. Gupta, James T. Simpson, Joan B. McWilliams

Performance-Based Logistics (PBL) is a mechanism to integrate the acquisition and sustainment of various systems in the Department of Defense. In this article, we report the results of a research study aimed at developing a working definition of PBL, the drivers for its use, and the infrastructure changes needed for its successful deployment. Utilizing our research findings and those of previous related studies, we suggest guidelines for successfully implementing PBL in organizations. We conclude the article by suggesting some useful directions for future research to fully realize the benefits of PBL.

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Product acquisition and sustainment have traditionally been separate and not necessarily equal concerns. The government's primary focus has been on the acquisition of technology and systems. Additionally, the government has had a number of secondary concerns: sustainment of the system, technology transfer, and the development of an industrial base to support the system long term. The environment for government acquisition creates consequences for major programs that span years, if not decades. As the government strives to understand how to generate the best value for its systems, it is appropriate to study experiences in the Department of Defense (DoD) and in Industry in order to maximize performance for the life of the system.

The ultimate goal in an acquisition strategy is to build both partnerships and relationships that align the goals of all organizations for the duration of the program. Once the competition for the initial acquisition of a system has occurred, the ability of the government and the contractor to make substantial changes in the system is typically limited. Since some acquisition efforts last for decades, it is essential for the parties to explore the acquisition strategy carefully before embarking on a course of action. This is especially so as, over the life cycle of most systems, it has been estimated that about 30 percent of all dollars spent are used to acquire the system, while the remaining 70 percent of all dollars are used for support.

The goal of both acquisition and sustainment is to gain the most efficient and effective performance of the system for its entire life. In doing so, it is important to realize that acquisition and sustainment are not separate but simultaneous and integrative issues that require analysis and synthesis throughout the product life cycle. Ultimately, the challenge for the program manager is to structure optimal relationships with contractors through the use of appropriate contractual mechanisms, agreements, and incentives.

The Department of Defense initiated a long-term program to link performance to acquisition through a concept called Performance-Based Logistics (PBL), which represents an integrated Performance-Based Environment (PBE) for both acquisition and sustainment. This is very appropriate since dollars spent on maintenance continue to increase as systems age. Since the inception of PBL, various agencies have tried to develop definitions, implementation guidelines, and infrastructure to attain the goal of acquisition and sustainment integration through performance-based initiatives. While several organizations in various branches of the DoD have attempted to use PBL approaches in acquisition and sustainment efforts, no clear and universally acceptable definition of PBL exists. Therefore, there is no clear understanding of the drivers of PBL. Hence, implementation guidelines for PBL are at best ad-hoc and incomplete. This situation undermines the DoD's ability to use PBL to make Defense operations more responsive.

The purpose of this article is to identify the issues and complexities of the relationships that exist in making the transition to the PBL environment. Utilizing the relational exchange theory and new product development literature, along with the combined knowledge and resources of the government and in Industry, we develop a conceptual and working definition of PBL, identify the drivers for the deployment of PBL, propose the needed infrastructure changes to be effective and efficient in using PBL, and outline guidelines found useful in implementing PBL. Finally, we conclude the paper by summarizing our findings and suggesting some directions for future research to successfully implement PBL.

RESEARCH PROCESS

In this section, we briefly describe the combination of research processes and methodologies used to achieve the goals of this research. Basically, we used interviews as the primary vehicle to gather information about the definition and deployment of PBL. In addition to interviews, we hosted roundtable discussions. We also participated in an Army Materiel Command (AMC)-wide PBL video conference at the Aviation and Missile Command (AMCOM). For the interviews, we used an emergent design process that employs a predetermined set of questions to start the interview process. In this approach, the set of questions are altered over time to reflect what was learned in previous interviews. Before the interview process began, each respondent was informed that the purpose of the research was to develop a workable definition and implementation approach for the transition to a PBL environment.