Performance-Based Logistics buys results

ARLINGTON, Va., May 29 (UPI) -- Performance-Based Logistics is designed to buy results and outcomes instead of services and resources. The service provider is responsible for the final outcome measured in terms agreed to by the customer -- the government. The U.S. government is responsible for managing suppliers rather than supplies and services. The results are measured in terms of outcomes, not costs.

Performance-Based Logistics changes the risk and incentive relationships that exist between the suppliers of services and the government customer. Unlike fixed-price or cost-plus contracts, Performance-Based Logistics permits the service provider to realize greater gains the more efficient he becomes and the greater the availability of the products.

By tying the supplier's compensation to outputs -- measurable increases in value to the customer -- Performance-Based Logistics serves to improve product availability and reduce the total costs of ownership for the customer.

All Performance-Based Logistics implementations are unique. They are designed to fit the character of the platform or system being supported and the specific needs of the war fighter.

Performance-Based Logistics strategy defines performance outcome in terms relevant to the warfighter. One of the challenges in pursuing Performance-Based Logistics is to determine the appropriate character or scope of a specific sustainment activity.

In some instances, it may make sense to make a platform's maintenance and all its support requirements part of a single activity. In other cases, it is more appropriate to focus only on critical systems or components -- for example, aircraft engines, or compressors that have high maintenance requirements and that are critical to the availability and operation of a platform or major system.

Even the provision of commodities such as tires and batteries can be the subject of Performance-Based Logistics. Regardless of the focus of the Performance-Based Logistics activity, the key is to empower the service provider to integrate all aspects of maintenance and sustainment -- repair, the supply chain and product improvement.

In order for Performance-Based Logistics to work, it is critical to identify the appropriate outcome or performance parameter the warfighter requires. These outcomes will be translated into system performance levels or support metrics that will be documented in the Performance-Based Assessments. The specific performance measures desired may vary widely. In a memo dated July 31, 2008, the Undersecretary of Defense for Acquisition, Technology, and Logistics serving under Defense Secretary Robert Gates focused on Material Availability, Material Reliability, and Ownership Cost at the macro level. Often more than one performance measure will be specified in a contract or agreement.

A key to the success of Performance-Based Logistics is the altered relationship between the service provider and the customer.

--

Part 5: Shifting the traditional functions of the government to the contractor without giving up core capabilities

--

(Daniel Goure is vice president of the Lexington Institute, an independent think tank in Arlington, Va.)

--

(United Press International's "Outside View" commentaries are written by outside contributors who specialize in a variety of important issues. The views expressed do not necessarily reflect those of United Press International. In the interests of creating an open forum, original submissions are invited.)