PBL Support Alternatives
Contractor Support
CONTRACTORDoD
More DoD More Commercial
TraditionalDoD Support Environment
ContractorResponsibleFor Majorityof Support
Public/PrivatePartnering
Opportunities
MIX
DoD Support
• Most DoD support workloads are performed by a combination of DoD and contractor providers
Challenge: Find right “mix” to support the systemChallenge: Find right “mix” to support the system
Workload Allocation Planning• Objective is to identify BEST support alternatives
– Comply with law (USC Title 10)– Comply with DoD policy (Public-Private Partnering) – Performance– Capability – Skills, Infrastructure– Cost– Flexibility
• An effective support plan considers “best competencies” and partnering opportunities
Where will the work be done? Who will do it?Where will the work be done? Who will do it?
Best
Value
Support Workload AllocationStatutory
Requirements Title 10
DoD Policy Best Value
Structure Agreements
Statutory Requirements
Title 10DoD Policy Best Value
Structure Agreements
What you WANT
to doWhat you HAVE
to do
Planning Process
text
Statutory Requirements
(Title 10)DoD Policy Best Value
Structure Agreements
text
Statutory Requirements
(Title 10)DoD Policy Best Value
Structure Agreements
Applicable Sections:• 2460: Definition of Depot Level Maintenance• 2464: CORE Logistics Capability• 2466: Depot Level Maintenance Limitations• 2469: $3M Rule (Competition)• 2474: Centers of Industrial and Technical Excellence
Workload Allocation Planning
Workload Allocation Restrictions & OpportunitiesWorkload Allocation Restrictions & Opportunities
US Code Title 10 Subtitle A Part IV Chapter 146 Section xxxx
2460: Definition of Depot-Level Maintenance and Repair
“Material maintenance or repair requiring overhaul, upgrading, or rebuilding of parts, assemblies, or subassemblies, and the testing and reclamation of equipment, regardless of the source of funds or the location at which the maintenance or repair is performed.”
Each military service manages and operates its own organic Each military service manages and operates its own organic depot-level maintenance infrastructuredepot-level maintenance infrastructure
• Excludes procurement of major modifications or upgrades
• Does not address non-maintenance logistics functions such as:– Technical data– Engineering– Configuration Management– Supply Support
2460: Definition of Depot-Level Maintenance and Repair cont.
2464: Core Logistics Capabilities
• “Performance of workloads necessary to maintain a core logistics capability that is Government owned and operated (including personnel, equipment and facilities).”
• “SECDEF…shall assign such facilities sufficient workload to ensure cost efficiency and technical competence in peacetime while preserving surge capacity and reconstitution capabilities…”
• Services have flexibility to define Core workload
− Usually by weapon system or major commodity group
• Services determine when Core requirement has been met
─ Bottom line: A portion of CORE workload will always be performed by government personnel
─ The amount, if any, that can be contracted out will depend on Service assessments
2464: Core Logistics Capabilities cont.
Core Logistics Capability•Maintain and repair systems identified by SECDEF as necessary to fulfill the strategic and contingency plans
•Must be in place NLT 4 years after Initial Operational Capability
•Exceptions: Commercial Items, Special Access Programs, Nuclear Aircraft Carriers
Core Logistics Capability•Maintain and repair systems identified by SECDEF as necessary to fulfill the strategic and contingency plans
•Must be in place NLT 4 years after Initial Operational Capability
•Exceptions: Commercial Items, Special Access Programs, Nuclear Aircraft Carriers
Core Logistics Workload”Depot workload needed to maintain DoD Core Logistics Capability”
•Sufficient workload to ensure cost efficiency and technical competence in peacetime
•Preserve surge capacity and reconstitution capabilities necessary to support DoD strategic and contingency plans
Core Logistics Workload”Depot workload needed to maintain DoD Core Logistics Capability”
•Sufficient workload to ensure cost efficiency and technical competence in peacetime
•Preserve surge capacity and reconstitution capabilities necessary to support DoD strategic and contingency plans
DoD identifies both core logistics capabilities and the DoD identifies both core logistics capabilities and the workload required to maintain those capabilitiesworkload required to maintain those capabilities
2466: Limitations on Performance of Depot-Level Maintenance
PBL Workload Allocation Impact: • Limits funds spent on depot-level maintenance and repair by
non-Federal Government employees to 50% – By fiscal year– Calculated at Service or military agency (not program) level– Applies to depot maintenance, not other ILS elements
“Not more than 50 percent of the funds in a fiscal year to a military department or a Defense Agency for depot-level maintenance and repair workload may be used to contract for the performance by non-Federal Government personnel”
PBL Workload Allocation Impact: • After CITE designation, the Secretary may authorize and encourage
Center to enter into public-private cooperative arrangements – Referred to as a '‘Public-Private Partnerships”– Excluded from Service’s 50-50 (10 USC 2466) calculation if:
• Depot designated as a CITE• Work pursuant to partnership, AND• Is performed at depot by industry personnel
2474: Centers of Industrial and Technical Excellence (CITE) “The Secretary concerned, or the Secretary of Defense in
the case of a Defense Agency, shall designate each depot-level activity of the military departments and the Defense Agencies…as a Center of Industrial and Technical Excellence in recognized core competencies”
Depot Partnering:Enabled by Sections 2474 and 2563
• Can include articles manufactured or services performed by working-capital funded industrial facility
• Provides the basis for a Depot activity serving as a sub-contractor to a Commercial “Prime” contractor (i.e., Product Support Integrator)
• PBL Context – Organic Accountability: Purchaser (i.e. PSI) agrees to hold Government harmless except in the case of: – Government willful misconduct or gross negligence– Failure of the Government to comply with quality, schedule,
or cost performance requirements
The Secretary of Defense may sell … to a person outside the Department of Defense articles and services…that are not available from any United States commercial source.
• Section 2563: Sales of Articles or Services
2469: Requirement for Competition
“The $3 Million Rule” “The Secretary of Defense shall ensure that performance of
a depot-level maintenance and repair workload…is not changed to performance by a contractor or by another DoD depot-level activity…”
PBL Workload Allocation Impact:
Competition required if transferring DoD depot workload – That is currently performed at a Depot– Valued at $3M per year or greater [for shared workloads (a
portion is contracted out) applies only to that portion currently performed at the depot]
– Includes labor and material costs– Applies to both CORE and non-CORE workload
Section Known
as: Addresses: PBL Workload Allocation Impact
2460 Depot
Mx Defines “depot-level maintenance and repair” as touch labor.
Does not limit support provider options for non-maintenance logistics functions such as supply support, Configuration Management, engineering or technical data.
2464 CORE
Requires DoD to retain capability to maintain and to repair essential systems through development of Core Logistics Capability as defined in 2460.
DoD depots must retain Core capability and workload, but not all Core workload must be performed by DoD depots.
2466 50/50 rule
Limits the amount of funds spent on depot-level maintenance and repair workload by non-Federal employees to 50% of the total annual spending; calculated at the Service level by fiscal year.
Computed at Military Service level annually.
2469 $3M rule
Competition before existing Government depot workload greater than $3.0M may be transferred to another Government or commercial activity.
Must compete workload if transferring over $3M annually in maintenance and repair from a DoD depot
2474 CITE
Adoption of “best-business practices” at all organic repair depots. Requires SECDEF to designate each depot as a Center of Industrial and Technical Excellence (CITE).
Authorizes and encourages Public-Private Partnerships (PPP) with CITE.
2563 Sub-
Contracting
Sales of articles or services to a Commercial source.
Enables depot activities to become formal subcontractors to Commercial PSIs, thus incorporating organically repaired items in an overall PBL contract
US Code Title 10 Summary
text
Statutory Requirements
(Title 10)DoD Policy Best Value
Structure Agreements
text
Statutory Requirements
(Title 10)DoD Policy Best Value
Structure Agreements
• Government/Industry Partnering• Public-Private Partnerships (PPP)
• Best Practices
• Funding Types & Limitations
Workload Allocation Planning
Public-Private Partnering
• DoD Policy: “Sustainment strategies shall include the best use of public and private sector capabilities through government / industry partnering initiatives, in accordance with statutory requirements.” (Source: DoDD 5000.1, paragraph E1.17, dated 12 May 2003)
• Definition: A public-private partnership for depot maintenance is an agreement between an organic depot maintenance activity and one or more private industry or other entities to perform work or utilize facilities and equipment. (Source: JDMAG Report on Partnerships for Depot Level Maintenance, dated July 2004)
Enables industry to manage depot-levelEnables industry to manage depot-levelmaintenance & repair on Core systemsmaintenance & repair on Core systems
JOINT• Program Management
• Transportation
• Supply Chain Management
• Depot-Level Maintenance
GOVERNMENT• Depot-Level Maintenance
• Existing infrastructure• Marginal workloads
• O-level Maintenance• Service preference
• DoD Transportation System• In-theater
• Configuration Control
Public/Private Competencies
INDUSTRY• Product Support Integrator• Production/Manufacturing• Depot-Level Maintenance
• Partnerships• Non-Core
• Contractor Field Teams• Sustaining Engineering• Configuration Management• Tech Data Management• Subcontractor Management• Information Networking
Supply/DLA Depot Repair Contract Support
Transportation
O-Level Maintenance
Common Commodities
PSIProgram Manager
Risk
Remember: The PSI Integrates System Support
“The PSI is…charged with integrating all sources of support, public and private, defined within the scope of the Performance Based Logistics agreements to achieve the documented outcomes” - Defense Acquisition Guidebook, Para 5.3.1.5
PBL Partnering Opportunities
Industry Prime Vendor(Product Support Integrator)
Subcontractor
Subcontractor
Subcontractor
DoD Depot(Subcontractor)
Organic Depot as Subcontractor
to Industry PSI
Contractor utilizingDepot facilities for
Work sharing
Contractor/Depotpersonnel sharing
workloads
PBL Partnering Steps
Service designates “core” capability and workloads (minimum workload level of that must be performed by DoD depots)
Industry PSI and DoD identify potential DoD depot-level maintenance and repair partnering opportunities
PSI negotiates with DoD to identify specific DoD depot(s) as partner(s) for maintenance and repair
PSI negotiates Performance Based Agreements (contracts) with DoD depot(s)
PSI provides workload oversight in partnership with DoD depot(s)
1 2 3
4 5
text
Statutory Requirements
(Title 10)DoD Policy Best Value
Structure Agreements
text
Statutory Requirements
(Title 10)DoD Policy Best Value
Structure Agreements
WHAT: Logistics Elements
WHO: Product Support Integrators/Providers
Workload Allocation Planning
Capability, Skills, Infrastructure, Cost, Flexibility …
Other PBL Workload Allocation ConsiderationsLogistics Support Elements (What, Who, Where)
• Maintenance Planning• Technical Data• Facilities• Design Interface• Training & Training Support
• Manpower & Personnel• Supply Support• Support Equipment• PHS&T• Computer Resources
Policy & Preferences• Contractors on the battlefield• Retrograde management• DSOR/SORAP
• In-theater distribution• Surge• DMI Evaluation
Best Competencies, Partnering Opportunities, & Support Options• Artisan skills• Affordability
• Infrastructure• Public/Private flexibility
text
Statutory Requirements
(Title 10)DoD Policy Best Value
Structure Agreements
text
Statutory Requirements
(Title 10)DoD Policy Best Value
Structure Agreements
HOW:• DoD Funding Sources • Performance Based Agreements
• Contract (Fixed-Price & Cost-Plus)• Memorandum of Agreement (MOA)• Service Level Agreement (SLA)
Workload Allocation Planning
A PBA is any agreement with performance-based language
Working Capital Funds (WCF)• WCF vs Appropriated Funds
• Why Working Capital Funds?
• How the WCF Operates
• Navy WCF and PBL
• Additional WCF Resources
Logistics Support Funds Comparison
Appropriated Working Capital Fund
Type
• Operations & Maintenance -O&M• Procurement• RDT&E• MILCON
• Revolving fund for military service
Uses• All ILS elements • Supply management
• Depot-Level Maintenance • Transportation
Restrictions
• O&M – one year funds• Procurement – 3 year funds• RDT&E – 2 year• MILCON – 5 year
• Can only be used to fund activities associated with supply, depot maintenance and transportation
PBL Impact
• Funds Expire• Cannot guarantee availability of
funds beyond appropriation limits• “Multi-year” agreements achieved
through series of 1-year contracts subject to availability of funds
• Funds do not expire• Can be used to award true “multi-
year contracts• Must get appropriated funds from
other resource sponsors to fund additional logistics support elements
Why Working Capital Funds ?
• Defense WCF established by statute
• Working Capital Funds are used to:
Finance purchase of material
Finance DoD and commercial industrial services, including depot-level repair of components and platform maintenance
US Code Title 10 Subtitle A Part IV Chapter 131 Section 2208
Defense Working Capital Funds
$$Reimbursement
$$Payment
Goods orServicesProvided
CongressRevolving
Fund
AppropriationInitially
”Capitalizes” Fund
SupportProvider
Order
Customer
Annual Appropriation
Of SupportFunds
Customer
Navy WCF & PBL
• Navy Working Capital Fund has been used by the NAVICP to fund PBL sub-system contracts – Materiel– Repair– Supply infrastructure– Obsolescence management
• WCF is replenished through sales of goods and services funded by warfighter O&M dollars– Enables WCF revolving fund to maintain solvent– Must break-even – neither makes a profit nor incurs a
loss
How The NWCF Funds PBL Contracts
NWCF PSI
Fund Contract
Unserviceable Items
“Sell”
“Buy”
DEPOT REPAIR
NAVY DEPOT
SUBCONTRACTOR
CUSTOMER
REIMBURSEMENT
TO NWCF
Serviceable
Items
Additional WCF Resources
• Primer on Defense Working Capital Fund
• OSD on-line tutorial about Defense Working Capital Funds is available at:
http://www.dod.mil/comptroller/icenter/dwcf/dwcftrain.htm
DoD Contract Categories
Fixed-Price Cost-Plus
•Maximum risk on Contractor •Contractor has greater incentive to control costs
•Minimal risk on Contractor•Government pays allowable costs incurred by contractor.
•Use when support requirements and resources are well-defined
•Use when requirements are less defined (baseline not yet firm)
•Award Fee or Incentive Fee - Metrics related to performance, schedule, and/or cost
•Award Fee or Incentive Fee - Metrics usually based on cost targets
•FAR Part 12 and 15 •FAR Part 15 only
•Minimizes administrative burden on both parties
•Increased administrative burden on both parties
•Government must establish price reasonableness
•Government obtains full Contractor cost information
Take AwaysPBL Workload Allocation
• Statutory requirements have significant impact on
depot workload and PBL support strategy
• Most DoD support workloads are performed by a
combination of DoD and commercial providers
• Multiple DoD funding sources must be considered
• Contract type can help mitigate risk
• Public Private Partnerships consider best use of both
public and private sector capabilities
PBL workload allocation is ‘best value’PBL workload allocation is ‘best value’
IAW statutes, policy, and guidanceIAW statutes, policy, and guidance
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USAF C-21 Case
PSI Whitepaper
Navy F-18 Case Parts I & II
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AM Course Introduction
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New SystemLevel PBL Strategies