Decision-Support Quantitative Models for Valuing Incentives in Performance Based Contracts

Abstract

The purpose of this MBA project is to identify the actual cost savings when a Performance-Based Logistics (PBL) contract, with incentives, is awarded to replace a specified maintenance echelon for critical components or subcomponents of systems. The authors examine the impact on system availability to determine if a proposed investment will be practical. The entire logistics flow and maintenance processes, to include all associated sub-activities, are analyzed. To do this, they must initially identify all costs of operating the current organic maintenance echelon, which will become the PBL baseline. This will be used to determine the value added of any incremental percentage change in readiness or elimination of organic maintenance echelon(s). They propose to develop a simulation-based decision support tool to assist Program Managers (PM) with issues of valuing options for the improvement of system availability, and making appropriate investment options. Ultimately, this project will determine the financial viability and practicality of implementing a PBL incentive contract. Since there is no standard DoD Total Life Cycle Cost Model that can determine the costs associated with PBL incentives, how can program managers accurately compute the value additive when subcomponent reliabilities or logistics support elements change? This report focuses on the affect, in terms of dollars and Operational Availability (Ao), when assessing the potential application of a PBL strategy. Three realistic PBL scenarios are developed and analyzed with a focus on cost savings and Ao. Each scenario examines the affect on Life Cycle Cost (LCC) and or Ao when the PBL strategy is to do the following: (1) Outsource an organic, Intermediate, or Depot maintenance echelon; (2) Create incentives for the contractor to improve the Mean Time Between Failure (MTBF) through redesign of the system, subsystem, or major assembly level; and (3) Reduce the Turn Around Time (TAT).

Open PDF

Document Details

Document Type
Technical Report
Publication Date
Jun 01, 2005
Accession Number
ADA435671

Entities

People

  • George C. Estrada
  • Jeffrey J. Myers
  • Michael Aguilar

Organizations

  • Naval Postgraduate School

Tags

Communities of Interest

  • Autonomy
  • Ground and Sea Platforms
  • Human Systems
  • Weapons Technologies

DTIC Thesaurus Topics

  • Aircraft Equipment
  • Aircrafts
  • Business Administration
  • Contracts
  • Department Of Defense
  • Electronic Mail
  • Global Positioning Systems
  • Ground Control Stations
  • Logistics
  • Maintenance
  • Maintenance Personnel
  • Management Personnel
  • Military Science
  • Organizational Structure
  • Simulations
  • Spreadsheet Software
  • Unmanned Aerial Vehicles

Readers

  • Defense Acquisition Program Management
  • Life Cycle Cost Analysis