There is buzz around the Pentagon about something called Performance-Based Logistics (PBL) that just won’t go away and it is starting to be heard with respect to companies that have not traditionally done business with the DoD.

In DoD speak, PBL is defined in the Defense Acquisition Guidebook as “…an integrated, affordable, performance package designed to optimize system readiness and meet performance goals for a weapon system through long-term support arrangements with clear lines of authority and responsibility.”

The emergence of Performance-Based Logistics reflects how warfare has changed post-Cold War. Instead of facing a single imminent standing army threat such as the Soviet Union, the U.S. armed forces now must be agile and prepared to engage in fast-paced, rapidly emerging conflicts fought on multiple fronts against different enemies. This means that the previous doctrine of stockpiling large quantities of parts to cover necessary repairs at known, fixed locations is no longer effective.

At the same time, the average age of equipment being used by the military continues to grow, creating an ever-growing requirement for maintenance to keep the equipment combat capable. This generates a competition for scarce financial resources.

PBL began to emerge as a body of thought in the late 90s, and was codified in 2001 when the DoD issued policy stating that PBL would be their preferred method for procuring support for the weapon systems.

The University of Tennessee has profiled the evolution of PBL in a white paper “Performance-Based Logistics: The Changing Landscape in Support Contracting” available online at http://bus.utk.edu/utpbl/white_papers.htm.

The fundamentals of PBL

PBL is a different approach to buying what the military calls logistics support (which includes maintenance and repair). PBL doesn’t change the nature of the requirement: the Pentagon still needs to keep airplanes flying, tanks rolling, and warships afloat around the world. What is distinctive about PBL is that now the DoD client buys performance outcomes instead of what has historically been individual transactions defined by product specifications. PBL is about paying for results.

In the past, the DoD has dictated to contractors what to produce, when to produce it, what activities to perform, and paid for it. In a classic fee-for-service arrangement, the more the contractor produced, the more money they made. With the implementation of PBL, the government simply tells the contractor what the desired performance outcome is in terms of measurable metrics and lets the contractor utilize industry best practices to efficiently and cost effectively meet those goals.

Under this arrangement, the DoD does not pay for unit transactions of such support services as warehousing, transportation, spare parts, repairs, or hours of technical support.

So what makes PBL work?

The University of Tennessee is currently conducting a PBL benchmarking study funded by the U.S. Air Force, reviewing twenty-four PBL programs from the Air Force, Army, and Navy that have documented PBL successes. The intended outcome of this research is to benchmark PBL successes and utilize those successes to help the USAF reach the next level in Performance-Based Logistics.

As part of the research, the University of Tennessee has identified 15 attributes of a good PBL. These include:

- Performance Definition. Top-level broad scope outcomes optimizing readiness, availability, reliability, cycle time, and affordability.

- Performance Measurement. Minimum number of top-level ‘Outcome’ metrics that measure and are aligned to warfighter needs and tightly aligned with Support Provider scope of authority.

- PBL Knowledge Base. Comprehensive knowledge and experience in PBL concepts, tenets, business model, and implementation of PBL strategies.

- Organizational Alignment. Both Horizontal and Vertical alignment, with full visibility and coordination on top-level outcomes driving lower-level outputs in most efficient manner.

- Risk Alignment. Effective balance of increased Support Provider risk offset by high flexibility and high reward incentives.

- Stakeholder Perspectives. Strong consensus across all stakeholders toward common support strategy objectives. Strong top-down support to align stakeholders for optimal solution.

- Work Scope. Scope of work encompasses broad range of Logistics elements at highest possible level of system operational use and is fully aligned with assigned performance and support outcomes.