Historically, the government bought military equipment, supplies and services “by the yard” with relatively little thought as to the costs of integrating all the parts and activities. How the troops used that material and support was sometimes a secondary consideration. In Vietnam, mislaid shipments rotted or rusted in the jungle. And in later years, this approach led to all kinds of procurement scandals, Congressional investigations and fielding delays. As if that weren’t enough of a headache, the government also maintained a legion of procurement officials and contract specialists. They helped the government get the best price, if not always the best outcome.
A new approach, called performance-based logistics or PBL, promises a radical break with the government’s traditional contracting system. The new method focuses on performance outcomes, not the acquisition of individual parts or particular repair actions. That means the government tries to buy what it really wants — an airplane ready to fly, a satellite communication system that works — instead of assembling its own collage of hardware, spare parts and technical manuals.
Specific logistics contracts are called performance-based agreements, and they can be extremely successful. The military can get more bang for its buck when less of its equipment is sidelined for repairs. And the government can save money and cut back on logistics personnel. An AIA study of 23 of these new logistics agreements showed an average annual savings of $21 million, compared to the old contracting approach.
But the Defense Department hasn’t made a wholesale switch to the new system, despite the promising data so far. Some military planners are skeptical the system can work for them. What if the Army runs out of spare truck parts because its just-in-time inventory can’t keep up in a crisis? What if the Air Force loses the ability to repair its own jets by relying too much on contractor assistance? These fears sound reasonable, but they don’t always hold up under scrutiny. Acres of spare parts don’t do much good if they are buried in disorganized warehouses. And today’s aircraft maintainers are already a mix of public and private-sector personnel.
Only a few of the Pentagon’s major weapons systems now use performance-based support contracts. The potential to save money — and get more gear to the troops who need it, when they need it — is enormous. These contracting methods also have great potential for support services such as medical care and mail delivery, where the military already relies heavily on contractor support. In an era when some question whether the U.S. can maintain enough combat capability, streamlining the military’s logistics train makes sense. Performance-based logistics contracts can exploit the best capabilities of the private sector on behalf of the nation’s security.
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