Acting Under Secretary of Defense for Acquisition, Technology & Logistics Frank Kendall issued a memorandum to service acquisition executives on May 14 reiterating the Department of Defense’s support for performance-based logistics strategies. Performance-based logistics strategies, or PBLs, are arrangements in which a contractor agrees to deliver specific outcomes in terms of readiness, reliability and other precisely-defined metrics. According to Kendall’s memorandum, a recent study conducted within his office “provided compelling evidence that properly constructed and executed performance-based product support strategies deliver best-value weapon system support.”
Best value in this context means an optimum tradeoff of price and performance. It doesn’t mean just the lowest price, because that can always be achieved by scaling back performance metrics. Instead, it means getting the best results for warfighters in terms of performance at an affordable price. That may seem reasonable enough, but as Kendall notes, “developing correctly structured, priced, and executed PBLs is often a more complex task than initiating a standard transactional arrangement.” The reason why is that traditional logistics contracts measure contractor inputs, whereas performance-based logistics is keyed to results. It’s a more sophisticated approach to acquiring support and sustainment services.
During periods such as today when threats and budgets seem to be retreating in tandem, there is sometimes a tendency among politicians and policymakers to retreat into wishful thinking about what can be achieved using new management concepts. Performance-based logistics is the precise opposite: a proven approach to delivering readiness at best value by creating a sound structure of incentives for providers. The willingness of senior policymakers to endorse PBLs as their preferred approach to securing logistics support in appropriate circumstances shows they have a solid grasp of what the times require.
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