 |
FAQs
|
 |
Note: While the answers to these PBL frequently asked questions (FAQ) represent potentially useful reference material, they are provided for informational purposes only and do not replace, supersede, or take precedence over any statutory or FAR/DFARS requirements, or DoD/Service policy, instructions, regulations, and/or guidance.
Business Case Analysis
- Question: What is a Product Support BCA?
Answer: A decision support tool that compares alternative product support strategies. It is also an expanded cost/benefit analysis with the intent of determining a best value solution for product support. The BCA assesses each alternative and weighs total cost against total benefits to arrive at the optimum solution. The BCA process goes beyond cost/benefit or traditional economic analyses by documenting how each alternative fulfills the strategic objectives of the program; how it complies with product support performance measures; and the resulting impact on stakeholders. A BCA is a tailored process driven by the dynamics of the pending investment (PBL) decision. The BCA identifies which alternative support options provide optimum mission performance given cost and other constraints, including qualitative or subjective factors.
- Question: Why are they important?
Answer: To assist the PM/PSM is developing cost effective product support (aka sustainment) strategies. Per Public Law 111-84, Section 805 (FY 10 NDAA), product support strategies must be validated and revalidated by a BCA.
- Question: When are they required?
Answer: DoD BCA Guidance requires PM/PSMs to use sound business judgment (i.e. BCA) when selecting between support alternatives and support strategies, and is used to support award of a PBL contract. Per FY10 NDAA, Section 805, BCAs need to be conducted to validate weapon system product support strategies and updated with a change in strategy or every 5 years, whichever occurs first. These BCAs:
- Are used in the initial decision to invest in a project.
- Guide the decision to select among alternative approaches.
- Are used to validate any proposed scope, schedule, or budget changes during the course of the project.
- Should also be used to identify the various budget accounts and amounts affected by the various product support strategies.
- Should be a living document; as project or organization changes occur they should be reflected in updates to the business case.
- Should be used to validate that planned benefits are realized at the completion of the project.
- Should be used in further decisions to sustain or enhance the solution and to refine estimation of benefits and costs for future projects in the organization.
- Question: How much time do Product Support BCAs generally take to prepare/complete?
Answer: It is dependent upon the complexity of the PBL strategy (system, sub-system, component).
- Question: Who is responsible for the development of the BCA?
Answer: The Program Manager (PM) and the Product Support Manager (/PSM) is ultimately responsible and accountable for the development of product support BCAs, however supporting commands may conduct BCAs to justify award of a PBL contract, e.g. NAVSUP "contract BCA" to support award of a PBL contract covering a specific market basket, scope of work, and period of performance.
- Question: Where can I find additional information about product support BCAs?
Answer: Extensive references and training are available, including but not limited to:
back to top
Contracting Strategies
- Question: What is the optimal contract type for a PBL effort?
Answer: Generally, the optimal contract type for a PBL effort is a fixed price vehicle, which uses a per unit or per unit throughput basis. In fact, direction from the Office of the Secretary of Defense states that the desired PBL pricing approach is a fixed price model. “When robust competition already exists, or there is recent competitive pricing history, I [USD(AT&L)] expect components to be predisposed toward Firm-Fixed-Price (FFP) type contract arrangements. FFP should also be used to the maximum extent reasonable when ongoing competition is utilized in multiple award contract scenarios.” (BBP 3.0)
- Question: If PBL program pricing history is not available, then what contract type is recommended?
Answer: It is usually necessary to begin with cost reimbursement (or cost plus) contracts in the early phases of PBL implementation while the appropriate cost and resource baselines are maturing. It is rare that a program matures to the point where all elements appropriate for cost plus elements are eliminated, and it is risky to implement fixed price agreements without first understanding the baseline performance and cost of the existing business model. Greater maturity allows the program to develop realistic cost and performance profiles. This maturity leads to program stability as cost uncertainty is driven down. As a result, programs can then transition to a PBL pricing model with more of a fixed price emphasis.
- Question: What are appropriate PBL incentives?
Answer: All PBLs implicitly use incentives. Best practice PBL programs use incentive strategies that are tightly aligned, promoting behaviors and outcomes that benefit both the customer and supplier. The incentives should include an explicit reflection of factors like program maturity, scope of agreement, complexity of the system, context of use, etc.
A PBL agreement can leverage various types of incentives. Contracts can be incentivized based on award fees (cash payments/bonuses) or extended contract terms. Award term extensions of the contract whereby the contract will be extended if desired outcomes are being achieved. Cost-cutting targets are inherent if a fixed price model is used; the more the supplier cuts costs the more margin they make; contract price adjustments are made at pre-defined timeframes to review costs and re-price the work. However, not all PBL programs are fixed price and as such, any cost plus type contract should include some form of cost savings incentive.
It is important to keep in mind that the government has wide discretion in assembling and blending contract types and incentive types, tailored to fit the circumstances of the program. There is no one-size fits-all, universally applicable contract and incentive template.
- Question: What is the optimal PBL contract length?
Answer: Longer-term contracts encourage long-term investments to improve product or process efficiencies—a key desired outcome of a PBL – but there is no real guidance or “right answer” for the appropriate length of a contract. The general rule of thumb is that the contract length should be commensurate with the payback period for the supplier’s investments. There have been some successful PBL contracts of up to 10 years for the US government and up to 20 years with foreign governments – although this period of performance is more the exception than the rule.
The government gives guidance on this in Section 2304 of title 10 USC, which reads that contract length may be “any period up to five years and may extend the contract period for one or more successive periods pursuant to an option provided in the contract or a modification of the contract. The total contract period as extended may not exceed 10 years unless such head of an agency determines in writing that exceptional circumstances necessitate a longer contract period.”
DoD guidance recognizes that effective PBL contracts are multi-year contracts (i.e., 3 to 5 years with additional option or award term years), with high confidence level for exercising options/award term years. They also typically feature provisions to recognize supplier investment and opportunities to recoup investments.
Longer-term contracts are more conducive to effective PBL implementation because of simple economics. Up-front investment drives performance improvement and the annual “payback” for a PBL investment - as reflected in financial returns in the “out years” - is what justifies the up-front investment. Therefore, longer planning horizons justify higher up-front investments because of the higher total return opportunity for both the provider in terms of “paybacks” and the government in terms of improved performance and/or cost savings. One year contracts do not encourage support provider investment, and therefore are less effective in generating performance or cost improvements.
- Question: What is the difference between multi-year and multiple year contracts?
Answer: It is important to note the differences between these two terms, as they are easily confused. Here are the primary characteristics of each type:
Multi-Year:
- Buys more than one year’s requirement without having to exercise options
- Beyond one-year investments can be recovered if contract terminated
Multiple Year:
- Contract written for multiple years
- Only first year is ‘guaranteed’
- No recovery of investments if contract terminated
It is also important to note that the PM generally does not have the authority to implement multi-year contracts, but exceptions do exist. Working capital fund authorities can be used for multi-year contracts, for example.
- Question: What is the optimal contracting approach?
Answer: There are 2 major types of methodologies that can be potentially used to implement PBL contracts: the supply or service contracting approach. Both types have been used successfully.
PBL Contracts as Supply Contracts – Supplies are broadly defined by FAR Part 2 to mean all property except land or interest in land. It includes (but is not limited to) public works, buildings, and facilities; ships, floating equipment, and vessels of every character, type, and description, together with parts and accessories; aircraft and aircraft parts, accessories, and equipment; machine tools; and the alteration or installation of any of the foregoing.
The supply contracting PBL approach has been used extensively, particularly by the Navy and the Naval Supply Systems Command (NAVSUP). The PBL contract does not procure work in terms of an amount of effort, and the contractor is not paid based upon performance of any number of labor hours or labor years in the contract. The PBL contract requires delivery of end items of supply and measures the performance of the end item delivered to the Fleet.
Since the PBL contract requires delivery of an end item of supply, it is within the discretion of the contractor to deliver a new spare, overhaul the item, or remanufacture the item to provide the specified availability and reliability. The Government receives a rebuilt or new end item with a new (or nearly new) life expectancy resulting from processes similar to original manufacturing.
Under the PBL contract, end items of supplies are delivered, which are measured against availability and reliability metrics. The PBL contract does not result in the Government procuring a task, but in the delivery of an end item of supply.
PBL Contract as Service Contracts – A service contract is defined by FAR Part 37 to mean a contract that directly engages the time and effort of a contractor whose primary purpose is to perform an identifiable task rather than to furnish an end item of supply. A service contract may be either a non-personal or personal service contract. It can also cover services performed by either professional or nonprofessional personnel whether on an individual or organizational basis.
As listed on the Defense Procurement and Acquisition Policy (DPAP) webpage, service contracts can include the following:
- Equipment-related services
- Knowledge-based services
- Facility-related services
- Electronic and Communications services
- Transportation services
- Research and development
- Logistics Management Services
- Construction Services
- Medical Services
It should be noted that the Department of Labor (DOL) Field Operations Handbook provide the basis for distinguishing between supply and service contracts based on the nature of the repair- i.e. when remanufacturing or overhaul is involved. The Walsh-Healey Public Contract Act generally applies to the remanufacturing and furnishing of supplies.
Contracting agencies are required to initially determine whether the work to be performed under a proposed contract would principally involve remanufacturing work or service work based on the above guidelines and incorporate the appropriate Walsh-Healey or SCA labor standards clauses into the contract prior to issuing a solicitation.
back to top
Funding Strategies
- Question: How can I execute a long-term PBL contract when there is so much budget uncertainty?
Answer: One of the biggest challenges to PBL is funding stability and budget instability. Contract provisions should reflect fact-of-life funding variability and provide both the customer and supplier adequate adjustment mechanisms to mitigate risk to accommodate funding variability.
While PBL programs can be optimized when funding is stable, it is important to accept budget realities. In today’s austere budget environment, there is no such thing as certainty in appropriated funds. Therefore, all parties to a PBL agreement should work to identify and codify a “funding baseline” or “floor,” i.e, the minimum funding level that will allow the program to endure, with flexible structures above the baseline given requisite funds availability.
- Question: I keep hearing about “colors of money.” What does this term mean?
Answer: “Colors of money” refers to different types of funding appropriations. A thorough overview of the types of appropriations can be found in the DAU ACQuipedia article entitled Types of Funds. A summary of the primary categories are as follows, along with their overall scope and statutory time limits:
- Research, Development, Test, and Evaluation (RDT&E) – Covers RDT&E activities and expenses. Policy allows incremental funding, and the funds are available for two years.
- Procurement – For procurement of end items greater than or equal to $100K per unit, all centrally managed items, initial spares and labor for certain production-related functions (e.g., item assembly, quality assurance). Policy requires full funding, and the funds are available for three years.
- Operations and Maintenance (O&M) – For replenishment spares, fuel, civilian salaries, construction projects less than $750K, travel, non-centrally managed end items less than $100K per unit cost. Policy requires annual funding, and the funds are available for one year.
- Military Personnel (MILPER) – For Military Personnel expenses. Policy requires annual funding, and the funds are available for one year.
- Military Construction (MILCON) – Covers construction projects greater than or equal to $750K. Policy requires full funding, and the funds are available for five years.
Another type of fund is the Working Capital Fund (WCF), which is a non-expiring, revolving fund that allows for contracts with multiple year performance periods. Congressional multi-year contract authority is not required for these contracts, greatly simplifying contract execution. Funding is applied to long term contracts in annual increments, reducing the amount of funding that must be obligated at any given time.
- Question: How do “colors of funding” affect PBL contacts?
Answer: As described in the response above, current funding requirements stipulate that specific appropriation types be used at various points in the life cycle, that these appropriation types be used to address discrete types of products or support, and that these funds be used within statutory time limits. In order for PBL to be effective, many of these different colors of money may be needed to procure, support and sustain DoD weapons systems and equipment over the life cycle.
Time and scope restrictions on various appropriations are a challenge to manage, and often result in less than optimal PBL contracting structures. During System Acquisition, PBL may be funded with Procurement and, depending on scope of support, RDT&E funds. After fielding, O&M funds are the predominant source of funding for system sustainment, although multiple ‘lines of accounting’ may be required to address the disparate sustainment functions, e.g., depot maintenance, spares, software and personnel. The use of multiple funding types and lines of accounting restricts flexibility in PBL execution activities, and complicates tracking and baselining of sustainment costs.
In order to capitalize on the flexibility inherent in WCF, there has been an increased use of revolving funds to enable PBL strategies. It facilitates award of long-term PBL contracts, which allow industry to make investments not possible in a traditional support environment. The Navy has been very successful in utilizing the Navy Working Capital Fund (NWCF) to implement PBL. Their success with NWCF allows for direct interface with the Integrated Supply System and use of existing supply system infrastructure. Use of the Integrated Supply System has guaranteed transparency to Fleet users…as identical systems and procedures are employed by Fleet customers under PBL.
Per numerous studies and real world examples, funding through the WCF can be a significant financial enabler of the PBL strategy though the use of revolving funds.
back to top
Metrics & Incentives
- Question: What do we mean when we say “PBL is all about Performance”?
Answer:
- When obtaining Performance, need to specify what is needed - Performance Outcomes
- Outcomes must be clearly defined and measurable - Performance Measures
- Support Providers must be motivated to achieve outcomes - Performance Incentives
- Question: What are the key considerations of performance measurement?
Answer:
- Translating performance outcomes specified by warfighter into Performance Metrics (with measureable unit & timeframe) is critical process
- Product Support Integrators must be motivated to achieve performance outcomes through well-crafted Performance Incentives
- Question: What else?
Answer: It’s all about performance, including:
- Performance Outcome: Requirement (typically stated by customer)
- Performance Measure: Typically a mathematical equation (e.g., “miles per gallon”)
- Performance Metric: Measure with unit and conditions (“average # miles in city”)
- Performance Incentive: Motivate PSI and/or PSP decisions and investments, which results in the level of performance delivered to the customer
- Question: I’ve heard of something called SMART metrics. What are they?
Answer: SMART is an acronym that means quality (or smart) metrics should be:
- Specific: The metric should be clear in what it is measuring. It should be specific and targeted to the area you are measuring.
- Measurable: Enables collection of data that is accurate and complete. Some metrics are not easily measurable, due to the lack of accurate or timely information or to disagreement about how to measure data.
- Actionable: Metric should be easy to understand and be clear that there must be some action you should be able to take to influence performance.
- Relevant: Focus on important areas with leverage associated with them.
- Timely: Information must be available in a time frame that enables action.
- Question: So what constitutes a good performance metric?
Answer: Good performance metrics include:
- Key to Achieving & Improving Performance
- Linked to system level objective
- Appropriate to scope and responsibility
- Metrics for contracts should reflect processes that contractor has control of
- Specify unit of measure
- Specify acceptable range or threshold
- Motivate desired long-term behavior
- Understood and accepted
- Easy to collect data and verify
- Can be readily assessed
- Provide timely feedback
- Question: What are good examples of potential measurement units for performance metrics?
Answer: Types of units include:
- Time: Delivery time, schedule adherence, CPFH
- Accuracy Rates: Most often stated in %
- Error Rates: Number of mistakes/errors allowed in meeting performance standard
- Milestones: % complete by target date
- Cost: Hourly, annual, life-cycle
- Question: Can I also use performance thresholds?
Answer: Yes! For example:
- Measurement during a period
- Time (delivery within 36 hours in CONUS)
- Number (maximum of 4 days late from depot)
- Percentage (5% not mission capable supply)
- Improvement over multiple periods
- Product (improve quality by 3% each quarter)
- Process (increase efficiency 10% during 12 months)
- Cost (reduce support cost from previous fiscal year)
- Question: How do I select performance metrics? Or what constitutes a good performance metric?
Answer: Considerations include:
- Link metrics to top risks and problem areas
- Multiple metrics can reinforce desired behavior or create undesirable conflicts
- Avoid too many metrics and over-measurement
- Metrics only as accurate as the underlying data
- Metrics should be incentivized
- Question: Aren’t there required DoD product support metrics?
Answer: Called the Life Cycle Sustainment Outcome Metrics, encourage you to check out Para 3.3 Metrics section of the DoD Product Support Manager (PSM) Guidebook, the Life Cycle Sustainment Outcome Metrics ACQuipedia article and CLL 001 Life Cycle Management & Sustainment Metrics continuous learning module for additional information.
- Question: Can these top-level life cycle sustainment outcome metrics be put on contract or should we use tailored lower-tier metrics?
Answer: Either or both. “One of the most critical elements of a PBL strategy is the tailoring of metrics to the operational role of the system and ensuring synchronization of the metrics with the scope of responsibility of the support provider.” See both Para 3.3 Metrics section and “Appendix B – Typical Supporting Performance Metrics” of the DoD Product Support Manager (PSM) Guidebook.
- Question: What about incentivizing performance? What should I consider when selecting performance incentives?
Answer: These include but are not limited to:
- Make sure incentives are built upon performance objectives and standards and ensure that they are realistic, measurable, and attainable
- Incentives should be consistent with the effort and contract value
- Incentives must be carefully structured to consider overall impact and to avoid any unintended consequences while providing value for achieving mission
- Be careful what you ask for, you will likely get it (and may not be able to afford it – or may not have really needed or wanted it!)
- Question: What kinds of incentives are available?
Answer: See also the contracting strategies section of these FAQs. However, award fee, incentive fee, award term, shared savings/gain sharing, exercising option years are all examples of the kinds of incentivizes available.
- Question: What are some remedies if my PSI or PSP does not meet my performance requirements?
Answer: These could potentially include but are not limited to:
- Requiring provider to perform the services at no additional cost until the performance metrics are met
- Not exercising the award term agreement extension or contract termination if performance goals fail to be attained
- Reducing or eliminating award/incentive fee
- Question: What else should I consider when incentivizing performance?
Answer: Other considerations include:
- PBL arrangements should strive to include metrics that support OSD’s "Top Level Life Cycle Sustainment Outcome Metrics"
- Realize that it may not always be feasible for Availability to be a performance metric: the integrator or provider may not control all contributing logistics support elements
- Critical elements of a PBL strategy include the tailoring of metrics and ensuring synchronization with the support provider scope of responsibility
- A good metric is imposed on the organization that controls the process producing the metric and is accepted as meaningful by the customer
- A Performance Assessment Plan that provides appropriate level of monitoring and management is vital to achieving the desired performance
- Question: How do warranties from industry differ from a PBL arrangement?
Answer: Warranties and PBL arrangements are not synonymous. Generally, for a PBL, the government is buying performance based on a standard of use such as flight hours, operating hours, or cycles. If the government is paying a fixed price per operating hour, a warranty isn’t needed. The contract is self-governing since the contractor is on the hook for any failures. In fact they have a built in incentive to reduce failures. Outside of a PBL, If the government is buying non-commercial items of supply or a repair process performed to a set specification, there is no need for an express warranty since it is required that the contractor perform to spec. In sustainment (that is once accepted), if it’s a commercial item, government policy is to take advantage of any warranties offered since the risk pool goes beyond the items the government is procuring. If it’s a government unique item, policy is to self-insure since the government represents the entire risk pool.
The key provision in the FAR and DFARS to consider when generating requirements is FAR 46.702(2)(c): The benefits to be derived from a warranty must be commensurate with the cost of the warranty to the Government. This requires documentation in the business clearance. If it doesn’t meet that standard, the contracting officer shouldn’t incorporate an express warranty into the contract.
FAR Subpart 46.7-Warranties
46.701 [Reserved]
46.702 General.
(a) The principal purposes of a warranty in a Government contract are-
(1) To delineate the rights and obligations of the contractor and the Government for defective items and services; and
(2) To foster quality performance.
(b) Generally, a warranty should provide-
(1) A contractual right for the correction of defects notwithstanding any other requirement of the contract pertaining to acceptance of the supplies or services by the Government; and
(2) A stated period of time or use, or the occurrence of a specified event, after acceptance by the Government to assert a contractual right for the correction of defects.
(c) The benefits to be derived from a warranty must be commensurate with the cost of the warranty to the Government.
back to top
Product Support Arrangements
- Question: What is a Product Support Arrangement (PSA)?
Answer: The term "product support arrangement" was introduced in Section 805 of Public Law 111-84 (FY10 National Defense Authorization Act). The Act defined product support arrangements as “a contract, task order, or any type of other contractual arrangement, or any type of agreement or non-contractual arrangement within the Federal Government, for the performance of sustainment or logistics support required for major weapon systems, subsystems, or components. The term includes arrangements for any of the following:
- Performance-based logistics
- Sustainment support
- Contractor logistics support
- Life-cycle product support
- Weapon systems product support
- Question: What is the purpose of a PSA?
Answer: To enable Performance Based Life Cycle Product Support (PBL), the following must be documented:
- An acceptable range of weapon system performance objectives
- Corresponding support necessary to meet that level of performance
- Formal, disciplined and quantified arrangement to delineate anticipated level of required support
PSAs accomplish this by establishing the framework for the coordination and alignment of resources in support of customers. PSAs also help ensure that promised service levels can be fulfilled, as well as help in aligning resources to the service levels. Ultimately, however, they are used document expected performance outcomes.
- Question: What are the benefits of PSAs?
Answer: Product support arrangements are an enabler of the Product Support Business Model (PSBM) that is discussed in detail in the DoD Product Support Manager (PSM) Guidebook. Additionally, the term is part of the discussion regarding the responsibilities of the Product Support Manager (PSM). Among his/her assigned duties, the PSM is tasked with periodically reviewing product support arrangements between Product Support Integrators (PSIs) and Product Support Providers (PSPs) for consistency with the overall product support strategy. Performance based product support arrangements are focused on outcomes vice transactions and should possess the following attributes:
- Clear and well understood cost, schedule, and performance objectives with associated metrics to achieve documented Warfighter requirements
- Well defined roles and responsibilities
- Conflict adjudication procedures
- Reliability, availability, maintainability, supportability, and cost improvement targets
- Identified data sources and collection frequency
- Clearly stated arrangement terms and conditions including incentives and penalties
- Planned flexibility
- Processes for unforeseen circumstances identification and management
- Established business rhythm
- Performance reviews
Detailed information regarding product support arrangements and their role in the product support business model can be found in the Product Support Manager Guidebook.
- Question: How do Product Support Arrangements (PSA) differ from or align to Performance Based Agreements (PBA)?
Answer: When the PSA is tied to system or a subsystem/component level performance that describes measurable service and performance level parameters based on customer requirements and expectations it is known as a Performance Based Agreement.
- Question: What kinds of PSAs are available and what do they look like?
Answer: PSAs document terms, objectives, and scope of support with DoD support organizations. They are not legally binding by law unless in the form of a formal contract, but they are designed to hold each party accountable. They are generally between two or more government organizations, but can also include other parties (i.e. contractors). In addition to contracts, for government to government arrangements, documents such as Memorandums of Understanding (MOU), Memorandums of Agreement (MOA), and Service Level Agreements (SLA) are often used. MOUs tend to be more top level and generally outline broad principles, while MOAs tend to be more specific. SLAs are similar to MOUs/MOAs, however they are generally less formal and more “promises of support.”
back to top
Product Support Integrators (PSI)
- Question: What’s the best way for me as either a PSI or a Product Support Manager (PSM) to manage my PSPs?
Answer: In order to manage your PSPs effectively you should remember that an important part of any PBL is the relationship between the PSP and the PSI or PSM. The government program office and the PSP share the same basic goals and the best way to achieve these goals is through maintaining a business environment based on professional levels of collaboration, transparency, and trust. Note that communication, collaboration, transparency and trust should be mutual, limited only by legal and FAR/DFARS requirements.
- Question: What is the legal basis for a Product Support Integrator?
Answer: As defined in Public Law (P.L.) 111-84, codified from Section 805 of the 2010 National Defense Authorization Act (NDAA), a PSI is “an entity within the Federal Government or outside the Federal Government charged with integrating all sources of product support, both private and public, defined within the scope of a product support arrangement.”
- Question: Where does a PSI fit within the various roles and responsibilities of the Product Support hierarchy?
Answer: As defined within the Product Support Manager’s Guidebook (April 2012) available at https://acc.dau.mil/CommunityBrowser.aspx?id=470931, the Product Support Business Model, shown below, defines the hierarchical framework in which the planning, development, implementation, management, and execution of product support for a weapon system component, subsystem, or system platform will be accomplished over the life cycle. The objective of product support is to provide the Warfighter, at the top of the hierarchy, with consistent affordable operational readiness of weapon systems. The Warfighter depends upon the Program Managers (PM) across the range of weapon systems to provide that readiness. Within the Program Office, the PM assigns the responsibility for developing, planning, implementing, and executing that product support strategy to the Product Support Manager (PSM), an inherently governmental function. The PSM, employing outcome-based sustainment (also called Performance Based Logistics (PBL) or Performance Based Lifecycle product support (also PBL), may delegate specific portions of sustainment responsibility to one or more PSIs, who, as defined by law, integrate the support services of a range of Product Support Providers (PSPs) to achieve the specified warfighter required outcomes.
- Question: Can the PSM and the PSI be one and the same person (or come from the same organization)?
Answer: There is no law or policy that prevents the PSM from performing the duties and activities of the PSI role, but it is not the intent or expectation of the PSM to also assume PSI responsibilities. The responsibilities of the PSM are significant, and are more strategic than the day-to-day responsibilities of assuring the integration and execution of lower-level product support functions.
- Question: Can there be more than one PSI?
Answer: Yes. There is no limit to the number of PSIs that can be designated by the PSM, but PSIs are generally assigned a specific scope of responsibility that aligns either with subsystems or components on the weapon system, or for specific Integrated Product Support (IPS) Elements (see guidance and descriptions in the DoD Integrated Product Support (IPS) Element Guidebook). There can be a single PSI for the entire weapon system, or two (for example) for an aircraft airframe and propulsion system), or as mentioned, multiple PSIs for various subsystems or components of the weapon system. Each PSI would then have responsibility for accomplishing designated performance outcomes for their assigned scope of sustainment responsibility.
- Question: What exactly does the term “Integration” mean in the PSI role?
Answer: Product Support is accomplished through performance of the range of functions defined as Integrated Product Support (IPS) Elements. There are currently 12 IPS Elements defined in Appendix A of the DoD Product Support Manager (PSM) Guidebook. They are:
- Product Support Management
- Design Interface
- Sustaining Engineering
- Supply Support
- Maintenance Planning and Management
- Packaging, Handling, Storage, and Transportation (PHS&T)
- Technical Data
- Support Equipment
- Training & Training Support
- Manpower and Personnel
- Facilities and Infrastructure
- Computer Resources
The effective support and sustainment of any weapon system, subsystem, or component over its lifecycle always involves several, and often all, of these IPSEs. Each of them is usually performed not only by separate organizations, but often by either (or both) the public and private sector, and in geographically disparate locations. Yet each of these functions is dependent, to a greater or lesser degree, on the other functions. Effective maintenance cannot be performed without having the required spare parts (supply support) and a properly trained maintainer (Training & Training Support, Manpower and Personnel) utilizing the proper tools, equipment and facilities (Facilities and Infrastructure), guided by the appropriate instructions (Technical Data). In an organization as complex as the Department of Defense and within each of the Military Services, there is a critical need to orchestrate the performance of these functions such that they enable and optimize the performance of the other functions necessary to maintain weapon systems at required operational readiness. This critical process is termed “integration,” and the responsibility to manage and accomplish that integration has been assigned to the role of the Product Support Integrator. Without effective integration, there is a probability that each of the separate IPSEs and their functional application will sub-optimize within their "functional stovepipes," rather than working in harmony to optimize at the warfighter end-item level. The PSI ensures this does not happen.
- Question: Does it make any difference whether the PSI is a DoD entity or an Industry entity?
Answer: No. DoD law, policy, and guidance is very clear. As mentioned above, P.L. 111-84, section 805 of the 2010 National Defense Authorization Act (NDAA) states, “The term 'product support integrator' means an entity within the Federal Government or outside the Federal Government charged with integrating all sources of product support, both private and public, defined within the scope of a product support arrangement” [italics added].
- Question: How can an industry PSI manage DoD workers, or vice versa, in accomplishing the “integration” of product support?
Answer: The vast majority of product support functions are accomplished by a combination of both public and private sector workers, not only working separate functions, but working together on common functions. The collaboration of public and private sector workers is usually done under a Public-Private Partnership, enabled by DoD statute in Title 10, Section 2474 and other sections. For example, if an industry Original Equipment Manufacturer (OEM) is designated as a PSI, with responsibility for delivering metric outcomes dependent on organic performance of depot maintenance, then the industry provider has the ability to enter into a Public-Private Partnership with the depot (or depots, if more than one), in which the details of the roles and responsibilities to facilitate achievement of the necessary outcomes through their mutual efforts is documented. This collaboration can apply under an Organic PSI as well.
- Question: Haven’t we always had someone, or an organization, responsible for the integration of product support, i.e., a “PSI” without the nomenclature?
Answer: To some degree, yes. The Program Manager (PM) is assigned, by policy, the role of the “Total Life Cycle System Manager,” or TLCSM. This role encompasses both the acquisition and sustainment of a system over the life cycle. But the PM does not (in most cases) control the funding for sustainment, nor are they in the direct line of authority over the DoD Product Support Provider (PSP) organizations that accomplish sustainment. In the performance-based support model (Product Support Business Model, as defined by OSD in the Product Support Manager Guidebook) the responsibility for planning, developing, and implementing product support is assigned to the Product Support Manager (PSM), assigned under the PM (for all Major Defense Acquisition Programs). The PSM has the discretion to assign varying scopes of product support to Product Support Integrators, who in turn engage in business agreements (subcontracts, partnerships, etc.) with PSPs, and are therefore much more able to fully integrate among and across the PSPs to ensure achievement of the metric performance outcomes as specified by the government customer.
- Question: It seems that most PSIs are from industry, and most of those seem to be the Original Equipment Manufacturer (OEM). So does assignment of a PSI signify outsourcing of sustainment to industry?
Answer: No. As already mentioned, the role of PSI (or multiple PSIs for the same program) can be assigned to either a DoD or industry entity. While it is true that the majority (i.e., more than 50%) of PSIs are from industry, recall that the top-level product support integration role, held by the PSM, is a government-only position – so DoD always has the ultimate responsibility for managing and executing product support. Also (as already mentioned), even if an industry entity holds the PSI role, they seldom accomplish all product support unilaterally. The majority of product support is accomplished by a blend of both public and private sector sources, usually working in collaborative partnerships. PBL, and the PSI riles that execute PBL sustainment, represent the best value mix of skills, expertise, infrastructure, and cost across the entire public/private industrial base.
SEE ALSO PRODUCT SUPPORT PROVIDER (PSP) FAQs FOR RELATED INFORMATION.
back to top
Product Support Managers (PSM)
- Question: What policies and guidance address the roles & responsibilities of the DoD Product Support Manager (PSM)?
Answer: First and foremost is Directive Type Memorandum (DTM) 10-015 “Requirements for Life Cycle Management and Product Support.” DTM 10-015 was issued on October 6, 2011 by the Undersecretary of Defense for Acquisition, Technology and Logistics (AT&L) “to implement and institutionalize the requirements of section 805 of Public Law 111-84.” Public Law 111-84 “directs a number of changes to DoD policies designed to improve weapon systems life cycle management and product support by establishing new requirements that directly impact acquisition, fielding, and sustainment decisions.” Key DoD-level policies include:
In addition, extensive PSM and PBL related implementation guidance is also available, including but not limited to:
Finally, a wide-range of PSM and PBL-related tools, training, and references are available including, but not limited to:
- Question: This DTM provides policy concerning this position called a Product Support Manager (PSM). What exactly is a PSM?
Answer: According to Attachment 6 of the DTM, the PSM is defined as “the individual responsible for managing the package of support functions required to field and maintain the readiness and operational capability of major weapon systems, subsystems, and components, including all functions related to weapon system readiness, in support of the program manager's life cycle management responsibilities (outlined in DoD Directive 5000.01 and DoD Instruction 5000.02).
- Question: What are Product Support Manager (PSM) overarching responsibilities vis-à-vis weapon system product support?
Answer: The principal duties of the PSM are outlined in Attachment 2 (and discussed in greater detail in Attachment 4) of DTM 10-015, and include (but are not limed to):
- Provide weapon systems product support subject matter expertise to the PM for the execution of the PM's duties as the Total Life Cycle Systems Manager, in accordance with DoD Directive 5000.01
- Develop and implement a comprehensive, outcome-based, product support strategy.
- Promote opportunities to maximize competition while meeting the objective of best-value long-term outcomes to the warfighter.
- Seek to leverage enterprise opportunities across programs and DoD Components.
- Use appropriate analytical tools and conduct appropriate cost analyses...to determine the preferred product support strategy.
- Develop and implement appropriate product support arrangements.
- Assess and adjust resource allocations and performance requirements for product support, not less than annually, to meet warfighter needs and optimize implementation of the product support strategy.
- Document the product support strategy in the Life Cycle Sustainment Plan (LCSP)
- Conduct periodic product support strategy reviews and revalidate the supporting business case analysis prior to each change in the product support strategy or every 5 years, whichever occurs first.
- Question: Do the PSM’s product support responsibilities extend to fielded systems or programs that are out of production (e.g., post Milestone C and/or which no longer have a formal Acquisition Category [ACAT] designation assigned)?
Answer: Yes. See “Applicability” section on page 1 of DTM 10-15 which reads: “Acquisition Category (ACAT) Program Levels: Major Defense Acquisition Programs (ACAT I), major weapon systems (ACAT II) programs, and former ACAT 1/11 programs that are post-Initial Operational Capability (lOC) or no longer have program managers (PMs) reporting to Component Acquisition Executives (CAE).
- Question: Can someone from industry/a support contractor serve as a DoD PSM?
Answer: No. Per Attachment 3, “the position of PSM shall be performed by a properly qualified Military Service member or full-time employee of the Department of Defense, in accordance with Public Law 111-84, "National Defense Authorization Act for Fiscal Year 2010," October 28, 2009. Industry, however, can serve as a Product Support Integrator (PSI) as depicted in the DoD Product Support Business Model (PSBM).
- Question: Must the PSM be a Life Cycle Logistician or come from the Life Cycle Logistics acquisition career field.
Answer: Yes. According to Attachment 5 of DTM 10-015, “the PSM must be designated in the Life Cycle Logistics position category.” In addition, per the August 25, 2010, USD AT&L Policy Memo “Government Performance of Critical Acquisition Functions” mentioned above, the Program Lead Logistician and the Product Support Manager are used synonymously. Finally, later in Attachment 5, the DTM states, “PSM positions for Major Defense Acquisition Programs must be designated as KLPs. PSM positions for all major weapon systems must be certified at Defense Acquisition Workforce Improvement Act (DAWIA) Level III in the Life Cycle Logistics career field in accordance with (DoDI 5000.66) which includes achievement of general educational, training, and experience requirements.”
- Question: As a follow-up to the above question, is Life Cycle Logistics Level III DAWIA certification sufficient to serve as a PSM?
Answer: It is probably best viewed as a starting point, or a “threshold” requirement. The ideal PSM would have a broader base of experience, training, and certification. In Attachment 5, the DTM states, for example that “cross-certification at DAWIA Level II or above in accordance with (DoDI 5000.66) in the Program Management, Systems Planning Research Development and Evaluation, or Business-Financial Management career fields should be considered as valued criteria during the selection process.” The ideal PSM candidate would have both pre-Milestone C acquisition and post-fielding sustainment experience (including operational experience), regardless of the life cycle phase of the program they are assigned, as well as extensive familiarity and/or experience with systems engineering, program management, business, cost estimating, financial management, and/or contracting.
- Question: Is the PSM required to report directly to the Program Manager (PM)?
Answer: Yes. According to Attachment 5 of the DTM, “in support of the PM's responsibility required by (DoDD 5000.01), the PSM shall have a direct reporting relationship and be accountable to the PM for product support.” The DTM, however, has two caveats to this requirement: first, “this does not preclude the PSM from having a dual reporting relationship to a DoD Component logistics or materiel command” and second, “for Major Defense Acquisition Programs, major weapon systems, and programs that are post-IOC or no longer have PMs reporting to CAEs, the PSM may have a direct reporting relationship to a DoD Component logistics, sustainment, or materiel command.” The alignment between the Program Manager and PSM are clearly outlined in the DoD Product Support Business Model (PSBM).
- Question: DTM 10-15 mentions specific responsibilities related to conducing a Business Case Analysis (BCA). Is there additional information and guidance related to performing a product support BCA?
Answer: Yes. The DoD Product Support Manager Guidebook and the DoD Product Support BCA Guidebook are probably the best places to start. In addition, there are extensive resources on the subject on the DoD Product Support Policy, Guidance, Tools & Training site, on the DAU Logistics Community of Practice, the Product Support Manager (PSM) Toolkit, and in an ACQuipedia BCA article.
- Question: DoD and DAU very often interchangeably use the terms Performance Based Logistics, Performance Based Life Cycle Product Support, and the PBL acronym. Are these terms synonymous?
Answer: Yes. According to Enclosure 2, para 8.c.(1)(d) of DoD Instruction 5000.02, “Performance-Based Life-Cycle Product Support represents the latest evolution of Performance-Based Logistics. Both can be referred to as “PBL.” PBL offers the best strategic approach for delivering required life cycle readiness, reliability, and ownership costs. Sources of support may be organic, commercial, or a combination, with the primary focus optimizing customer support, weapon system availability, and reduced ownership costs."
- Question: But isn’t the Program Manager (PM) ultimately responsible for PBL implementation?
Answer: Yes. According to DoD Directive 5000.01, Enclosure 1, E1.1.17. that “PMs shall develop and implement performance-based logistics strategies that optimize total system availability while minimizing cost and logistics footprint. Trade-off decisions involving cost, useful service, and effectiveness shall consider corrosion prevention and mitigation. Sustainment strategies shall include the best use of public and private sector capabilities through government/industry partnering initiatives, in accordance with statutory requirements.”
DoD Directive 5000.01 also states in Enclosure 1, Para E1.1.29., “the PM shall be the single point of accountability for accomplishing program objectives for total life-cycle systems management, including sustainment. The PM shall apply human systems integration to optimize total system performance (hardware, software, and human), operational effectiveness, and suitability, survivability, safety, and affordability. PMs shall consider supportability, life cycle costs, performance, and schedule comparable in making program decisions. Planning for Operation and Support and the estimation of total ownership costs shall begin as early as possible. Supportability, a key component of performance, shall be considered throughout the system life cycle.”
In addition, according to Enclosure 2, para 8.c.(1)(d) of DoD Instruction 5000.02, “the PM shall employ effective Performance-Based Life-Cycle Product Support (PBL) planning, development, implementation & management.”
The PSM supports the PM in executing all of these responsibilities.
- Question: Why performance based?
Answer: DoD Directive 5000.01 articulates this well in Enclosure 1, Para E1.1.16, stating, “to maximize competition, innovation, and interoperability, and to enable greater flexibility in capitalizing on commercial technologies to reduce costs, acquisition managers shall consider and use performance-based strategies for acquiring and sustaining products and services whenever feasible. For products, this includes all new procurements and major modifications and upgrades, as well as reprocurements of systems, subsystems, and spares that are procured beyond the initial production contract award.” When properly structured and executed, effective performance based product support strategies are designed to deliver both increased readiness and reduced operations & sustainment costs.
back to top
Product Support Providers (PSP)
- Question: Is the role of PSP limited to private sector companies?
Answer: No. Similar to Product Support Integrators (PSI), organic activities such as an Army Depot, an Air Logistics Complex, or an Inventory Control Point (ICP) can also serve as a PSP.
- Question: What is the best way to incentivize a PSP?
Answer: Much in the same way as incentivizing a Product Support Integrator (PSI), it depends on whether or not the PSP is an organic or commercial activity. If the PSP is an organic activity, the primary incentive is to increase the robustness and predictability of the PBL workload or to reward the PSP with additional work. For the commercial PSP there are a variety of effective incentives that can be used to manage repair behavior. While a properly structured PBL contract by itself is often sufficient incentive to produce the desired outcomes, experience has shown that Award Fees, Incentive Fees, Award Terms, longer contracts (5-10 years) and contract renewals are also effective tools to manage PSP behavior. PSPs should, in turn, examine ways to incentivize their suppliers through level of effort and PBL arrangements.
- Question: If operational requirements change, can I reduce the required level of performance I’m paying for from the PSP (e.g., a “readiness rheostat”)?
Answer: Again, much in the same way as incentivizing a PSI, It depends on how you structure the PBL arrangement. A properly structured PBL should have off-ramps that cover such eventualities by allowing the program manager to legally step away from a contract under certain conditions. As an alternative, if payment is tied to unit of use, such as operating hour or miles driven, etc., then a change in the level of operations will automatically result in a change in payment. Another structural solution is to set the contract performance baseline below the operational requirement and rely on incentive fees to regulate performance to the desired levels, up as much as necessary or down to the contractual baseline. However, understand that the relationship between dollars and performance is generally asymptotical rather than linear.
- Question: Why does my PSP prefer a longer contract (5 years) to a shorter one (1 year)?
Answer: A longer contract provides sufficient time for the PSP to realize a return on any investment he makes, up front or otherwise, to improve his product reliability or process efficiency. The typical Class II ECP reliability improvement can take up to five years, from initial idea to full implementation, before the PSP will begin to notice a return on his investment. Shorter contracts risk stifling innovation and reduce the efficacy of the PBL arrangement. This would apply to both PSIs and PSPs.
- Question: Is it wrong for a PSP to realize a profit margin that may be perceived as or seem to be excessive outside the program office?
Answer: For commercial sector PSP (or PSI for that matter), if the program manager and PSM properly structured the Fixed Price PBL contract -- and the PSP is meeting the performance metrics -- then the amount of margin is at least somewhat dependent on the PSP’s ability to reduce his costs and the level of risk being borne. Because a successful PSI (or PSP) may have made up-front investments in product and/or product improvements in order to meet contractual metrics requirements, it is not unrealistic for margins to change over the life of the contract. In addition, margin levels are typically adjusted down during negotiations for contract options or renewals. Award-term, exercising options, gain share and shared savings can all be used to incentivize desired behaviors and expected outcomes. Application of such incentives in the contract can be used to adjust to significant program improvements unforeseen at the time of negotiations. The trigger for such mechanisms should be set at a level so as not to inadvertently serve as a performance disincentive.
SEE ALSO PRODUCT SUPPORT INTEGRATOR (PSI) FAQs FOR RELATED INFORMATION.
back to top
Depot Maintenance Workload Allocation
- Question: How is workload allocation determined when implementing a PBL product support strategy?
Answer: Under best practice PBL programs, workloads are distributed to the most effective providers consistent with statutory guidelines, with a conscientious effort to focus on best competencies, best value, and effective use of public-private partnering solutions. Public private partnerships are an effective tool for balancing workload allocation around best value solutions. PBL does not pre-ordain CLS or organic support structures. Rather, PBL gives all stakeholders the opportunity to compete for and earn business in line with their core competencies and value proposition.
- Question: Isn’t PBL just contractor logistics support by a different name?
Answer: No. PBL programs are sometimes mistakenly believed to be “outsource” efforts or “contractor logistics support (CLS)” with minimal emphasis on best value and best competencies in placement of depot maintenance workloads. When a government depot is performing organic workload for sustainment, a common misunderstanding is that PBL will automatically result in the redistribution of work from the depot to the contractor. This is not the case. In fact, PBL can result in additional work at the depots. Teaming relationships are central to PBL—and Title 10 clearly emphasizes the importance of Public Private Partnerships. Workload Allocation decisions are clearly a key component of best value PBL product support strategy decisions.
- Question: Where can I find more about workload allocation and Title 10 depot maintenance and public-private partnering (PPP) statutory requirements?
Answer: DAU offers extensive information on this subject in the following learning assets:
back to top
