RICHMOND, Virginia –
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Defense Logistics Agency Aviation team has saved the agency more than 20 percent on parts support spanning 11 aviation platforms compared to the parts’ historical costs.
DLA Aviation’s Strategic Acquisition Programs Directorate awarded a performance-based logistics contract to Boeing in late 2013 that provides a comprehensive framework to support most Boeing aviation platforms. The contract has an estimated value of $12.6 billion for the 10-year performance period.
According to Tammy Kozior, DLA Aviation director of procurement operations in Philadelphia, performance-based logistics is a sustainment strategy that incentivizes contractors to reduce cost and improve warfighter support by using outcome-based metrics, incorporating best practices and including appropriate incentives.
The PBL construct is one of eight initiatives included under the focus area entitled “Incentivize Productivity and Innovation in Industry and Government” in the Department of Defense’s
Better Buying Power 3.0 initiative.
Simply increasing the use of performance-based logistics isn’t the intent, Frank Kendall, undersecretary of defense for acquisition, technology and logistics, said during a Pentagon briefing April 9.
“We want to make sure that the ones we have are effective. We will probably increase our use, but we need to do so in cases where it makes sense, and we need to make sure it’s being done well,” he said.
The contract’s initial intent was putting sole-source consumables under a PBL construct. Kozior said that the effort has resulted in more than 2,600 items being covered so far. The contract includes the potential for growth, including depot-focused programs aligned with warfighter requirements, and already contains some depot-level items.
“We are adding additional phases under a government- and industry-developed roadmap,” she said.
DLA Aviation’s contract with Boeing also embraces “should-cost” principles and facilitates cost management throughout the lifecycle of each platform supported.
“Through unprecedented data transparency, the team baselined costs using historical pricing, demand patterns and administrative costs to determine a should-cost baseline,” Kozior said. “We enlisted the help of a third-party evaluator to assist in measuring potential savings.”
Officials also partnered with the Defense Contract Audit Agency and Defense Contract Management Agency while reviewing Boeing’s proposal.
The pressure to reduce costs led Boeing to increase competition in its subcontracting efforts and has increased the firm’s small business participation, according Kozior.
The contract has been recognized by DLA and DoD leaders as a model for cost savings and was one of DLA’s nominations for the 2014 Should Cost and Innovation Award.
“One of the most important aspects of the program is the use of a fixed-price incentive contract,” said Charlie Lilli, DLA Aviation deputy commander. “This contract type incentivizes suppliers to continually drive down costs and allows DLA and the warfighters to share in those reduced costs. The overarching objectives of the initiative are to enhance performance and reduce cost. It is considered a model for other aviation business.”
Editor’s note: This is part of a series of articles that highlight DLA’s efforts toward BBP 3.0, called “Better Buying Power in Focus.”