Better Buying Power initiatives showcased in engine contract’s unique features

By Cathy Hopkins DLA Aviation

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Five years ago, the undersecretary of defense for acquisition, technology and logistics launched the Better Buying Power initiative, stressing efficiency and productively. Since then, two subsequent versions of BBP have been enacted, and Defense Logistics Agency Aviation’s procurement strategies have continued to evolve to meet those challenges.

Last November, DLA Aviation and one of its major aviation suppliers signed a contract incorporating the BBP tenants of affordable programs, smart acquisition strategies and incentives for productivity and innovation.

Holistic support – DoD teams with industry

The 2014 F-Series engine contract was the culmination of a year’s worth of teaming and negotiations for the engine, which powers many aircraft across U.S. and allied forces. The contract takes advantage of the original equipment manufacturer’s expertise to provide holistic F-Series engine support.

The contract is currently in its six-month implementation period, which ends June 1. Embedding the OEM in the supply chain, on the floor of aircraft production lines, is just one way the Aviation is improving productivity and achieving retail supply excellence.

The team, made up of representatives from DLA Aviation, the supplier and the Air Force, used innovative solutions to meet its objectives and provide flexibility, said Cathy Contreras, DLA Aviation Strategic Acquisition Programs director.

The F-Series engine production line resides at the Oklahoma Air Logistics Complex at Tinker Air Force Base, Oklahoma. This contract supports engines used on the B-1B, B-2A and F-16C/D aircraft weapon systems, foreign services’ F-15 fleets, and the re-engineered U-high altitude reconnaissance aircraft.

Brian Johnson is the chief of Air Force Materiel Command’s F-101, F-108, F-110, F-118 Engine Branch at Tinker. He said his team helped define constraints impacting F-Series engine production and facilitated fact-finding visits.

By incorporating customers in defining constraints and fact finding, DLA Aviation was able to improve processes and find innovative ways to improve retail support, he said.

“Last spring, that involvement grew as requirements were identified and performance metrics were further refined for the final request for proposal,” Johnson said. “This was an all-hands effort with DLA, (the OEM supplier), and the various Air Force stakeholders.”

Johnson called the effort groundbreaking.

“It has taken both DLA and the Air Force out of a business-as-usual transactional mindset and got us thinking about innovative ways of achieving cost-effective readiness,” he said. “It has also resulted in a very collaborative environment between (all stakeholders) that is creating a much more productive working relationship. I believe this is just the first step toward a broader, more strategic approach to sustaining engine platforms.”

Richard Schwing, chief of the Material Management Division atDLA Aviation in Oklahoma City, said he is excited about the concept.

“I’m impressed with how we were able to work with the OEM to put this together,” he said. “They are going to be embedded in our supply chain on the floor and will be right there with us.”

Integrated teams ensure successful implementation, improved productivity

 “It is critical that all stakeholders collaborate with each other to understand the process hand-offs and any gaps that exist to address and/or mitigate risks to the overall success of the program,” said Johnson, whose team is heavily involved with implementation.

Johnson and DLA Aviation senior leaders realize that improvements don’t occur without addressing aircraft supply chain and life-cycle management from requirements to disposition.

“There are a number of integrated product teams we are supporting to address various process areas, to include program management, planning and forecasting, storage and delivery, IT requirements, etc.,” Johnson said. “Success depends on all parties’ participation.”

As part of the contract negotiations, the OEM has dedicated staff residing both at the customers’ location and at the company’s headquarters, ensuring the real-time “voice of the customer” is integrated into the process.

“DLA is working to ensure our business systems can support the contract structure,” Schwing said. “This contract is not your standard, traditional delivery-type contract. We are working with DLA Logistics Operations and Information Operations on testing and any system changes that may need to be done.”

Schwing explained that the OEM won’t be issued delivery orders for material, but rather will monitor stock and tell DLA what materials are needed to resupply Oklahoma City.

“(The OEM) will be issued stock transfer orders to establish a ‘due in’ at Oklahoma City to supply DLA with material,” he said.

The cross-functional implementation team ensured the OEM had access to forecasting information directly from the Air Force and to DLA’s historical demand data, said Air Force Col. Ken Ruthardt, DLA Aviation’s industrial support activity site commander in Oklahoma City.

“We established a memorandum of understanding with the OEM on operations, training and Air Force internal support,” he said.

Employees at Tinker will have access to DLA business systems for order fulfillment and planning. There will be no new OEM supply systems for DLA or the Air Force to learn, Ruthardt said.

By ensuring there are no new systems to learn, the team was able to eliminate redundancies and additional training requirements.

“The OEM is directly linked and a lot closer to our customers’ demand signal now,” Schwing said.

Shared supply chain management improves customer support

Under the new contract, while the OEM has the ultimate responsibility for supply chain performance, the responsibility of the DLA-managed national stock numbers for the engines is shared between DLA Aviation and the OEM. Under this contract, the OEM is responsible for more steps in the supply chain management process, including planning, forecasting, acquisitions, quality control and interface with customers in Oklahoma City for parts.

“Our bill of materiel covers all DLA consumables tied to the F-Series engines,” said Ingrid Smith, DLA Aviation contracting officer. “Justification and approval to pursue a sole-source acquisition with the OEM was broadly written to allow the Air Force to build on this contract for future phases of Air Force requirements. We also have the flexibility to add DLA consumables to the OEM-sourced population.”

Have the broadly written J&A is a smart acquisition strategy, reflective of BBP’s intent, which allows Aviation the needed flexibility to quickly meet its customer emerging needs.

Providing parts insurance to customers

“Another pretty unique aspect of the contract is that the OEM will be paid a fee for providing a kind of insurance at Oklahoma City,” Smith said. “If, for instance, DLA can’t, for whatever reason, supply a DLA-sourced part, the OEM will come in behind us and provide support so the customer isn’t impacted.”

Smith said the insurance includes the OEM monitoring DLA’s supplies and communicating potential gaps to the agency.

Prior to this contract, DLA Aviation maintained a large amount of inventory for maintenance and operational customer support, Smith said. Now, DLA will realize significant inventory cost savings, as the OEM will resupply DLA’s wholesale inventory at lower levels for their sourced parts, while still maintaining or exceeding the required 93 percent order response time and 92 percent material availability. Smith said the contract includes an incentive to resolve half of back orders in 30 days and a disincentive if 15 percent of backorders are greater than 180 days.

“Savings for the five-year base period exceeded the 5 percent savings DLA sought to achieve under the acquisition,” she said. “Savings may grow depending on performance.”

“The effort will certainly impact the Air Force in the area of improved parts availability to both depot-and field-level engine maintenance activities, as well as the eventual reduction in overall life-cycle cost for the engines,” Johnson said. “Both DLA and the Air Force have worked very closely to make sure that the change in support processes with the addition of increased OEM support is invisible to the actual maintainers at both the depot and the field. While they should reap the benefits of increased parts supportability, they should not see a significant change or impact to their day-to-day processes of repairing and delivering whole engines to the warfighter.”

Editor’s note: This is part of a series of articles that DLA will highlight on BBP 3.0 called "Better Buying Power in Focus."