Logistics: Compete Or Die

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October 20,2008:  Throughout the Western world, the military is adopting PBL (performance based logistics). This is yet another new commercial concept, eventually adopted by the military. Think of it as outsourcing on steroids. Put simply, PBL is buying a complete support program for a major piece of equipment (ship, aircraft) over its entire lifetime. The fixed (with adjustments for inflation and some other uncontrollable elements) price also comes with minimum availability and performance requirements for the supported equipment. The U.S. Department of Defense has nearly $100 billion a worth of such work each year. 

An example of how this all works is a recent PBL deal by the Royal Air Force, to have its fleet of fifty C-130 transports maintained over the next 24 years. Total cost of the contract is $2.86 billion (about $120 million a year, or about $2.4 million a year per aircraft). The deal is expected to save the RAF about $12 million a year, and be one less headache for RAF commanders.

PBL deals don't replace the maintenance done by the crew, in the course of regular operations. But the cost of major repairs, periodic refurbishment and the like, is typically done at centralized maintenance facilities. The military PBL deals also make provision for war related damage, which is taken care of by surcharges.

In many nations, the military PBL incorporates existing maintenance facilities owned and operated by the government. Nations with large air forces or fleets often have their own repair facilities, and there's a lot of repair work involved in keeping hundreds, or thousands, of military aircraft flying. Engines have to be rebuilt periodically, and expensive electronic components break down, and are put back into service by technicians who have the parts and expertise to do so.

The U.S. Navy adopted PBL by basically reorganizing many of its major maintenance facilities as suppliers. Instead of getting money from the military budget to repair things, the end users (ship captains or squadron commanders) spend their maintenance budget by being able to send their stuff in for repair by any one of a number of qualified facilities. Some are purely civilian, others are military repair shops that have been around for a long time. This approach worked, with the military shops suddenly getting a lot more competitive. No more civil service mentality, because a military repair depot that did not get enough work, got shut down, or reduced in size (and the number of government employees working there.) Over the last few years, the speed and quality repairs has gone up, and the number of man hours required to do it has gone down.

 

 


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