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<p>The purpose of this MBA project is to evaluate and assess the metrics, incentives and other terms and conditions of the Performance Based Logistics (PBL) contract between Naval Aviation Inventory Control Point (NAVICP) and Honeywell in support of FA-18/S-3/P-3/C-2 Auxiliary Power Unit (APU) to determine if the contractual terms and conditions established are effective in facilitating and encouraging the full potential of PBL savings and improved performance. PBL is an acquisition reform initiative intended to improve weapon system logistics with the goals of: 1) compressing the supply chain, 2) eliminating non-value added steps, 3) reducing total ownership costs, 4) improving weapon system readiness and reliability, and 5) reducing logistics footprint. PBL entails buying measurable outcomes with metrics based on war fighter stated performance requirements. The war-fighter requirements should be linked to metrics and metrics should be linked to contract incentives. An additional element of PBL is gain sharing, which ensures the contractorb2ss profit and the governmentb2ss increased performance at a reduced cost. Based on the elements of PBL, the objectives of this project include; 1) comparing the actions/activities/accomplishments of the contract to the goals of PBL, 2) measure and appraise the attainment of those goals 3) provide information about the major factors causing the observed effects on the above, and 4) identify and analyze the metrics and incentives for their effectiveness in achieving the desired outcomes. In meeting the objectives of this report, our findings indicate that non-value added steps were eliminated, and there were potential reductions in the logistics footprint. On the other hand, the supply chain was not compressed; aircraft maintenance costs did not decrease; and more importantly, the APU reliability for the FA-18, S-3, and C-2 did not improve. For the P-3, reliability improved by 7% to 19%, but not 300% per the contract guarantee. Our research also determined that the reliability metric was inappropriate for measuring and tracking APU reliability improvements. Additionally, disincentives were provided for not meeting contract requirements with the only contract incentive being the award term contract arrangement. Our report provides recommendations specific to the APU TLS contract and other recommendations for other PBL applications. These recommendations include an alternative contract pricing and gain sharing methods and appropriate metrics and incentives that reflect the true definition of PBL.
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<br>Subjects: Acquisition Principles; Supply Chain Management; Performance-Based Logistics; PBL; Contracting; Incentives; Metrics</div>
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<dl><dd>Landreth, Clifford J.</dd>
<dd>Corporon, Laura L.</dd>
<dd>Wilhelm, Richard H.</dd></dl></div>
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