SPECIAL SECTION Another requirement for effective competition is being able to provide potential bidders with data on demand patterns, consumption and failing parts on subsystems. Reynolds said the Air Force is getting this data. The Air Force is re-thinking another dimension of economy and competition: the length of contracts. “There is a balance between giving contractors enough time to get a return on the investment they make on a program versus locking the Air Force into what may be a bad deal,” Reynolds noted. “We are thinking two to five years for the base contract, with a series of options, may be the sweet spot.” On contract metrics, the Air Force has experience with contracts that just measured aircraft availability and not much else. As things are now evolving, the Air Force is looking more at subsystem PBLs, for example on radar and electronic warfare. “Then you need metrics for those subsystems and may need a larger set of metrics,” Reynolds said. The Air Force will probably get into more detail, both to understand where the cost drivers are on a current contract and to make smarter decisions about future PBLs. Access to metrics must be provided for in contracts. “If we ask for more data, they can price that into contracts, and we will sometimes be willing to pay more to get more data,” Reynolds said. Combat operations result from proper maintenance and an optimized supply chain. Tighter budgets create So far, information technology (IT) systems have not challenges up and down the process, but can never be manifested in less-than-absolute operational limited data. “We are able to get the data we need, even when readiness. [Photo courtesy of DoD] IT systems are not interconnected,” Reynolds said. “But in third priority is modernizing maintenance capabilities, including the future, we want IT systems to talk back and forth. We better maintenance reporting and asset-management systems, need our ERP [Enterprise Resource Planning] systems to connect and more use of prognostic, health-management and autonomous with contractor ERP systems. That will make it easier to do, but we systems. can do it now.” One big efficiency challenge is in the seams between supply, The Air Force does not know yet exactly where cost savings are maintenance and transportation. “Cross-functional integration, at possible, but is looking at opportunities weapon by weapon, espethe process-level, is the next significant area for greater efficiency cially at pass-through costs, management fees and bundling where and effectiveness,” Kratz said. He cited the Air Force’s Industrial bundling may not be necessary. “We are asking the contractors to Prime Vendor program as proof. “The contract specifies metric outhelp us understand where those extra costs are,” Reynolds said. comes significantly higher than those achieved through traditional “They have an interest. They want to sell us these systems and not processes and has been an unqualified success. Under the new conprice themselves out of the market.” tract, bin fill rates have averaged over 99 percent, compared to a low So the Air Force is reviewing all its sustainment programs, of 62 percent under prior support.” looking for cost drivers and savings. Major programs include the Kratz continues to support the PBL approach, citing a recent F-35, MQ-1 Predator, MQ-9 Reaper, C-17 Globemaster III, F-22 and DoD estimate that PBLs could save $10 to $20 billion annually, KC-46 tanker. while improving readiness. He said the Navy’s H-60 Tip-to-Tail PBL The Air Force is definitely not looking at less readiness to save with Sikorsky and Lockheed Martin, which provides supply chain money. “No one here is thinking about that,” Reynolds stressed. “We management support for 1,266 repairable H-60 items, has reaped do not want iron on the ramp that is not ready.” more than $60 million in savings while increasing readiness. As the U.S. draws down from wars, there will be some natural Kratz prefers fixed-price incentive contracts with built-in incensavings. “There will be less expense due to harsh environments—for tives to improve reliability while allowing for a fair profit. And he example, the sand in Afghanistan,” Reynolds said. “We had a lot of favors longer-term contracts to encourage investment and labor corrosion on engine fan blades. So that will help us lighten the stability. Kratz said a guidebook on how to make public-private partworkload in depots.” nerships (PPPs) work, published in February, can help maximize As the Army and Marines pull out of Afghanistan, they must go benefits from the partnership approach. through reset, increasing maintenance requirements. “But we have Kratz thinks better IT can also help, saying the Littoral Combat cycled our aircraft in and out, and have done our maintenance, so Ship (LCS) Sustainment Portal “is a good example of the art of the we don’t have that reset spike.” possible.” The LCS Portal enables advanced planning of maintePersistent terrorism threats and the need for resets, especially nance availability and schedule, records, and maintenance status. It for ground forces, require a short-term maintenance surge, argued has an automated depot asset management system, which manages Louis Kratz, vice president of logistics and sustainment at Lockheed part inventories, supports help-desk activity and stores ship data for Martin. Afterward, normal operations should aim for a vibrant and analysis. competitive industrial base in both government and industry. A www.MLF-kmi.com
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