The Department of the Navy 2004 Logistics Conference

Performance Based Logistics Panel

20 May 2004

Joe Grosson

Corp. Director of Logistics

Evolving towards Capability Based Contracting

DriversTechnology

Investment

DMS,

Obsolesce

nce, Tech

Refresh

Sustain-

ability;

inventory

ownership

TOC

Incen-

tive

How

Designed

Deliverable

•Performance; ProcessPerformance; Process

•SCM SpeedSCM Speed

•Vendor ManagementVendor Management

•High ReliabilityHigh Reliability

Industry & Industry &

CommercialCommercial

LeveragingLeveraging

IndustryIndustryIndustryIndustryYesYesBest Best

Integrated Integrated

SolutionSolution

Provide Provide

Capability Capability

~Industry ~Industry

SustainsSustains

•Design

•Initial Acq Cost

DOD/

Industry

DODDODNoIndustry

Design

Provide

the

Product

~ DOD

Support

•Design

•Initial Acq Cost

DODDODDODNoDOD

Design

Build to

Mil Spec

~DOD

Support

Optimal Capability at the Least Total OutlayOptimal Capability at the Least Total Outlay

Sustainment Shift to Industry Providing DOD the Wherewithal to Recapitalize

Military Organic Support

• Military Depots• Intermediate Maintenance

Activities• Inventory Control Points• In-Service Engineering

Activities• Military Maintenance Training• High Levels of Ready Inventory• Disparate and Expensive CM• Military Maintainers At Sea and

Ashore• Support By Other Than the

Original OEM Or Original Design Agent

Commercial

• Network Centric Logistics C3I• Virtual Depots & 3PLs• OEM Does Repair/Return• Autonomic Supply Chain

Management• Just In Time Supply Support• Web Enabled Distance Support,

Training and Total Asset Visibility• Tech Refresh: Avoid DMS and

Increase Availability and Throughput Potential

• Maintenance Free Operation Design Motivated By Performance-By-the-Hour Fixed Price Contracting

• Contractor Support Deployed In the Theater of Operations

No Incentive to Reduce TOC Heavy Incentive to Reduce TOCNo Incentive to Reduce TOC Heavy Incentive to Reduce TOC

PBL ~ What we are doing today:PBL ~ What we are doing today:

• Primarily Performance Based Logistics Contracts to

support LM Weapon Systems and Platforms; and also

includes commercial

• Engaged in Command and Control Systems for

logistics processes

• Moving towards total support of systems that comprise

both LM and other OEM components, involving

automated supply chain management and concepts

such as maintenance free operating period design,

distance support and total asset visibility

Corporate Wide: About 5,000 lifetime support engineers and logisticiansBusiness Base exceeding $3B

Total System Support Responsibility From Systems to “Systems of Systems”

Base of In-Place System Level Lifetime Support & Performance Based Logistics Contracts

------------------------------------------------Surface Combat System Related• AEGIS Lifetime Support ~ MS2

Moorestown• MK-41 VLS ~ MS2 Baltimore• MK-92 FCS ~ LMSTS

Huntsville/Moorestown• USQ-70 ~ MS2-Eagan-------------------------------------------------Naval Aviation Related• S-3 PVS ~ Aero Marietta• CASS ~ LMSTS Orlando• LANTIRN PBL ~ M&FC, Orlando• Navy Aircraft Tires ~ MS2

Moorestown• H-60 ~ LMSI / Sikorsky JV--------------------------------------------------Submarine Related• BSY2 POSS ~ MS2 Syracuse• ARCI PBL ~ MS2 Manassas--------------------------------------------------Army • JAVELIN ~ M&FC• HIMARS ~ M&FC

Total System Support Responsibility

Ultimate Goal: Maintenance Free

Operating Design & Autonomous

Support

Total System Support Responsibility

Ultimate Goal: Maintenance Free

Operating Design & Autonomous

Support

System of SystemsTotal Platform

Support

• F-117 TSPR ~ Aero• F-35 TSPIR ~ JSF• Deepwater ~ MS2• THAAD ~ Space

New Major SystemProgram Pursuits• Navy PBL Omnibus • Littoral Command Ship

~ MS2• MMA ~ Aero• MUOS ~ Space

D2D/ALISfor Autonomic Logistics

Supply Support• Depot Management• Requisition Processing• Supply Chain Management• Transportation & Distribution• Stock Point Functions • Modeling and Forecasting• Repair & Return

Installation & Maintenance • Remote Condition Monitoring• Work order generation• Fault response monitoring• Installed base maintenance (RCM,

CBM)• Documentation Updates• System Grooming• Distance Support to Field Operators & Maintainers• Asset data collection• Data base maintenance

Training• New Operators & Maintainers• Workforce

•Management•Technical•Operational•Compliance

• Refresher and Update training• Curriculum Updates

Program Management• Strategic planning• System Upgrade & Major

Maintenance Schedules• Cost Baselines• Ownership Cost Reduction • Contracting Services for:

• Maintenance• Support services • Upgrades• Major System Overhaul

• Schedule Baselines• Technology Insertion

Development Schedules• Subsystem Upgrade

Schedules

Supportability Engineering • Technology Refresh & Insertion• Configuration Management• Baseline Mgmt. - Functional,

Physical• Design for Supportability • Safety Engineering.• Test Planning• Test, Validation & Verification of

Technology Refresh/Insertion• Software Maintenance• Hardware Maintenance• Commonality Analysis

•Systems Design•Systems Engineering•Systems Integration

•Software Development•Production

•Enterprise Resource Planning

•Systems Design•Systems Engineering•Systems Integration

•Software Development•Production

•Enterprise Resource Planning

Single PointAccountability

Total systems support from design to disposal (D2D)Total systems support from design to disposal (D2D)Holistic systems engineering lifetime support processHolistic systems engineering lifetime support process

End State: Integration of Systems Engineering & SupportabilityFor all our products throughout their life

Enablers

• Effective Public-Private Partnerships

• Performance-By-the-Hour™ Contracts ~ The Incentive for Industry to

Reduce TOC, Which In Turn Results In:

– MFOP ~ Maintenance Free Operating Period Design

– Employing Use of PHM: Prognostics and Health Management

– Web-Enabled Distance Support (e.g., NavalSupport.com) and Distance Training

– Autonomic Supply Chain Management and JIT Support

• Logistics Command and Control for Sense and Respond

An Integrated Solution Set for Full Service SupportAn Integrated Solution Set for Full Service SupportAn Integrated Solution Set for Full Service SupportAn Integrated Solution Set for Full Service Support

The Operative Enabler, the Accountable & Incentivized Business Deal

• AWARD TERM CONTRACT – PROVIDES DoD AWARD TERM CONTRACT – PROVIDES DoD “OFF RAMP”“OFF RAMP”

• “ “PERFORMANCE BY THE HOUR” CONCEPT PERFORMANCE BY THE HOUR” CONCEPT

• INCLUSIVE SUPPORT – LOGISTICS NOT INCLUSIVE SUPPORT – LOGISTICS NOT LAWYERS, USEAGE NOT BREAKAGELAWYERS, USEAGE NOT BREAKAGE

• CONTINUOUS CONTINUOUS COST REDUCTIONSCOST REDUCTIONS ONLY ONLY METHOD TO ACHIEVE COMMERCIAL METHOD TO ACHIEVE COMMERCIAL PROFITABILITY… NO REVENUE SOLUTIONSPROFITABILITY… NO REVENUE SOLUTIONS

• INCENTIVES/PENALTIES FLOWED TO ALL INCENTIVES/PENALTIES FLOWED TO ALL TEAMMATES – INCLUDING DoD DEPOTS AND TEAMMATES – INCLUDING DoD DEPOTS AND ICPs . . . TRUE COMMERCIAL CONTRATORS ICPs . . . TRUE COMMERCIAL CONTRATORS 

• COMPREHENSIVE SUPPORT PER COMPREHENSIVE SUPPORT PER OPERATIONAL HOUR; COST PERIODICALLY OPERATIONAL HOUR; COST PERIODICALLY REDUCED BASED ON LEARNING CURVE AND REDUCED BASED ON LEARNING CURVE AND ACTUALS ACTUALS 

• IMPROVED COMPONENT RELIABILITY IMPROVED COMPONENT RELIABILITY AND DEPOT TURN-AROUND TIMES AND DEPOT TURN-AROUND TIMES PERPETUALLY INCENTIVIZED – ONLY PERPETUALLY INCENTIVIZED – ONLY MEANS TO ENHANCE PROFIT IS THROUGH MEANS TO ENHANCE PROFIT IS THROUGH COST REDUCTIONSCOST REDUCTIONS

TSPIR Contract LCC

Lockheed Martin Aeronautics CompanyLockheed Martin Proprietary Information

Questions?

Back-Up Slides

How Does Total Systems Support Responsibility Reduce Costs?

By coalescing all TSSR responsibilities under a single, long term contract, with single point accountability and clear performance metrics, we can then:

– Consolidate lifetime support functions across companies that support the Combat System, improving productivity, efficiency and reducing administrative overhead. Reallocate some of these savings to focus on direct war fighter support

– Consolidate the architectural design capabilities across Companies to truly optimize the open architecture and COTs management

– Because of contract incentive structure, Institute the trade-space paradigm that focuses on achieving continuous TOC reductions coupled with increases in operational effectiveness, readiness and sustainability

– Use a standard architecture for total sustainment management & standardized processes thus eliminating duplicate investment and maintenance costs

– Standardize on automated Supply Chain Management to lean-out all supply chain and total asset visibility processes and materially reduce inventory while improving supportability

How Does Total Systems Support Responsibility Reduce Costs?

– Reduce redundant infrastructure (with its attendant hardware and software maintenance costs) through consolidation including depots, stock points, and test environments

– Have a single collaborative design, development, configuration management and testing environment that truly provides the capability for virtual development, test and management.

– Coalesce the technology refresh/insertion strategies within one organization to optimize planning, testing, and sparing philosophies; import the Submarine approach for maintenance free operating period design in order to reduce inventory, maintenance, training and documentation; while increasing operational effectiveness through continuous processing power growth and Ao improvements

– Continue the implementation of Public-Private partnerships in a common fashion across the customer community to rationalize and optimize workload assignments that reduce redundancy in work performance and infrastructure

– Implement one standard distance support system thereby streamlining the maintenance, diagnostics and parts ordering process; this in-turn, reduces inventory levels, simplifies training and significantly reduces maintenance documentation

How Does Total Systems Support Responsibility Reduce Costs for DoD?

Coalescing all TSSR responsibilities under a single, long term contract, with single point accountability and clear performance metrics, enables the following:– The need for third party reviewers and non-value add activities can be

eliminated at significant savings– The roles of Warfare Centers, Depots and ISEAs can be redefined to

engagement with technical authority and approval matters with an attendant decrease in funding requirements as contract performance is the responsibility of the prime contractor

– Focusing on employment of CITE activities, public-private partnerships will be optimized to reduce all areas of unnecessary functions and hardware/software infrastructure

– Instituting one standard supply support arrangement will substantially decrease government administrative costs and thus lower the Fleet Surcharge

– Use of prime contractor training facilities will reduce cost of redundant infrastructure and instructors; real time incorporation of configuration changes into training curriculum and IETMs will improve operator/maintainer efficiencies