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.