Logistics: Performance Based Logistics

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June 9, 2006: PBL (Performance Based Logistics) is yet another new commercial concept that is being 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 years worth of such work.

An example of how this all works is a recent PBL deal by the Royal Air Force, to have it's fleet of fifty C-130 transports maintained over the next 24 years. Total cost of the contract, $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 facility. The military PBL deals also make provision for war related damage, which is taken care of by surcharges.

 


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