Defense Management: DOD Needs to Demonstrate That Performance-Based Logistics Contracts Are Achieving Expected Benefits
GAO-05-966
Published: Sep 09, 2005. Publicly Released: Sep 09, 2005.
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Highlights
The Department of Defense (DOD) contracts with private sector companies to perform depot maintenance of weapon systems using performance-based logistics--that is, purchasing a defined level of performance over a defined time period at a fixed cost to the government. After implementing such contracts, program offices are to validate their efficacy using cost and performance data; DOD cannot otherwise ensure cost savings and improved performance are being achieved through the use of performance-based logistics. GAO was asked to review the implementation of performance-based logistics to determine whether DOD could demonstrate cost savings and improved responsiveness from these arrangements. In conducting its review, GAO analyzed the implementation of performance-based logistics arrangements for 15 weapon system programs.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status Sort descending |
|---|---|---|
| Department of Defense | To demonstrate that performance-based logistics arrangements are resulting in reduced costs and increased performance, and to improve oversight of performance-based logistics contracts, the Secretary of Defense should direct the Under Secretary of Defense (Acquisition, Technology and Logistics) to direct program offices to improve their monitoring of performance-based logistics arrangements by verifying the reliability of contractor cost and performance data. The program offices may wish to increase the role of the Defense Contract Management Agency and the Defense Contract Audit Agency in overseeing performance-based logistics contracts. |
Closed – Implemented
DOD issued new guidance and requirements to address this recommendation. First, DOD revised chapter 5 of the Defense Acquisition Guidebook, which now states that the reliability of contractor cost and performance data should be verified during monitoring of performance-based logistics arrangements. The new guidance also states that increased use of the Defense Contract Management Agency and Defense Contract Audit Agency in overseeing these arrangements may be considered. Second, DOD took steps to improve life-cycle sustainment metrics. DOD expects these metrics will be used in monitoring system performance in terms of availability and reliability and ownership costs. Specifically, in May 2007, DOD revised its JCIDS instruction and manual (CJCSI 3170-.01F and CJCSM 3170.01C) establishing a mandatory sustainment key performance parameter and ownership cost key system attribute as metrics to drive future sustainment decisions, including business case analyses.
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| Department of Defense | To demonstrate that performance-based logistics arrangements are resulting in reduced costs and increased performance, and to improve oversight of performance-based logistics contracts, the Secretary of Defense should direct the Under Secretary of Defense (Acquisition, Technology and Logistics) to reaffirm DOD guidance that program offices update their business case analyses following implementation of a performance-based logistics arrangement and develop procedures, in conjunction with the military services, to track whether program offices that enter into these arrangements validate their business case decisions consistent with DOD guidance. |
Closed – Not Implemented
DOD concurred with this recommendation and agreed to work with the military services to develop tracking procedures. While DOD took steps to improve sustainment metrics, which could produce improved performance and cost data for updating business case analyses following implementation of a performance-based logistics arrangement, the department did not develop procedures to track whether program offices that enter into these arrangements validate their business case decisions consistent with DOD guidance. During audit work performed for a follow-up review, we found that only the Army had developed a tracking system and a centralized oversight process to monitor the status of PBL arrangements, including dates for initial and subsequent business case analyses. The remaining services had not established oversight responsibilities to ensure that business case decisions were validated. As a result, in December 2008 we again reported that many of the performance-based logistics arrangements we reviewed had not updated their business case analyses to validate the approach taken and to support future plans in accordance with DOD and service policies and guidance (GAO-09-41). The report included recommendations for DOD to issue guidance clarifying when business case analyses should be updated and for the services to revise guidance to implement internal controls to ensure that business case analyses are prepared and updated.
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Topics
Contract administrationContract performanceCost effectiveness analysisDepartment of Defense contractorsEquipment maintenanceInternal controlsLogisticsWeapons systemsPerformance-based contractingPerformance-based logistics