Description
Organization: NAVSUP, NAVICP
Team Name: ALR-67(v)(3) Radar Warning System Performance Based Logistics Team.
Related Acquisition Topic(s): Commercial Practices, Contract Logistics Support (CLS), Financial Management, Partnering, Performance Based Acquisition, Performance Based Logistics
Description:
The Naval Inventory Control Point (NAVICP) ALR-67(v)(3) Radar Warning System Performance Based Logistics Team awarded this six year $58.4 million Performance Based Logistics (PBL) contract to Raytheon Systems-Sensors and Electronics Division in support of the ALR-67(v)(3) Radar Warning System (RWS) in September 1999. This precedent setting contract expands industry's role well beyond the typical one of manufacturing and/or repairing components for Naval Aircraft. This vehicle tasks industry to become a full service provider encompassing overall program management, inventory control and engineering support for the ALR-67(v)(3) RWS. The contract structure provides incentives to the vendor to employ "best commercial practices" and introduce innovations and efficiencies that help to further reduce total life cycle costs. The Navy expects to enjoy a six-year cost avoidance of $28.8 million as a result of this effort.
The ALR-67(v)(3) RWS is currently scheduled for installation on the Navy's premier tactical fighter/attack jet aircraft, the F/A-18E/F "Super Hornet". The RWS is a new, non-fielded system for which no organic production or repair capability currently exists within the Department of Defense. NAVICP partnered with the Naval Air Systems Command (NAVAIR) and Raytheon Systems to mutually develop an innovative and cost effective support solution during the early phases of this system's life cycle…when the most flexibility existed to craft such a solution.
The RWS Performance Based Logistics contract is a primary example of NAVICP's creative approach to redefine industry/government acquisition roles and responsibilities. It reflects NAVICP's initiative to move away from managing spare parts to managing industry performance and relationships. In the case of this contract, industry has assumed the role of a full service provider with the Navy retaining integration responsibility to ensure the changing roles remain transparent to the sailor. Specifically, this Performance Based Logistics contract provides the following benefits not available in a standard repair contract:
Reliability Improvements - Included in Raytheon's cost is its guarantee to improve system reliability in annual increments as measured in mean time between failures (MTBF) from 300 hours to 475 hours at the end of year 6 of this contract. The reliability growth will be achieved primarily through technology insertions, manufacturing process improvements and design error correction through failure trending. There is also a built-in reliability incentive a more reliable system requires fewer repairs, further reducing labor and material costs for the contractor. NAVICP is expecting the increased reliability will mean fewer inductions for repair and in turn will drive down costs. This lower level of anticipated repairs is reflected in the pricing for fewer repairs as the contract progresses, in addition to less need for additional retail spares at system operating sites (naval air stations and aircraft carriers).
Availability Guarantees - Raytheon Systems is required to ensure fleet users receive shipments at sites within the continental United States (CONUS) within thirty (30) business days for year 2 and within five (5) business days for years 3-6 from receipt of a fleet customer requisition. This metric is suspended during year 1 of the contract to allow for "ramp-up" of the program. The contractor has guaranteed a 90% availability rate. "Availability" is defined as the number of requisitions filled on time divided by the total number of requisitions for each measurement period.
Commercial Holding of Wholesale Inventory - Raytheon Systems will be responsible for maintaining the Government's wholesale inventory, eliminating the need for the Navy to store inventory, and subsequently incur costs, at organic stock points.
Obsolescence Management - The contractor provides full, proactive obsolescence management. This ensures material parts availability and WRA availability through timely parts procurement or technical enhancements (i.e., Class II Engineering Change Proposals (ECPs)) to avoid material or configuration obsolescence. This eliminates the need for Government directed ECPs for obsolescence.
Configuration Management - Raytheon Systems provides full Class II configuration management including updating and maintaining technical data files. This will allow the contractor to immediately make design or component changes to increase the reliability of fielded units, provided it does not affect the operation or interface (i.e., "form, fit or function") of the system. This provides flexibility to the contractor to provide technology insertion and obsolescence management.
Transportation Costs - The contractor is responsible for transportation costs for the shipping of the Ready-For-Issue (RFI) units to a Government designated site within the continental United States. The Government pays for the shipping of the units to the Depot and also for the return retrograde units.
Electronic Data Interchange (EDI) Transactions - Requisition processing will be accomplished under EDI using systems compatible with DoD legacy systems. Requisitions from users will be sent directly to Raytheon via EDI. Filled and shipped requisitions and receipts at destinations will also be tracked via EDI. The fleet will be provided with a seamless, transparent support system.
Loaner Spares Clause - To ensure the program is successful and provides incentives to meet the performance metrics, a Loaner Spares provision was inserted in the contract. In the event Raytheon does not meet the guaranteed availability and reliability metrics, it will be required to provide additional parts in the form of temporary loaner spares at no cost to the Government. These assets would be returned to Raytheon only upon its meeting the performance metrics during the next measurement cycle.
Exit Criteria - The Government has the right to Terminate for Convenience as stated in the terms of the contract. In the event of a termination, Raytheon must provide data and information to set up organic support.
The innovative and creative techniques used by the ALR-67(v)(3) RWS Team in constructing its alternative logistics support solution should be easily adaptable to other acquisition situations within the Government. In fact, Deputy Under Secretary of Defense (Acquisition Reform) reps visited NAVICP in February 2000 to hear a briefing on the ALR-67(v)(3) PBL contract. These reps stated that they intended to post portions of this contract to a Department of Defense web site since it incorporated features that were at the leading edge of Acquisition Reform and should be shared throughout the Department.
