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Full Service Contracting in Full Service Contracting in Support of Support of
Complex Weapons SystemsComplex Weapons Systems
& Industry Perspective on the & Industry Perspective on the Navy FSC War GameNavy FSC War Game
20 November 200220 November 2002
Joe GrossonDirector, Lifetime SupportLockheed Martin SIBA
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The Integration of Systems Engineering & Supportability
•Enabling trade space decisions for the life of a system
•Reducing ownership cost while optimizingmission effectiveness
•With the Prime Contractor delivering, modernizing and supporting the system from
design through end of life
FSC (Full Service Contracting &PVS (Prime Vendor Support) Definition
CharacteristicsCharacteristics•Guarantee of Operational Availability and Management of Technology Refresh,
Insertion and Modernization•“Power by the Hour” with term and performance incentives. Reinvestment of
some savings in technology insertion and reliability improvement•Long term FFP multiple incentive Contract where the Prime is incentivized to:
- Maintain a Robust and Competitive Industrial Base- Single prime contractor using best provider government organizations - Guarantee technology currency- Respond to surge requirements
Full Service Contractor
Performance Based Logistics Direct Vendor Delivery
Virtual Prime Vendor – DLA Items
Prime Vendor Support
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Full Service ContractingFull Service Contracting““A Notional NAVSEA Business Model”A Notional NAVSEA Business Model”
Full Service Contractor
ShipFSC
ShipFSC
ShipyardHM&E
LM NESS
PVS
System Integrator
PVS
Other PrimeVendors -
Program Management OrganizationManages and Plans for the Entire Ship
PrimeVendors
OEMs
& Navy Partners
OEMs&
Navy Partners
OEMs&
Navy Partners
Navy Infrastructure
For Legacy Equipment
Full Service Partnership
SystemIntegrator
PEO & NAVSEA
Shipbuilder
PublicPartners
NavalShipyard
Fleet
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Contracting Trend re: FSC/PVSContracting Trend re: FSC/PVS
The US Navy Support Paradigm is continuing to shift to contractor lifetime supportThe US Navy Support Paradigm is continuing to shift to contractor lifetime support NAVICP has awarded 125 PBL contracts & NAVSEA and NAVAIR have awarded PVS and NAVICP has awarded 125 PBL contracts & NAVSEA and NAVAIR have awarded PVS and
Lifetime Support contracts. PVS showing up as an evaluated factor for major Lifetime Support contracts. PVS showing up as an evaluated factor for major acquisitions. 1/3 of weight for JSF selection based on lifecycle solutionsacquisitions. 1/3 of weight for JSF selection based on lifecycle solutions
Enablers include:Enablers include: Government Contracting Ingenuity that works within 10 USC statutes & Government Contracting Ingenuity that works within 10 USC statutes &
Appropriation language while balancing risk with appropriate contract incentivesAppropriation language while balancing risk with appropriate contract incentives Redefining the System Integration Process to combine engineering & supportability Redefining the System Integration Process to combine engineering & supportability
with trade-space analysis for the life of the systemwith trade-space analysis for the life of the system Effective public-private partnering using lessons learned from both US Military Effective public-private partnering using lessons learned from both US Military
Components and the UKComponents and the UK COTS driven solutions and employing the natural growth of processing power and COTS driven solutions and employing the natural growth of processing power and
reliabilityreliability Distance Support and Training (Anchor Desk & One Touch)Distance Support and Training (Anchor Desk & One Touch) Collaborative Engineering Environments & IDEsCollaborative Engineering Environments & IDEs e-Business and automated supply chain managemente-Business and automated supply chain management
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PBL/PVS Type Contracts (Partial List)PBL/PVS Type Contracts (Partial List) Lockheed MartinLockheed Martin
F117 TSPRF117 TSPR F-14 LANTIRNF-14 LANTIRN AEGISAEGIS ARCIARCI CASSCASS MK 41 VLSMK 41 VLS Q70Q70 Aircraft TiresAircraft Tires S3 PVSS3 PVS JAVALINJAVALIN HIMARSHIMARS Mk 92 FCSMk 92 FCS TRIDENT NavTRIDENT Nav TADS/PVNSTADS/PVNS UK MerlinUK Merlin
Lockheed Martin Lockheed Martin PendingPending H-60 Tip to TailH-60 Tip to Tail P3 AIPP3 AIP BSY-2BSY-2 BLQ 10BLQ 10 SQQ89(V)15SQQ89(V)15 Machinery ControlsMachinery Controls
RaytheonRaytheon ITAS (TOW)ITAS (TOW) CWISCWIS
BoeingBoeing C17 TSSRC17 TSSR F-18 E/FF-18 E/F
HoneywellHoneywell APUAPU
TRWTRW E2C E2C
ComputerComputer
GEGE F404 EngineF404 Engine
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Navy Full Service Contracting WargameNavy Full Service Contracting Wargame ObjectiveObjective: Wargame the procurement, award : Wargame the procurement, award
and operation of contractor provided lifetime and operation of contractor provided lifetime support ~ Key to the understanding, support ~ Key to the understanding, definition and future Navy policesdefinition and future Navy polices
SponsorSponsor: SECNAV & COMNAVSEA: SECNAV & COMNAVSEA ConductedConducted: March 3-6, 2002, McLean, VA: March 3-6, 2002, McLean, VA PlayersPlayers: 60 Flag/SES; 30 Industry: GD, NG, : 60 Flag/SES; 30 Industry: GD, NG,
Boeing, BAE, Raytheon, Brown & Boeing, BAE, Raytheon, Brown & Root/Halliburton, Wall Street, LMCRoot/Halliburton, Wall Street, LMC
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Navy Full Service Contracting WargameNavy Full Service Contracting Wargame Game Structure:Game Structure:
Navy Issued RFI~ pre-gameNavy Issued RFI~ pre-game Industry Responded with Comments ~ pre-gameIndustry Responded with Comments ~ pre-game RFP issued ~ starts gameRFP issued ~ starts game Three Companies respondThree Companies respond
Shipyard with Systems Integrator as subcontractorShipyard with Systems Integrator as subcontractor Systems Integrator with Shipyard as subcontractorSystems Integrator with Shipyard as subcontractor Commercial Privatization & Outsourcing CompanyCommercial Privatization & Outsourcing Company Each company has mix of senior Navy and Industry playersEach company has mix of senior Navy and Industry players
Navy Manages Process with Representatives from ASN, OPNAV, Fleet, OLA, Navy Manages Process with Representatives from ASN, OPNAV, Fleet, OLA, Congressional Staffers, ISEAs, Warfare Centers, other Systems Commands :Congressional Staffers, ISEAs, Warfare Centers, other Systems Commands :
““Big Navy” ~ SECNAV, OPNAV, SYSCOMS, FleetBig Navy” ~ SECNAV, OPNAV, SYSCOMS, Fleet Labs/DepotsLabs/Depots Congressional PlayersCongressional Players
Proposals evaluated, awards made, protests lodged and adjudicated and Proposals evaluated, awards made, protests lodged and adjudicated and contracts awardedcontracts awarded
Contracts worked in compressed time to determine how problems are Contracts worked in compressed time to determine how problems are managed and resolvedmanaged and resolved
Game completes with “Hot Wash-up”Game completes with “Hot Wash-up”
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NDIA FSC Working GroupNDIA FSC Working GroupView From Industry Preceded GameView From Industry Preceded Game
FSC-like contracts are successful when: Concept is fully backed by military leadership Concerns of opponents to direct contractor support
are acknowledged and addressed There is a sharing of information that results in a
compelling business case Time is taken to make the case for direct contractor
support to public and legislative leadership Legislative and regulatory impediments are directly
addressed and effective remedies developed
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From the perspective of the industry working group, the central issue is not whether an industry-led, public-private partnership can provide efficient, effective platform level life cycle support in peace and war.
In our view, the central issue is the commitment of Government in In our view, the central issue is the commitment of Government in resolving obstacles to FSC implementationresolving obstacles to FSC implementation.
The FSC working group proposed a definition of FSC that emphasizes the concept’s most important characteristic, single point industry accountability for platform/system life cycle support. The definition includes several important features:
- Performance by industry of design, development & support functions throughout the life of a platform or system- FSC responsibility for total systems engineering and delivery of technology refresh, technology insertion, maintenance and modernization changes.- FSC contract incentives to minimize Total Ownership Cost
(TOC) while delivering a specified level of readiness, and meeting unexpected support demands in peace and war.
NDIA FSC Working GroupNDIA FSC Working Group
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• and, FSC responsibility for viability of the industrial base, preservation of adequate competition, and management of diminishing manufacturing sources, including appropriate set-asides for small and disadvantaged businesses.
The paper presented an industry view of FSC essential elements, specifically:
•Public-Private Partnerships•Technical, Cost and Schedule Decision Authority•Process Visibility•Contract Period of Performance•Integrated Product Teams•Contract Structure, Incentives and Performance Measurement•Contract Costs and Total Ownership Costs•System Engineering•Contract Statutory, Regulatory, Policy and Procedural Environment•Small and Disadvantage Business Involvement in Full Service Contracting
NDIA FSC Working GroupNDIA FSC Working Group
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Navy Perspective of the FSC WargameNavy Perspective of the FSC Wargame
Game ObjectivesGame Objectives
•What critical areas of concern must be addressed in FSC negotiations between the government and industry?
• How should liability be determined and how can it be enforced?
• What are “warfighter” concerns and priorities?
• Roles and responsibilities defined & implemented for success?
•What are the near term and strategic opportunities for change?• “Business model” alternatives integrated into government environment?
• Commercial standards and practices that provide cost savings & success?
• Metrics and MOE’s to be integrated into a strategic road map?
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Navy Game WheelNavy Game Wheel
CONTROLCONTROL•Environment: Economics and Conflict•Politics: Local and National
Wall Street•Assess corporate profiles•Identify risks•Provide financial “guidance”
•Assess program: FSC requirements•Assess investment issues•Develop risk management•Identify issues of concern
DoN,SYSCOMS
DoN,SYSCOMS
•Review budget tensions•Assess and prioritize alternatives- operational and business•Promote corporate “guidance's”
•Review operational requirements•Identify budget constraints/ opportunities•Provide guidance
LPD-XXPHOENIX
•Assess program support requirements•Determine costs: current and future•Develop proposal strategy•Assess risks-cost/ benefit
Depots•Assess requirements / costs•Assess current capabilities•Develop proposal strategy
Warfighter•Review operational requirements•Review current and projected costs•Develop operational FSC strategy
Congress•Review budget issues•Review legislative requirements for Title X restrictions•Identify concerns•Identify the “art” of the possible
Shipbuilder w/ System Integrator as sub-contractor
System Integrator& Shipbuilder as sub
Commercialfull-servicecontractingcompany
DDG-XX
In Service Engineering•Partnering Strategy•Competitor strategy
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Game play developed a number of insights for the NavyGame play developed a number of insights for the Navy
1. FSC has potential if we can know how to get:1. FSC has potential if we can know how to get: Real savings to TOAReal savings to TOA Service tailored to ships’ operating cycles and the battle group Service tailored to ships’ operating cycles and the battle group
readiness requirementsreadiness requirements Safe operationSafe operation More effective warships that can meet their mission requirementsMore effective warships that can meet their mission requirements Meaningful metricsMeaningful metrics Business models that have exit strategiesBusiness models that have exit strategies
2. Policy and decision-makers must consider changing the existing budget 2. Policy and decision-makers must consider changing the existing budget process (PPBS) as it does not support FSC as a business initiative wellprocess (PPBS) as it does not support FSC as a business initiative well Annual budgets vs. 5-year or greater awardsAnnual budgets vs. 5-year or greater awards Execution year priorities—including readinessExecution year priorities—including readiness Budget tensions vs. requirementsBudget tensions vs. requirements
3. Full Service Partnering “FSP” should exist between government and industry3. Full Service Partnering “FSP” should exist between government and industry
How must FSC be defined for effective acquisition strategies?
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Game play developed a number of insights for the NavyGame play developed a number of insights for the Navy
4.4. FSC must have a Phased Approach for legacy systems that FSC must have a Phased Approach for legacy systems that accommodates Risk Mitigation needsaccommodates Risk Mitigation needs Proceed step-by-step until FSP overtakes all shipsProceed step-by-step until FSP overtakes all ships Allows both sides to assess true costs and opportunity to Allows both sides to assess true costs and opportunity to
integrateintegrate Government participation with contractorGovernment participation with contractor
5. FSC must have more ambitious approach for cradle-to-grave 5. FSC must have more ambitious approach for cradle-to-grave projectsprojects
6. Explore the extent to which levels of technical authority can be 6. Explore the extent to which levels of technical authority can be delegateddelegated
7. Must have clearly defined exit strategy for existing contract vehicles7. Must have clearly defined exit strategy for existing contract vehicles
8. Need to understand the best mix of organic Navy and FSC assets 8. Need to understand the best mix of organic Navy and FSC assets that plays to strengths of each for overall benefit of the Navy.that plays to strengths of each for overall benefit of the Navy.
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Game play developed a number of insights for the NavyGame play developed a number of insights for the Navy
What critical areas of concern must be addressed in FSC negotiations between the government and industry?
1. A clearly defined contract1. A clearly defined contract2. Stable and adequate funding2. Stable and adequate funding3. Government (including operators) need to identify and fulfill responsibilities3. Government (including operators) need to identify and fulfill responsibilities4. Contract requirements must reflect real warfighter needs4. Contract requirements must reflect real warfighter needs5. Industry’s viable business case in FSC must have the following tenets:5. Industry’s viable business case in FSC must have the following tenets:
Strategic alignment among all partiesStrategic alignment among all parties Opens new marketsOpens new markets Promotes corporate objectivesPromotes corporate objectives Meets risk parametersMeets risk parameters Meets financial objectivesMeets financial objectives
6. Achieving cost reductions is critical for success6. Achieving cost reductions is critical for success Minimize redundancyMinimize redundancy Cost-containment in sole-source environmentCost-containment in sole-source environment
7. Implementation strategies must have:7. Implementation strategies must have: Metrics (Total Ownership Costs, Readiness)Metrics (Total Ownership Costs, Readiness) Clear definition of contract scope in a dynamic environmentClear definition of contract scope in a dynamic environment Technology refresh needs to be open to all sourcesTechnology refresh needs to be open to all sources
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Game play developed a number of insights for the NavyGame play developed a number of insights for the Navy
What are the near term and strategic opportunities for What are the near term and strategic opportunities for change?change?
1. Any system…1. Any system…That is highly COTSThat is highly COTSNew with predominant commercially furnished New with predominant commercially furnished
equipmentequipment2. Conversion to FSC of existing support contracts2. Conversion to FSC of existing support contracts3. Explore “Sponsored Reserves” concept in order to deploy 3. Explore “Sponsored Reserves” concept in order to deploy
FSC personnel on Navy platforms engaged in hostile or FSC personnel on Navy platforms engaged in hostile or wartime environmentswartime environments
4. Single Program Manager, single sponsor programs with 4. Single Program Manager, single sponsor programs with cradle-to-grave responsibility may offer best pilotcradle-to-grave responsibility may offer best pilot
5. Create alignment to facilitate change5. Create alignment to facilitate change
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Future EffortsFuture Efforts
“ “At the game’s “hotwash” conclusion, the At the game’s “hotwash” conclusion, the majority of the players endorsed further majority of the players endorsed further exploring the feasibility, real time, and real exploring the feasibility, real time, and real life, of FSC. The participants commented life, of FSC. The participants commented that “the time is right for change.” Both that “the time is right for change.” Both senior level government and industry leaders senior level government and industry leaders are prepared to carry forward the business are prepared to carry forward the business strategy of full service contracting, but before strategy of full service contracting, but before this can be done, a number of issues this can be done, a number of issues need to need to be resolved”be resolved”
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Issues to be resolvedIssues to be resolved1. FSC may reduce Operational Navy flexibility to prioritize funds
SCN vs. O&MFleet control of funds vs. Program Managers, PEOs, SYSCOM’s
2. How would we deal with an FSC in less than a fully-funded environment?3. Preserving Big Navy interests:
Fleet flexibility across platformsPreserving core National Security capabilityAccountability/Liability throughout the life-cycle
4. A clear definition of desired outcomes (performance, schedule, cost, etc.) and metrics to be measured and frequency
5. Fleet must be part of contract and performance assessment—Fleet planning across platforms6. Must ensure that legal issues are addressed
Evaluate 10 USC 2464/2466Third party access rules/indemnity for service agentsOSHA/EPA liability clarification for service agentsSecurity issues with FSC databases (SIPR vs. NIPR)A-76/BRAC implicationsRedefining warrior and civilianMobilization in War Zone?Geneva Convention StatusStrike Free contract clause
7. Waivers may be needed to enable FSC partnering by governmentGovernment liability acceptanceGain sharingExclusive partnering
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What does this issue list signify?What does this issue list signify?
If all of these need to be “resolved” first will If all of these need to be “resolved” first will we ever get there?we ever get there?
Nevertheless, there are solutions for about Nevertheless, there are solutions for about half of these issues.half of these issues.
If we need to resolve these issues why hasn’t If we need to resolve these issues why hasn’t industry been asked to develop a industry been asked to develop a recommendation for resolution?recommendation for resolution?
Why hasn’t a Government/Industry IPT been Why hasn’t a Government/Industry IPT been convened to deal with the overall issue set?convened to deal with the overall issue set?
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Wargame Recommended Next StepsWargame Recommended Next Steps
1. Consider a pilot1. Consider a pilot2. Resolve legal/regulatory issues2. Resolve legal/regulatory issues3. Work out the savings and budget construct3. Work out the savings and budget construct4. Learn how to do it…and how to make it fit into current 4. Learn how to do it…and how to make it fit into current
Navy operationsNavy operations5. Create broader understanding of the current 5. Create broader understanding of the current
ship/combat system FSC efforts—in both Navy and ship/combat system FSC efforts—in both Navy and industry. Investigate issues using platforms and industry. Investigate issues using platforms and systems such as:systems such as:
JCC-XJCC-XLPD-17LPD-17CVN-77CVN-77CIWSCIWSEtc Etc
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COMNAVSEA’s Lessons LearnedCOMNAVSEA’s Lessons Learned
1.1. ““Partnership between industry & Navy is essential”Partnership between industry & Navy is essential”
2.2. ““There are many affordable support options There are many affordable support options between the commercial sector and traditional between the commercial sector and traditional organic support…it is imperative that we obtain organic support…it is imperative that we obtain Fleet performance agreements and business case Fleet performance agreements and business case analyses to evaluate the best support structure for analyses to evaluate the best support structure for the Navy”the Navy”
3.3. “…“…the Navy acquisition community is ultimately the Navy acquisition community is ultimately responsible for providing weapon system support to responsible for providing weapon system support to the Fleet. The support approach must always be the Fleet. The support approach must always be transparent to the Fleet.” transparent to the Fleet.”
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Finally, Here is an Industry Perception of the War Game Exercise Finally, Here is an Industry Perception of the War Game Exercise and the Impact on How the Navy Does Businessand the Impact on How the Navy Does Business
A tremendous amount of energy and time was invested A tremendous amount of energy and time was invested in planning and executing the FSC Wargame with the in planning and executing the FSC Wargame with the expectation that a new way forward would emerge. expectation that a new way forward would emerge. Pursuit of that expectation is not visible to industryPursuit of that expectation is not visible to industry
Since the 21 June 2002 final report, we see no impact on Since the 21 June 2002 final report, we see no impact on NAVSEA Acquisition Strategies to employ either PVS or NAVSEA Acquisition Strategies to employ either PVS or Full Service Contracting, or action on any of the five Full Service Contracting, or action on any of the five recommended next stepsrecommended next steps
While it was NAVSEA that stepped out with the While it was NAVSEA that stepped out with the wargame, NAVAIR has implemented the FSC/PVS wargame, NAVAIR has implemented the FSC/PVS concepts through programs such as JSF and S-3 PVS concepts through programs such as JSF and S-3 PVS
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Industry Perception of the War Game Exercise and the Impact on Industry Perception of the War Game Exercise and the Impact on How the Navy Does BusinessHow the Navy Does Business
NAVICP is the exemplar with regard to the complete NAVICP is the exemplar with regard to the complete spectrum of performance based logistics contracting. spectrum of performance based logistics contracting. With over one hundred PBL contracts in place and a With over one hundred PBL contracts in place and a great deal of BCA experience. That experience was not great deal of BCA experience. That experience was not capitalized upon during the wargame.capitalized upon during the wargame.
Public-Private Partnerships are a necessary enabler for Public-Private Partnerships are a necessary enabler for FSC especially for support of legacy portions of new FSC especially for support of legacy portions of new systems. While there are a few examples of PPP in-systems. While there are a few examples of PPP in-place, the notion is mostly rhetoric as the hard issues place, the notion is mostly rhetoric as the hard issues have yet to be faced. At the working levels, industry and have yet to be faced. At the working levels, industry and ISEAs sense an environment of competition vice ISEAs sense an environment of competition vice partnership. The wargame dealt with PPP and a model partnership. The wargame dealt with PPP and a model evolved that should be evaluated. Other successes, e.g. evolved that should be evaluated. Other successes, e.g. APU, LANTIRN, and UK experiences should be APU, LANTIRN, and UK experiences should be evaluatedevaluated
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Industry Perception of the War Game Exercise and the Impact on Industry Perception of the War Game Exercise and the Impact on How the Navy Does BusinessHow the Navy Does Business
There was emphatic agreement at the conclusion of the There was emphatic agreement at the conclusion of the wargame that NAVSEA needed to move out with pilot wargame that NAVSEA needed to move out with pilot programs. This can best be achieved for major systems, programs. This can best be achieved for major systems, especially where a support contract already exists with especially where a support contract already exists with the OEM. Existing contracts can be converted into PBL the OEM. Existing contracts can be converted into PBL or PVS using FFP, power by the hour, or multiple or PVS using FFP, power by the hour, or multiple incentive arrangements.incentive arrangements.
If the experience with PBLs is a bench-mark then it is If the experience with PBLs is a bench-mark then it is clear that cost savings opportunities resulting from FSC clear that cost savings opportunities resulting from FSC & PVS are not being exploited. & PVS are not being exploited.
We need to move out with pilot programs now!We need to move out with pilot programs now!We need to move out with pilot programs now!We need to move out with pilot programs now!
