Availability-Based Real Options Approach to Accurately Determine the Cost and Pricing of Performance-Based Logistic Contracts
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Authors
Sandborn, Peter
Goudarzi, N.
Lei, X.
Kashani-Pour, A.
Subjects
Advisors
Date of Issue
2017-05
Date
2017-05
Publisher
Monterey, California. Naval Postgraduate School
Language
Abstract
Performance-based logistics (PBL) is growing in popularity for both governmental and non-governmental acquisitions of critical systems. These contracts allow the customer to buy the performance of the system rather than purchase the system, and/or to buy the availability of the system rather than pay for maintenance. Outcome-based contracts, which include PBL, are highly quantified ﾓsatisfaction guaranteedﾔ contracts where ﾓsatisfactionﾔ is defined by the outcomes received from the system, i.e., the specified performance level or availability. Maintenance planning seeks to predict and optimize when maintenance for a system is performed. Prognostics and Health Management (PHM) provide Remaining Useful Life (RUL) estimates that can be used to plan maintenance. The challenge is how to use the predicted RULs (with their associated uncertainties) and the performance requirements imposed by the outcome-based contracts to optimally plan future maintenance. This research uses a real options approach to optimize maintenance planning under the constraints imposed by outcome-based contract requirements. A simulation-based real options analysis (ROA) approach is used to determine the optimum predictive maintenance opportunity for a system managed via an outcome-based contract. The methodology is applied to individual systems and fleets of systems, and production and non-production systems.
Type
Technical Report
Description
Series/Report No
Department
Organization
Identifiers
NPS Report Number
UMD-LM-17-200
Sponsors
Naval Postgraduate School Acquisition Research Program
Funding
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Citation
Distribution Statement
Rights
This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.