Decision-support quantitative models for valuing incentives in performance based contracts

Abstract

The purpose of this MBA project is to identify the actual cost savings when a Performance Based Logistics (PBL) contract, with incentives, is awarded to replace a specified maintenance echelon for critical components or subcomponents of systems. We will examine the impact on system availability to determine if a proposed investment will be practical. The entire logistics flow and maintenance processes, to include all associated subactivities, will be analyzed. In order to do this, we must initially identify all costs of operating the current organic maintenance echelon, which will become the PBL baseline. This will be used to determine the value added of any incremental percentage change in readiness or elimination of organic maintenance echelon(s). We propose to develop a simulation based decision support tool to assist Program Managers (PM) with issues of valuing options for the improvement of system availability, and making appropriate investment options. Ultimately, this project will determine the financial viability and practicality of implementing a PBL incentive contract.