Contractor Incentives for Success in Implementing Performance-Based Logistics: A Progress Report

Abstract

In implementing performance-based logistics (PBL), the need for several resources like inventory investment decreases. Therefore, the contractor's profit, which was based on the level of these resources, may decrease. Therefore, a contractor may have disincentives to implement and use PBL. One way to handle such a situation is to develop financial models to assist with profit/cost sharing during the implementation of PBL. Another way is to study the broader topic of contractor incentives in PBL to find appropriate ways to motivate the contractors to enhance their performance. While most literature in PBL mentions the importance of contractor incentives, not much research has been conducted in this topic. With such situations in mind, this research program proposes a framework to study and develop appropriate possible contractor incentives to succeed in the PBL environment. Our proposed framework considers the possibility of financial and non-financial contractor incentives to ensure PBL success. We anticipate that the final results of this research program will be useful in the defense and related public- and private-sector organizations to maximize the overall benefits of PBL projects. This paper provides a progress report in developing our proposed framework and outlines the remaining work to be completed.