Organizational Change Considerations for Implementation of Performance-Based Logistics Contracts

Abstract

Performance-Based Logistics (PBL) administrators have long struggled with developing contracts that result in a win-win relationship for both the contractor and the customer in terms of costs under dynamic conditions, contract length, and sustained performance. These inefficiencies lead to a perpetual cycle of reexamining outdated data, due to current data unavailability, or lack of publications. Thus, outdated practices or cost barriers can often plague outcome-based contracts (OBC). This research entailed seeking out other industries that utilize OBC in asset maintenance. In particular, several state Department of Transportation agencies adopted and successfully implemented Performance-Based Maintenance Contracts (PBMC). In both the qualitative and quantitative spheres, three areas of concern were identified: internal resistance towards performance-based procurement, ineffective relationships between the contractor and customer, and misalignment between contractor performance and scope complexity. After examining 75 contract performance scorecards and conducting interviews with Department of Defense personnel, this research determined that the organizational change required to tackle these specific challenges suggest a paradigm shift in how PBL contracts are implemented and administered.