A version of this article appears in the June 23 edition of Aviation Week & Space Technology.

With budgets nose-diving, the U.S. Defense Department is searching for strategies to preserve mission readiness. There is no need to look far and wide for a big part of the answer.

A time-tested and established methodology exists to incentivize industry to significantly reduce the prices charged for maintaining equipment and improving materiel readiness—performance-based logistics (PBL). PBL offers “wins” for warfighters and the military services, which benefit from improved readiness at reduced prices.

PBL simultaneously offers industry “wins” by providing the opportunity to earn improved profits and return on invested capital while locking in longer assured revenue streams (see page 25). 

Despite the above, the Proof Point project launched by the deputy assistant secretary of defense for materiel readiness reported that approximately 95% of department equipment is not covered by a PBL arrangement. Moreover, few new arrangements have been established since 2008, while the number under development remains small. Three key dynamics inhibit broad deployment: 

Skill sets. As expected, sustainment professionals are highly skilled in legacy transactional logistics practices. By contrast, few department professionals have developed a PBL. Those who have were self-taught and worked only on a single initiative. Many who worked PBL initiatives are no longer in the workforce. Bottom line: Only a handful of sustainment professionals exist with the requisite skills to develop and deploy a single initiative . . . let alone drive broad deployment.

Competing workplace imperatives. Virtually all Defense Department maintenance professionals have full-time responsibilities that do not include PBL program managers’ primary focus: weapon system acquisition, and more specifically new equipment costs, schedules and performance. Program managers are also responsible for maintenance strategy. However, maintenance is a “tomorrow” cost and a “tomorrow” readiness outcome. Today’s demands supersede tomorrow’s requirements. Moreover, a single PBL arrangement is more complex and time-consuming to develop and deploy than a single transactional arrangement. This presents program managers with a very real dilemma: “How do we allocate resources to develop a PBL without letting today’s business slip?”

Competing equities. Broadly deploying PBL represents fundamental change that generates concerns regarding the potential for negative impacts on Defense Department personnel, capabilities, organizations, control over processes, the so-called core and 50/50 statutes, and budgets, to name just some equities that might be affected. A few of the concerns are valid and enduring; all can be addressed successfully within the PBL strategy.

These inhibitors do not constitute an exhaustive list. They are, however, the critical few. How should this insight guide development of a broader PBL strategy? A key tenet of the PBL strategy points to a possible answer: the alignment of incentives.

Competing workplace imperatives, competing equities and the absence of skilled PBL professionals are the primary disincentives to broad PBL deployment. To counteract these disincentives, leadership should provide real and tangible pro-PBL incentives to government professionals. 

We are optimistic the department is headed in the right direction. Its most senior logistics executives understand the significant, untapped readiness improvement and price reductions afforded by PBL. They have undertaken sweeping measures to get PBL back on track and accelerate progress, including providing the incentives required to offset existing disincentives.

Institutionalizing the PBL transformation will take years. Much is at stake for our warfighters, the military services, taxpayers and industry. The cost of failure will be measured in billions of dollars in lost savings and reduced readiness.

In the past decade, warfighters transformed how they engaged our enemies in the battlespace. Over the next decade, the department’s logistics communities similarly should transform equipment sustainment practices and more broadly deploy PBL.