A retired navy officer friend, Jeff Cuskey, who is a professor at the
Navy Post Graduate School (NPS) in Monterey, CA, is engaged in a
research project for the Department of the Navy on Full Service
Contracting. Following is some background information, a list of issues
cited in a January 2002 report prepared by the National Defense
Industrial Association, and the research questions
presented to NPS. Jeff would appreciate any comments, insights,
experiences, etc., on this subject, especially with respect to potential
legal issues. I look forward to seeing your comments on the Pubklaw
website. If anyone wants to communicate directly with Jeff, his email
address is JCuskey@nps.navy.mil, and his phone number is 831-656-2966. This information is also on the PubKLaw website at
Thanks for your participation.
LeRoy Haugh,
phone 703-532-5377.
Since the early 1990s, the Department of the Navy has embraced numerous acquisition reform measures in an effort to maximize available procurement funding and to reduce total ownership and support costs of legacy and newly developed weapon systems. One relatively new initiative being considered by the DON Acquisition Community is the “Full Service Contractor” (FSC) Business Model, sometimes referred to as “Full Service Partnering” (FSP). This acquisition strategy differs from traditional acquisition strategies in a number of ways. The traditional acquisition approach relies upon industry to design and build the requisite system. Once built, the system is then turned over to the Service for operation, support and maintenance. Under this approach, the Service generally determines (within statutory constraints) the amount of support and maintenance that will be retained in-house and the amount of logistics support that will be contracted out to industry. The ultimate decision for determining the appropriate support concept and scope of Government-Industry participation rests with the Government. In contrast, the FSC Business Model shifts responsibility and accountability for lifetime support of a weapon system to a single industry point of contact. The chosen Full Service Contractor is responsible for the design, development, production and lifetime support of the system. Additionally, the FSC would likely become the integrator of contractor and Government capabilities to facilitate the full range of support during peace and war.
Navy leadership, as well as operators of weapon systems want more reliable weapon systems, requiring less maintenance. As noted in a DON “Success Stories” Website, the Program Executive Officer for the Navy's DD-21 Program acknowledged that a ship's “...engineering, development and construction (acquisition lead time) costs represent a significant portion of that system's total life cycle cost.” However, the “... single most costly category is the ship's operating and support (O&S) cost.” Depending upon the type of weapon system and it's projected useful service life, O&S costs can represent between 60 and 85 percent of a systems Total Ownership cost (TOC). For this reason as well as others, the FSC Business Model seeks to obtain enhanced warfighting capabilities while minimizing Total Ownership Cost (TOC). Although yet to be realized on a large scale, DON hopes to gain significant cost savings and cost avoidances with innovative Business Models such as FSC. It is anticipated that any savings realized through FSC would be redirected into procurement and modernization accounts.
The Department of Defense (DOD) and DON have significant experience with FSC-like contracts and business relationships. Public-Private Partnerships, Contractor Logistics Support (CLS), Performance Based Logistics (PBL), Direct Vender Delivery (DVD), Prime Vendor Support (PVS) and Virtual Prime Vendor (VPV) acquisition strategies have some of the characteristics of a Full Service Contractor Business Model. However none of these strategies assign complete or near complete responsibility for support functions throughout the system's lifecycle. For instance, a FSC Business Model might require a FSC to conduct total system engineering and delivery of technology refreshment, technology insertion, maintenance and modernization upgrades. Additionally, FSC-like models do not give a contractor complete access and authority to integrate Government capabilities. Nor do FSC-like contracts typically require a contractor to maintain the viability of the industrial base, preserve the competitive marketplace and manage diminishing manufacturing sources.
Despite DON's experience with FSC-like contracts, there are still significant Government and Industry concerns about the legality and implementation of the FSC Business Model. For instance, a National Defense Industrial Association (NDIA) report dated January 15, 2002 presented industry's view of Full Service Contracting and noted the following issues and concerns:
The above list of issues and concerns is not all-inclusive. There are other issues and risks associated with FSC implementation, such as budgetary and contractual. The proposed research effort will investigate DON's experience with Full Service Contracting for Major Systems and provide conclusions and recommendations to enhance the use and effectiveness of the FSC Business Model. Specifically, the researcher will attempt to answer the following questions.
Research Question(s):