DOD Spending on Performance Based Logistics Could Rise

Performance based logistics contracts are the preferred strategy for weapon system support says Deloitte study.

Based on a new analysis of Performance Based Logistics (PBL) contracts, Deloitte believes PBL is now a preferred strategy for weapon system support and sustainment. Since 2001, reports Deloitte, the role of PBL has crossed over to all branches of the military, platforms, systems and subsystems causing the size of Department of Defense (DoD) PBL spending to grow faster than the market overall.

“Our study demonstrates during times of budget constraints, the US military may find opportunities to reduce costs, improve dispatch reliability and transfer risk to defense contractors who know their equipment best. For suppliers, this is a beneficial and opportune trend, given the dynamic defense budget,” said Tom Captain, vice chairman, Deloitte LLP, and the Global Aerospace & Defense Sector leader.

DoD spending on PBL contracts has grown from an estimated $1.4 billion in 2001 to an expected $5.0 billion in 2009 or 17.2% compound annual growth rate (CAGR). Furthermore, based on the study, DoD spending is expected to continue growing at a rate of 10.3% CAGR to reach $7.4 billion by 2013. The average size of DoD contracts has grown from an estimated $26.4 million in the 2007-2009 timeframe or 12.3% CAGR, and it is expected to continue growing at a rate of 7.6% CAGR to reach $85.8 million by 2013.

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