Vanguard Magazine

I In ServIce Support 34 AprIL/MAY 2017 www.vanguardcanada.com repairs or delay investments. Other major contractual challenges are related to issues of contract management such as asset specificity, hence hold-up and underinvestment. Relational contracting in long-term relationships refers to trust as a lubricant of transactions and hence as improving efficiency. First, longer-term contracts facilitate for building trust to alleviate the asset specificity problem. Second, performance evaluation over longer periods may reduce need for direct monitoring of contractor effort. Third, if contractor rotation is re- duced, then contract management costs fall. Fourth, if good performance can be rewarded with contract extensions, the ef- fort incentive problem can be alleviated. Finally, if cost savings are realized at the expense of reliability and punctuality, op- erational readiness may be jeopardized – hardly a desirable trade-off. experience in allied countries Australia is spatially isolated from its major allies. Thus domestic sustainment capabili- ties for all equipment prove indispensable due to operational readiness requirements. This presents a problem, since they import most of their equipment and most sustain- ment is performed by firms that are not OEMs. They must, therefore, acquire IP rights at the time of procurement in order to service their equipment. Australian sus- tainment does not differ from the experi- ence of other Western countries in NATO and elsewhere. For instance, with a wide spectrum of OEMs, France mostly per- forms its own sustainment, but is other- wise open to foreign OEMs for equipment France does not manufacture. non-traditional sustainment The United Kingdom stands apart in that it has been experimenting with a non-tra- ditional capability development and equip- ment sustainment strategy. Four of UK's numerous defence Private-Public Part- nerships (PPPs) will be briefly described. UK's Strategic Tanker Aircraft (Airbus A330s owned and operated privately, but leased by the military when needed.), Stra- tegic Sealift (purpose-built transport and supply ships), Field Electrical Power Sys- tems and Heavy Equipment Transporters are the four capabilities which introduced hitherto unknown organizational changes into the UK military. Instead of outsourcing sustainment of capability equipment, British forces out- sourced whole capabilities, personnel and equipment combined using long-term contracts. The private parties running these capabilities are consortia typically including OEMs. Compared to traditional outsourced sustainment where equipment is just plug-and-play equipment, UK's PPPs are plug-and-play capabilities with sustainment bundled up with personnel. JSF project and sustainment Precursors to the JSF project are the Eu- ropean OCCAR and the worldwide C-17 Globemaster sustainment programs. Un- der OCCAR, members (Belgium, France, Germany, Italy, Spain, and the UK) and participants (Finland, Sweden, Nether- lands, Luxembourg, Poland, and Turkey) cooperate in sub-groups, sustaining their equipment without necessarily collaborat- ing as the whole group. Comparative ad- vantage dictates the sustainment provider and the latter is typically the OEM's coun- try. However, for the heavy transporter A400M, sustainment is provided by the contractor winning the tender, which de- cides where the work is carried out. Spare parts are shared across countries. Sustain- ment teams from different countries re- ceive common training. Cross-country maintenance exploits economies of scale. Under the original Global C-17 Sustain- ment Partnership (GSP) between Boe- ing and its C-17 customers, Boeing had overall sustainment responsibility, includ- ing spares stocking and distribution, de- pot maintenance, performing the repairs, overseeing the supply chain and providing technical and engineering support. Later, from 2011, the United States Air Force took over the lead as an in-house sustainer, while Boeing remained part of this new program C-17 Global Integrated Sustain- ment Program (GISP). In the successful spares pooling under C-17 GISP program, foreign partners did not have major design and industrial stakes in the development and production of the aircraft; moreover, their fleets are relative- ly small. Thus, the USAF has maintained common configuration by requiring all partners to make all of the upgrades and modifications that the USAF makes. Upon parts shortages, the USAF's Air Mobility Command allocates scarce resources. Shirk- ing or a partner failing to fund its share fully has not been a problem, as those fleets are small. By contrast, the F-35 partner nations have major design and industrial stakes in the development and production of the air- craft, and the disparity in fleet sizes is signifi- cantly lower than for the C-17. JSF sustainment The United States (for Air Force, Navy and Marines), Australia, Canada, Denmark, Italy, the Netherlands, Norway, Turkey, and the United Kingdom have been the full partners for development, manufactur- ing and sustainment of the F-35. In 2012, they agreed that F-35 sustainment assets (spare propulsion systems, support equip- ment, and all air system spares) would be pooled globally and centrally managed by the F-35 production support manager, but kept at spatially distributed maintenance, repair and overhaul (MRO) sites. Since then, participating countries and the JSF Program Office (JPO) have developed rules governing the allocation of scarce parts, what happens when a partner cannot fully fund its share of program costs, how the program will manage divergence from a common configuration baseline and, finally, how to allow participants to opt out of the global pool and establish (and be willing to pay for) its separate stock of assets. This global pool generates savings from the need to stock fewer total spare parts than if all participants operated separately because of non-simultaneous variations in demand for spares, particularly for high-cost parts with a low failure rate. This F-35 pool diverges from the success- ful C-17 version with a dominant role for the USAF; no U.S. service has primacy over spares allocation decisions, and no U.S. ser- vice dictates configuration management as in C-17 version. Thus the F-35 spares pool-

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