Logistic Support Cost Commitments for Life Cycle Cost Reduction
LOGISTICS MANAGEMENT INST BETHESDA MD
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In its efforts of recent years to reverse the trend of increasing operating and support O and S costs of weapon systems and equipment, the Department of Defense DoD has begun to use several new contracting techniques to transmit Government cost reduction goals to the Contractor during equipment development and production. One of these techniques is the Logistic Support Cost LSC Commitment. The LSC Commitment has three primary elements 1 a target logistic support cost TLSC defined in terms of a cost model framework, 2 a field verification test procedure, and 3 a contract remedy or price adjustment based on verification test results. This report summarizes results of a recent study which investigates the incentives conveyed by the LSC Commitment and the risks accompanying its implementation. It focuses particularly on the impact of statistical risk on the interpretation of verification test results, and presents guidance for structuring future LSC Commitments.
- Administration and Management
- Economics and Cost Analysis