Dissertation. How to implement Asset Management Control in a non-profit maintenance organization, on a cost effective manner

Transcription

1 Dissertation How to implement Asset Management Control in a non-profit maintenance organization, on a cost effective manner Master of Science in Asset Management Control International Masters School Student: H.W.G. Lobregt BSc Supervisor: Dr J. Stavenuiter Date: January 31, 2008

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3 Acknowledgements This report is written in order to fulfill the requirements to obtain the Degree of Master of Science in Asset Management Control on the Hogeschool Zeeland. First of all I would like to thank my wife Emmie and my kids Mitchel and Daley for being patient during this dissertation phase and supporting me with my struggle. Furthermore I would like to thank Dr John Stavenuiter for giving me the opportunity to follow this master course and supporting me with his advice and for the cooperation during this dissertation phase. His criticism and experience force me to keep on track. I also have to thank my colleagues Dave Sinay, for being a sounding board and for giving support in theoretical assessment during this course/dissertation and Rob Oudelaar, Wim Nijenhuis, Ron Bromlewe, Albert Stam, Hidde Hylarides, Henk Broekhuizen, Martin Wouters, Wim Polle, Ruud Wilner, Reinoud van Kralingen, Ben Kersting for filling in the questionnaire. I hope this dissertation will contribute to the Asset Management Control process within the Royal Netherlands Naval Maintenance and Service Establishment ii

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5 Executive summary The goal of the research is to find out how to implement Asset Management Control in a non-profit maintenance organization, in a cost effective manner. Sub-questions were: Is there a way available yet to implement performance driven maintenance and system management approach (Asset Management Control) within a Defense Maintenance Organization? The capital technical system forms the core feature of Asset Management Control (AMC). To achieve an effective capital asset, the activities in relation to design, production and maintenance have to be considered. Asset Management Control aims to specify, organize, plan, direct and control these activities to achieve the most cost-effective solution. AMC is practically supported by AMICO which is a software-tool that was specially developed to support the AMC theory. AMICO transparently combines performances and costs of actors and installations in view of the system s life cycle to provide management information on installation and system level. For one class of Navy ships (M-Frigate class) a case is conducted to discover any improvements in management and organization to elucidate the working of AMC to the defense organization. This case consisted of setting up and testing a Life Cycle Management model for a period of two years. This case resulted in locating performance killers, cost drivers and figures of system and cost-effectiveness. To find out whether AMC could contribute to the profit of Royal Netherlands Naval Maintenance and Service Establishment, the level up to which the Royal Netherlands Naval Maintenance and Service Establishment was already managing their maintenance had to be investigated. This case is based on the ten improvement factors on which AMC was developed. It appeared that AMC had room for improvement. It was estimated that Royal Netherlands Naval Maintenance and Service Establishment could save on specific parts of the operational costs by management according to AMC in the Design & Acquisition phase. An analysis with the PRIMA program lists all strengths, weaknesses, opportunities and threats for the implementation of AMC. The most important factor that resulted from this analysis is: motivation and education of iv

6 participants. This is considered a success factor that should be monitored very closely by the organization. AMC can only become a success when all involved actors are motivated and educated. The implementation of AMC is considered to be beneficial to the Royal Netherlands Naval Maintenance and Service Establishment when the success factors are closely monitored. AMC will provide insight in costs and performance over the life cycle of a ship and is therefore considered to be a significant and beneficial tool for management. The main conclusion and recommendation of this dissertation are that a maintenance approach should be implemented utilizing the following phases: prepare an appropriate business strategy with directives; prepare and plan the implementation; improve of the data systems and analyses implement and continuously improve the maintenance organization by: o education and motivation of the employees. A very interesting outcome of this dissertation is that in order to achieve the best results, Royal Netherlands Naval Maintenance and Service Establishment organization need to put some effort into basic needs such as better definition of responsibilities within the Royal Netherlands Naval Maintenance and Service Establishment, getting consensus about maintenance responsibility throughout the whole Defense Materiel Organization, and reinvestigate the structure and role of the changed management organization, which are the corner stone s of motivation according to General Berlijn [Berlijn, Leiderschap in de Krijgsmacht, 2008]. v

7 Table of Contents Acknowledgements Executive Summary Introduction The Netherlands Defence Materiel Organisation The Weapon Systems and Establisment The Air Systems Branch Land Systems Branch Sea Systems Branch Core Tasks RNLN Maintenance and Service Establishment Theoretical Assessment Through Life Management Results / Findings Total Life Cycle System Management Results /Findings Summarized AMC Feasibility study General Tools Lay-out of the study Value of the study AMC review on the Integrated Maintenance Case Introduction The Basis: Contracts per System/Ship Contents Performance contract (SLA) The PBSC as 1-on-1 input for the LCM model and SLA The Multi-purpose - Frigate Case vi

8 4.3.1 The Multi-purpose - Frigate Materiel-oriented Operational Management The SLA baseline Maintenance Management Organization Maintenance Operation Status Report System Portal Product description of SLA General Communication Model Description of Maintenance Activities The analysis and control tool Function Diagram Installation Diagram Activity Diagram Information on the Web Portal Point of interest Findings and conclusions M-Frigate Case conclusions as results of evaluation Contract (SLA) conclusions Points of improvement The Change of Maintenance Compatibility with DMO business model PRIMA Analysis of the Maintenance Organization General PRocess IMprovement application Results evaluation of the organization related to the asset... M-Frigate, with PRIMA vii

9 5.3.1 Analysis System Plan Life Cycle Management model Contract management Service Level agreemen Organizational Plan Actor Definition Model Resource management Material Logistics Organization Activity Plan Team Building Team Management Team Work Control Plan System Information Portal Management Control System Cost Effectiveness Summary of PRIMA Matrix Points of Improvement Procedures and directives Summary Conclusions and Recommendations General Organization Structure Management Control Case and contract Case Service Level Agreement Point of Improvement... viii

10 6.6 Follow up activities Recommendations ix

11 Appendix 1. Resources Appendix 2. References Appendix 3. Description of the Process Definition Matrix application Appendix 4. Relation to previous work Appendix 5. Relation to the Program of the course Appendix 6. List of abbreviations and concepts Appendix 7. Questionnaire for PRIMA Appendix 8. Questionnaire results for PRIMA Appendix 9. LCM model M-Frigate x

12 Table of Figures Figure 1 The cost effectiveness diagram of Juran [1999] Figure 2 The Logistic Process Cycle Figure 1.1 The Netherlands Defence Materiel Organisation Figure 1.2 Weapon Systems & Establishments Figure 1.3 Sea System Branch Figure 1.4The Royal Netherlands Naval Maintenance Establishment Figure 2.1 Through Life Management Figure 2.2 Actor relations during the CADMID stages Figure 2.3 Support Options Matrix Figure 2.5 Total Life Cycle Systems Management Figure 2.6 The PBL Maturity Framework Figure 2.7 PBL Implementation model Figure Layout of the study Figure Reduce cost Figure Improve Performance Figure Consider the combined cost Figure Performance Based Service Contract input Figure Integrated Maintenance case Figure System Portal M-Frigat Figure Analyze and control tool Figure Function Diagram from AMICO model M-Frigate Figure Installation Diagram from AMICO model M-Frigate Figure Activity Diagram from AMICO model M-Frigate Figure Cost drivers and Performance Killers Figure Development in the daily work of the Installation Manager Figure Production Model Figure Result of the analysis with PRIMA xi

13 Table list Table 2.1 Through Life Management Successes Table Performance-Based Logistics Programs review...41 Table Summarized results of improvements Table Summarized results of procedures / directives xii

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15 Introduction Asset Management Control: a new concept for capital assets; a management approach to manage and control, over the life cycle, all processes (specify, design, produce, maintain and dispose) needed to achieve a capital asset capable to meet the operational need in the most effective way for the customer/user. But can it also give answers on the following questions: How to get the best value for money? How to control the total cost of Ownership? Which system cost effectiveness is really needed? How to improve performances and/or reduce cost? Is there a way yet to implement performance driven maintenance and a system management approach within a Defense Maintenance Organization yet? These questions [Kirkels, 2004] have been in every one s mind, but finding the answers for large technical systems is not simple. The purchase price of an M- Frigate is known, but what is the price of a capital asset, e.g. during its Life Cycle. The new concept of Asset Management Control provides an answer to these questions. Organizations like the NL Defense Materiel Organisation feel the need to show the financial pros and cons of different investments. A number of models are available to establish the effectiveness of expenditure; the most popular is the model of Joseph M. Juran. His model divides system effectiveness in availability, capability and dependability and costs has been specified by type. Figure 1: The cost effectiveness diagram of Juran [1999] 14

16 The AMC system approach aims to stimulate all logistic actors to fulfill their part in the most cost-effective way by showing the intended result and the impact of their contribution to the whole system. The Logistic Process Cycle is used to establish a relationship between costs and system effectiveness. The material logistic process has subdivided into eight process steps. Each step has to be in balance with the preceding and subsequent steps in the cycle, all related to the Integrated logistic Support/Life Cycle Management (ILS/LCM) analysis. Figure 2: The Logistic Process Cycle [Stavenuiter, 2004] A case was initiated to tackle the problem of implementing the ILS/LCM to primarily intend to realize a Competence Center for Integrated Maintenance. A Competence Center for Integrated Maintenance necessitates the Naval Maintenance and Service Establishment to be capable of entering into business performance contracts, made up of the following basic elements: system definition (functions, capability); yearly service plan; performance standards; a cost allocation report. Why Integrated Maintenance? Where the maintenance of the materiel is concerned, the Royal Netherlands Navy centers its focus on minimizing life cycle costs during assigned 15

17 operational readiness. Methods and techniques have been developed for this purpose, allowing for the integrated management of the materiel life cycle. The Royal Netherlands Naval Maintenance and Service Establishment (RNLNMSE) tend to the maintenance of a large portion of the Royal Netherlands Navy (RNLN) materiel. The realization of Royal Netherlands Naval Maintenance and Service Establishment products and services was often segmented and differentiated. As a result, the Royal Netherlands Naval Maintenance and Service Establishment s product-focused management failed to fully fit in with the Royal Netherlands Navy ambition to approach maintenance in an integral form. With the development and implementation of IM, the Royal Netherlands Naval Maintenance and Service Establishment is capable of offering products and services which fit in with the ambitions of the Royal Netherlands Navy and its own aim; realize the required system effectiveness at minimum cost. IM enables the Royal Netherlands Navy to make cost-effective considerations with regard to maintenance. To that end, performance per ship (as system) is, at installation level versus maintenance costs, expressed in terms of active time, availability, reliability and capability. Expressing system effectiveness in this way it will be possible to enter into Service Level Agreements (SLA) per ship, per period, and the customer can base his choices on system performance and operational needs. 16

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19 1. The Netherlands Defence Materiel Organisation The Defence Materiel Organisation (DMO) is the element of the Defence organization where a large number of civilian employees work alongside military personnel from the Navy, Army and Air Force to ensure the availability of virtually all of the defense materiel. The majority of the materiel logistic activities within the defense organization are carried out by DMO. The operational commands can concentrate fully on their core business, in the knowledge that DMO provides high-value materiel support. DMO is responsible for materiel logistics policy, new materiel, maintaining materiel and the divestment of surplus materiel. DMO makes no distinction among the Services: the parts of the organization are clustered around areas of expertise and types of materiel. The air force, for example, has a great deal of expertise in the area of helicopters; but the navy uses that type of materiel as well. Through concentration of expertise and project management from the Services around a single type of materiel, DMO is able to provide high-value expertise and quality to the operational commands. Director -General Defence Materiel Organisation Directorate of Materiel policyt Directorate of Planning and Control Directorate of Personnel & organisation Transition Manager Directorate of Projects & Procurement.Project Branch Procurement Branch Defence suppliers monitoring Division Directorate of Weapon Systems & Establishment Sea Branch Land System Branch Air System Branch Facility Management Division. Safety Section. Department facilitaire matters. Defence Materiel Codification C2 Centre of Excellence Figure 1.1. The Netherlands Defence Materiel Organisation. 18

20 1.1 Weapon Systems & Establishment The Directorate of Weapon Systems & Establishments is a combination of DMO tasks related to logistic upkeep of materiel. This relates to activities concerned both setting up and carrying out tasks. The directorate also provides standards and expertise to the Directorate of Projects & Procurement to support the materiel projects. The directorate also carries out many projects on its own behalf. Those are all category 1 projects that were not mentioned above, and the regular divestment of materiel. The directorate s focus is the improvement and optimization of the readiness levels of materiel and weapon systems. Maintenance, repairs and modifications to mainly surface ships, submarines and related military maritime systems. Director -General Defence Materiel Organisation Directorate of Materiel policyt Directorate of Planning and Control Directorate of Personnel & organisation Transition Manager Directorate of Projects & Procurement.Project Branch Procurement Branch Defence suppliers monitoring Division Directorate of Weapon Systems & Establishment Sea Branch Land System Branch Air System Branch Facility Management Division. Safety Section. Department facilitaire matters. Defence Materiel Codification C2 Centre of Excellence Figure 1.2. Weapon Systems & Establishments. 1.2 The Air Systems Branch The Air Systems Branch ensures that weapon systems are suitable for the mission, function properly and are airworthy and takes care of safe use of weapon systems and the upkeep of weapon systems. Product management, 19

21 configuration management, Integrated Logistic Support management (ILS) and Contract Management are among this branch s main tasks. 1.3 Land Systems Branch The Land Systems Branch cost-effectively provides safe and high-quality materiel for all operational users of the armed forces, throughout the product life cycle. The branch has a philosophy of transparency and continuously shares information with clients, to harmonize mutual expectations. The wishes of the operational commands and their priorities are the key factor. 1.4 Sea Systems Branch The Sea Systems Branch is active in technology areas that are unique for military maritime systems. The branch also serves as the all-services expertise cluster for inter alia sensors, such as: radar, health & safety, environmental and chemical technology. Maintenance, repairs and modifications to mainly surface ships, submarines and related military maritime systems. Sea Systems Branch Branch Staff Centre for automation of mission critical systems Weapon system management division Platform technollogy division Sensor and Weapons technology division Requirement s support &integration division Royal Netherlands Naval Maintenance & Services Establishment Figure 1.3. Sea System Branch Core Tasks The Sea Systems Branch carries out feasibility studies in respect of the procurement of materiel, carries out research to system integration, and makes life-cycle cost analyses. Specifications and plans for the manufacture and delivery of sea systems also originate in this branch. The branch also provides support and advice with respect to procurement, construction and 20

22 implementation of systems. The Sea Systems Branch develops modification programs and provides technical advice during divestment. The high-value technological expertise within the branch enables the composition of specifications for, for example, requirements, integration with existing or new sea systems, and analysis for modification programs. In this context, sea weapon systems means Multi-purpose and Air Defense and Command Frigates, Landing Platform Docks, supply ships, Walrus-class submarines and other sailing units Royal Netherlands Naval Maintenance and Service Establishment Maintenance, repairs and modifications are the responsibility of the Royal Netherlands Naval Maintenance and Service Establishment. The establishment activities relate to all logistic and maintenance duties in respect of the electronics and weapon systems on board. That is how the establishment ensures that the materiel readiness of the ships and submarines is kept at the desired level. It also provides technical advice and logistic support for the ships, anywhere in the world, and supports large materiel projects. The Royal Netherlands Naval Maintenance and Service Establishment comprise the Platform (ships), Sensors, Weapon and Command Systems (SEWACO), Special Products, and Logistic Services divisions. A DIP Naval Maintenance Establishment Sales Division Platform Division Branch Sensor Weapon & commando systems Logistic Division Special product division Casco Systems Command Control & computers Electrical Systems Onder water systems Above water systems Figure 1.4 The Royal Netherlands Naval Maintenance Establishment. 21

23 The main tasks of the Royal Netherlands Naval Maintenance and Service Establishment are: Consulting services to the internal customers; Maintenance, Repair and Overhaul (MRO) services; Product Data Maintenance (PDM) services The internal customers (operational users) are highly trained operators of military equipment within combat or combat simulated environments. In the recent years the complexity, costs and operational demands upon the capital assets have increased. Due to an increase of complexity, maintenance-related costs and operational demands upon the capital assets maintenance management have become more important. The DMO organization has adopted the Integrated Logistics Support (ILS) methodology in order to increase the efficiency of the capital asset life cycle. 22

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25 2. Theoretical assessment Aim In order to identify related developments with respect to Asset Management Control, a theoretical assessment was conducted. However, the assessment was, due to relevance, limited to the defense industry. Approach Research by literature, internet and seminars shows that there are different philosophies and concepts, although, not all developments are fully mature, we can acknowledge on basis of seminars and available publicized information [ Ref. 13, 25 and 27] that the US DoD and UK DoD developments gained most maturity and are originated on defense standards. Results In order to establish a shared vision, these concepts and philosophies are used and they have been summarized in the following paragraphs. 2.1 Through Life Management "Historically, the functions of requirement definition, procurement management and through-life support have been organizationally separated, which makes it difficult to get the right balance between risk, cost, performance and throughlife support." The Ministry of Defense s Strategic Defense Review The Strategic Defense Review launched what have become known as the SMART (Specific, Measurable, Achievable, Relevant, Time bound) Acquisition reforms, aimed at faster, cheaper and better acquisition and support of equipment. At the heart of SMART Acquisition is a change to integrated management of the delivery of all aspects of capability, from identification of the need for the capability to its disposal. This approach is known as Through- Life Management [PBM handbook, 2001]. Through Life Management (TLM) is an integrated approach to all SMART Acquisition processes, planning and costing activities across the Whole System and Whole Life of the project and is illustrated in figure

26 Through Life Management Plan (TLMP) Whole Life Costing (WLC) Cost of Ownership (COO) Costed Project Plan C A D M I D/T Figure 2.1 Through Life Management [PBM handbook, 2001]. The MOD UK life cycle stages of a defence capability are; concept (C); assessment (A); demonstration (D); manufacture (M); in-service (I); disposal / Termination (D/T). The Through Life Management philosophy is adopted by the United Kingdom Ministry of Defense (MOD) and started with the development and implementation of SMART acquisition. SMART Acquisition, that is governed through the Acquisition Policy Board (APB), chaired by Minister (Defense Procurement), is a long-term MOD initiative to improve the way to acquire defense capability and to adopt a through-life approach to acquisition, rather than concentrating resources on the initial procurement. The aim of SMART Acquisition is; "To acquire Defense capability faster, cheaper, better and more effectively integrated." The objectives of SMART Acquisition are: 25

27 to deliver and sustain defense capabilities within the performance, time and cost parameters approved at the time the major investment decisions are taken; to integrate defense capabilities into their environment within Defense, with the flexibility to be adapted as the environment changes; to acquire defense capabilities progressively, at lower risk. Optimization of trade-offs between military effectiveness, time and whole life cost are maximized; to cut the time for (key) new technologies to be introduced into the frontline, where needed to secure military advantage and industrial competitiveness. To achieve the objectives of SMART Acquisition, that is To acquire defence capability faster, cheaper, better and more effectively integrated, it is vital that there is an integrated through life approach to managing projects. The characteristics of a Through Life Management approach are: - a whole life outlook; starting from the point that the Equipment Capability Customer (ECC) identifies the capability gap, and continuing up to the point of final disposal; - a whole system outlook; taking a integrated approach to delivering all of the components of Military Capability, not just the Equipment; - managing the Whole Life Costs of capability. Ensuring that investment decisions take full account of all the longer term implications of acquisition, in terms of operating, supporting, maintaining and finally disposing of equipment; - proactive involvement of stakeholders throughout the process. Being realistic about what can be affordably achieved and agreeing this with the customers and other stakeholders; - having a realistic, cost- defined, whole life plan - the Through Life Management Plan - and maintaining this throughout the lifecycle; - better informed decision making, through the use of the TLMP; - building all of these characteristics into IPT processes and working practices. 26

28 Hence, Through Life Management is the philosophy that brings together the behaviors, systems, processes and tools that will deliver these objectives. By projecting the Through Life Management philosophies / concepts to the dissertation subject Organizing performance based management for in-service support cooperation s there should be ascertained that the application of performance based management within the MOD UK is supported by Customer Supplier Agreements (CSA) between the Integrated Project Team (IPT) and (depending on life cycle stage) the Defence Procurement Agency (DPA) or Defence Logistic Organization (DLO). The CSA is an agreement between the Customer and Supplier setting out the working relationship between them and recording other key project information such as deliverables required, and performance measures and targets. There are two distinct types of CSA currently in use: CSA (Acquisition) - an agreement between the Equipment Capability Customer (ECC) and an IPT for the procurement stages of a project (Concept through Manufacture); and CSA (Support) - the comparable agreement prepared at the In-Service stage which manages output relationships between the Second Customer and an IPT/ Business Unit. The development of clear customer and supplier roles, and a defined relationship between them, is fundamental to SMART Acquisition. What this means in practice is creating a more logical separation of customer and supplier roles, and clearly defining the tasks and responsibilities which go with these. This will enable both customer and supplier to fulfill their roles more effectively. It will give the customer more real control throughout the acquisition life-cycle, and will provide the supplier with a clear and unambiguous framework in which to operate, while maintaining the flexibility the supplier requires, meeting the agreed project deliverables. The purpose of a Customer Supplier Agreement CSA is to make short and long term priorities, commitments and outputs between the parties explicit, to describe clear and unambiguous Performance-Cost-Time (PCT) Targets, permissible tradeoffs, roles and responsibilities for the signatories and to produce realistic expectations through discussion and review. It should also 27

29 clearly outline the behaviors that each party will demonstrate in the course of discharging their responsibilities under the agreement. Such a CSA will facilitate a better Customer Supplier working relationship. The principles of all Customer Supplier Agreements should be: collaborative - A partnership agreement; comprehensive but short - No more than 5 pages. If further detail is essential it should be placed in an appendix, including appropriate references to source documents; broad In scope - High level with sufficient scope to identify and act on trade-offs; output focused - Focus on outputs rather than inputs. During the Assessment Phase these will be expressed in terms appropriate to the exploratory nature of the work. As the project progresses the outputs will become more specific; measurable - Identify objectives and timescales with mutually agreed indicators to track performance; dependencies - Identify any high level dependencies and other interactions which might impinge upon the project output; a Working Document With performance reviewed jointly as demanded by the short and long term objectives; a Relevant Document With a content review each year in the light of the annual planning round, or between rounds if there is a significant change in the situation, or a new project cycle phase calls for a redefinition of the outputs; referred to in the TLMP and updated when changes occur during a planning round; cost on a through-life basis, across all Lines of Developments using Cost Of Ownership data. However, the research scope is limited to the in-service phase. As illustrated in figure 2.2 we can conclude that in-service support cooperation are managed by the Defence Logistic Organization (DLO) 28

30 Equipement Capability Customer (Customer 1) Front Line Command (Customer 2) In-Service Date Integrated Project Team (IPT) Integrated Project Team (IPT) Defence Procurement Agency Defence Logistic Organization (DLO) Concept Assessment Demonstration Manufacture In-Service Disposal Figure 2.2 Actor relations during the CADMID stages. The DLO Strategy is to transform logistic support to the Front Line by delivering improved reliability and availability. Underpinning the strategy is the need for an end to end and through-life view that optimizes logistic support solutions and provides opportunities and incentives for industry to align with DLO capabilities and responsibilities. This transformation represents a shift from traditional support arrangements with separate contracts for maintenance, repair and overhaul, spares and postdesign services, to an integrated approach that may include long-term partnering arrangements with major Defense contractors. Furthermore, it is underpinned by the SMART Acquisition approach which encourages Integrated Project Teams (IPT s) to seek increasingly innovative support solutions in order to optimize levels of service and value for money to drive down the cost of ownership. Such solutions are collectively known as Contractor Logistic Support (CLS). They cover a wide spectrum of support solutions ranging from minimum contractor involvement ( Traditional model), where MOD-owned equipment and spares are supported through various contractual arrangements, to maximum contractor involvement ( Contracting for Capability model), where the prime contractor provides a total support package. The full spectrum of options along this support continuum is illustrated in the Support Options Matrix (SOM) (see figure 2.3) 29

31 Figure 2.3 Support Options Matrix (SOM) [Jones ]. In practice most solutions fall somewhere between the two extremes of this continuum and will include elements of both traditional and non-traditional support arrangements [Jones. 1994]. CLS is recognized as a cost-effective support strategy that has developed an increased drive under the SMART Acquisition initiative. Given the reality that operational risk cannot be transferred but only managed, the application of the principles and adherence to Integrated Logistic Support (ILS) methodology will significantly aid in-project risk management. While it is accepted that CLS solutions may be time constrained to limit risk, they must form a credible part of a complete Through-life Management Plan (TLMP) and support strategy. Solutions must identify sustainable and competent organizations to cover ownership and Design Authority functions, ensuring that a project can be taken 30

32 through its full service life to its eventual cost-effective disposal. Throughout this time, contractual arrangements will be required to provide incentives to industry to invest and deliver against constantly improving performance and cost targets, while still maintaining the flexibility of the MOD to respond to changes in both operational and budgetary priorities. With respect to CLS solution - Contracting for Availability (CfA), the TES department published a draft TES-RMG Guidance note in 2006 with respect to Contracting for Availability (CfA). The aim of this guide is to alert Project Staff to a series of significant issues relating to Reliability & Maintenance which should be considered during the Contacting for Availability process and addressed by Availability Contracts. Contracting for Availability (CfA) is a commercial process which seeks to sustain a system or capability at an agreed level of readiness, over an extended period of time, by building a partnering arrangement between the MoD and Industry. The result of this process will be an Availability Contract, which should include incentives for both parties to improve efficiency and effectiveness over the life of the agreement. This is similar to a comprehensive Contractor Logistics Support (CLS) arrangement, which uses Availability as its principal metric. CfA can be applied to new capabilities and legacy systems in any environment, at various levels. Fundamentally it must address the Availability of what, when and where. CfA is a deceptively simple concept which can be extremely difficult to deliver, given the complexities and uncertainties which surround the Service environments. The success of individual arrangements will stand or fall on the effectiveness of the resulting contract and the degree of cooperation between the MoD and Prime Contractor. CfA should be exploited as an opportunity to improve support to the User community and not be viewed as a flag of convenience for financial savings, manpower reductions or the abrogation of responsibilities. Finally, the successful implementation of CfA requires a wholesale change of attitude by all stakeholders, since it requires traditional support activities to be replaced by innovative processes based on need 31

33 2.1.1 Results / findings Some examples of Through Life Management successes are illustrated in table 2.1. Table 2.1 Through Life Management Successes [PBM, 2001]. In the year 2002 the United Kingdom s National Audit Office performed an audit with respect to the application of Through life Management at the Ministry of Defence [PBM, 2001] This audit was mainly focused on Through Life Management within the Ministry of Defence excluding contractors from Industry and resulted in the following findings: Through-Life Management is a key element of SMART Acquisition but not all aspects of the change it entails have been fully developed and managed coherently; 32

34 There has been continuing support for Through-Life Management from senior management, but this has not always been consolidated into a clearly visible strategy across the Department and the definition and benefits of the change are not yet clear to some members of the acquisition community; The enablers of Through-Life Management are not yet fully in place. Progress in setting in place tools and information sources to support Through-Life Management has not always been as quick as the Department would have liked and more remains to be done. Some mechanisms for engaging the defence acquisition community and promoting Through-Life Management behavior are not yet fully effective, and measurement of progress and success has been patchy and is still developing. Although the audit depicts all findings and recommendations, as well the transformation to as the application of Through Life Management, several findings and recommendations should be taken into account when Performance Based Management cooperation is established. These are; Clearly communicate the aims and benefits of Through-Life Management to all stakeholders related to the cooperation; align responsibility with authority; make every effort to speed up the implementation of the Whole-Life Cost program and establish robust cost data for all projects to inform decision-making; ensure that all members of the PBM cooperation acquisition community involved in the development and ongoing review of Through-Life Management Plans have appropriate visibility of these plans; clearly define the responsibilities of all members of the PBM cooperation in Through-Life Management, either by revising Customer Supplier Agreements or by developing alternatives such as the Responsibility Matrices in Through-Life Management Plans; ensure suitably mature costs. 33

35 Through-Life Management Plans are a prominent and integral part of Business Cases. Unfortunately, no accessible information was found with respect to successes with Performance Based Contractor Logistic Support (or CfA) related to Through-life Management. 2.2 Total Life Cycle System Management Total Life Cycle Systems Management is the implementation, management, and oversight, by a designated Program Manager, of all activities associated with the acquisition, development, production, fielding, sustainment, and disposal of a DoD weapon system across its life cycle. The Total Life Cycle Systems Management approach to system development is optimized if it targets, as a major end state goal, operations and maintenance phase effectiveness and affordability. TLCSM is distinguished by the translation of force provider-specified levels of performance into deliverable capabilities that represent system readiness, availability, and logistics supportability. An overview with respect to the scope of Total Life Cycle Systems Management is illustrated in Figure 2.5 Total Life Cycle Systems Management Figure 2.5 Total Life Cycle Systems Management [TLCSM-US DoD, 2003]. 34

36 With respect to Life Cycle Logistic it is fundamental to systems engineering to take a total life cycle, total systems approach to system planning, development, and implementation. Total life cycle systems management (TLCSM) is the planning for and management of the entire acquisition life cycle of a DoD system. Because of TLCSM, the program manager should consider nearly all systems development decisions in context of the effect that the decision will have on the long term operational effectiveness and logistics affordability of the system. TLCSM considerations should permeate the decision making of all acquisition functions and communities, during all acquisition phases. In fact, TLCSM factors should be considered by the participants. TLCSM encompasses the following concepts: single point of accountability; evolutionary acquisition; supportability and sustainment as key elements of performance; performance-based strategies, including logistics; increased reliability and reduced logistics footprint; continuing reviews of sustainment strategies. In executing TLCSM responsibilities, program managers should apply systems engineering processes and practices known to reduce cost, schedule, and performance risks. This includes best public sector and commercial practices and technology solutions The program manager should apply a robust systems engineering methodology to achieve the optimal balance of performance and total ownership costs. Effective sustainment of weapons systems begins with the development of a balanced system solution. The key is to apply the systems engineering processes Consequently, systems engineering should be applied at the initial stages of program formulation to provide the integrated technical basis for program strategies; acquisition plans; acquisition decisions; management of requirements, risk, and design trades; and integration of engineering, logistics, 35

37 test, and cost estimation efforts among all stakeholders. Likewise, the Systems Engineering Plan (SEP) should be established early in the program definition stages and updated periodically as the program matures. The overall systems engineering strategy should be addressed in and integrated with all other program strategies. Systems engineering enables TLCSM, and provides the framework to aid decision making about trade-offs between system performance, cost, and schedule. By projecting the Total Life Cycle Systems Management philosophies / concepts to the dissertation subject Organizing performance based management for in-service support cooperations it can be concluded that the scope is limited to Performance Based Logistics during the sustainment phase. Therefore, Life Cycle Logistic in systems engineering is not further discussed. PBL is the purchase of support as an integrated, affordable, performance package designed to optimize system readiness and meet performance goals for a weapon system through long-term support arrangements with clear lines of authority and responsibility. Application of PBL may be at the system, subsystem, or major assembly level depending on program unique circumstances and appropriate product support strategy analysis. The essence of PBL is buying performance outcomes. It is procurement of a capability to support the war fighter versus the individual parts or repair actions. This is accomplished through a business relationship that is structured to meet the war fighter s requirements. PBL support strategies integrate responsibility for system support in the Product Support Integrator (PSI), who manages all sources of support. Source of support decisions for PBL do not favor either organic or commercial providers. Like traditional support strategies, PBL optimizes the best public and private sector competences based upon a bestvalue determination, evidenced through an appropriate analysis of the provider's product support capability to meet set performance objectives. The major shift from the traditional approach to product support emphasizes how program manager teams buy support, not who they buy from. Instead of buying set levels or varying quantities of spares, repairs, tools, and data, the focus is on buying a predetermined level of availability to meet the war fighter s objectives. 36

38 One of the most significant aspects of PBL is the concept of a negotiated agreement between the major stakeholders (e.g., the program manager, the force provider(s), and the support provider(s)) that formally documents the performance and supports expectations and commensurate resources to achieve the desired PBL outcomes. However, notice should be made that each PBL arrangement is unique and will vary from other PBL arrangements. A PBL arrangement may take many forms. There is no one-size-fits-all approach to PBL. Performance Based Logistics starts with the PBL strategy. A PBL strategy focuses weapon system support on identified war fighter required performance outcomes, rather than on discrete transactional logistics functions. It should balance three major objectives throughout the life cycle of the weapon system: delivering sustained materiel readiness; minimizing the requirement for logistics support through the incorporation of reliability-enhancing technology insertion and refreshment; continually improving the cost-effectiveness of logistics products and services. Careful balancing of investments in logistics and technology to leverage technological advances through the insertion of mature technology is critical. The program manager should insure that the PBL strategy addresses war fighter requirements during peacetime, contingency operations, and war. The development of a PBL strategy is a lengthy, complex process, led by the program manager, involving a multitude of stakeholders. No two weapons system PBL strategies are exactly the same. Fundamental to the development and execution of a PBL strategy is the ability to understand and communicate the ability of the provider(s) to support across the spectrum of PBL solutions, to quantify the required elements of system performance included, and to understand the practices and technology enablers that will be critical to meeting the required performance levels. The PBL Maturity Framework (see Fout! Verwijzingsbron niet gevonden.) was developed to meet this need. 37

39 Figure 2.6 The Performance-Based Logistics Maturity Framework [PBL, 2006]. The PBL Maturity Framework captures the range of solutions that may be employed in a PBL strategy. Every PBL is not the same. The framework encourages program managers to strive for the right level of PBL maturity and not the minimum level. Associated with each level is a metric associated with the outcome the program manager is buying. The framework is incremental, in that each level builds on the previous levels. A description of each level follows: Level 1: These agreements make the supplier accountable for the delivery speed required to meet customer requirements. This level focuses on logistics planning and transportation and is applicable to many commodities and parts. Logistics Response Time (LRT) is the preferred metric for Level 1 agreements. The time it takes the supplier to deliver the part or commodity to the government should determine their payment. The government s requirement and terms of the contract will drive the supplier s behavior. Level 2: These agreements focus on maintaining the required availability of key components or assemblies, such as a wing flap or auxiliary power unit. Level 2 includes logistics planning and execution, configuration management and transportation. Under Level 2, a PBL provider may also make repair vs. replace decisions. The preferred metric for Level 2 agreements is Materiel Availability, measured at the point where the material is consumed. Availability 38

40 of the component or assembly is also linked to delivery speed because it helps determine the reorder point, as does demand. Level 3: These agreements transfer life cycle support responsibilities to the PBL provider, assuring the operational availability (Ao) of the system. This level is typically applicable for systems and weapon system platforms. There is an additional focus on life cycle support, training, maintenance, repair and overhaul. The appropriate metric is operational availability. The reliability of the equipment and supply chain processes will influence the availability of the system or platform. In Level 3 agreements, the PBL provider is assigned specific life cycle responsibility, solely or in partnership, for the breadth of processes that influence operational availability of the system. Level 4: The PBL provider is assigned overall responsibility for the mission effectiveness of the entire system. While each of the partnerships stages contributes incrementally more to downstream mission effectiveness, Mission Assured Logistics strives for Level 4 elements to assure that all critical elements for success can be managed in an aligned and integrated manner. The appropriate metric is Mission Reliability, measuring success in achieving mission outcomes. Level 4 is applicable for complete weapon system platforms. The development and management of PBL arrangements consist of 12 discrete steps that can be applied to new, modified, or legacy systems, as shown in Figure 2.7 Performance-Based Logistics Implementation model. Figure 2.7 Performance-Based Logistics Implementation model [PBL, 2006] 39

41 The Performance Based Logistics methodology can be applied to new, modified, or legacy systems and encompasses 12 steps. The intended outputs of these steps are: integrate requirements and support; form the Performance Based Logistics Team; baseline the system; develop performance outcomes; select the Product Support Integrator(s); develop a Workload Allocation Strategy; develop a Supply Chain Management Strategy; establish Performance Based Agreements; perform a Performance Based Logistics Business Case Analysis; award contracts; employ financial enablers; implement and assess. 2.3 Results / Findings Literature research with respect to PBL results / findings shows different interpretations and/or conclusions. On request of the DoD, the US Government Accountability Office (GAO) performed a review with respect to DoD s implementation of performancebased logistics arrangements. The objective was to determine whether DoD could demonstrate cost savings or improved responsiveness through the use of performance-based logistics arrangements. The results are published in the Report to the Subcommittee on Readiness and Management Support, Committee on Armed Services, U.S. Senate [Defense Management DoD, 2005] GAO analyzed the implementation of performance based logistics arrangements for 16 weapon system programs. 40

42 Military service Weapon system or Program office component Air Force C-17 Air Force Materiel Command Air Force F-117 Air Force Materiel Command Air Force JSTARS Warner Robins Air Logistics Center Air Force C-130J Air Force Materiel Command Navy ALR-67 (V3) Naval Supply Systems Command Navy Auxiliary Power Units Naval Supply Systems Command and Naval Air Systems Command Navy F-18 E/F FIRST Naval Supply Systems Command and Naval Air Systems Command Navy F-404 Naval Supply Systems Command and Naval Air Systems Command Navy T-45 engines Naval Supply Systems Command and Naval Air Systems Command Navy V-22 engines Naval Air Systems Command Navy/Marine Corps KC-130J Naval Supply Systems Command and Naval Air Systems Command Army HIMARS Aviation and Missile Command Army Javelin CLU Aviation and Missile Command Army TOW-ITAS Aviation and Missile Command Army TUAV Shadow Aviation and Missile Command Table Performance-Based Logistics Programs reviewed [Defense Management DoD, 2005] The following was concluded; DoD program offices cannot demonstrate that they have achieved cost savings or performance improvements through the use of performance based logistics arrangements. Although DOD guidance on implementing these arrangements states that program offices should update their business case analysis based on actual cost and performance data, only 1 of the 15 program offices included in the review have performed such an update consistent with DoD guidance. In the single case where the program office has updated its business case analysis, it determines that the performance based logistics contract does not result in expected cost savings and the weapon system does not meet established performance requirements. In general, program offices have not updated their business case analysis after entering into a performance-based logistics contract because they assume that the costs for weapon system maintenance incur under a fixed price, performance-based logistics contract will always be lower than costs under a more traditional contracting approach and because they lack reliable cost and performance data needed to validate assumptions used. Furthermore, the Office of the Secretary of Defense has not established procedures to monitor program offices to ensure they follow guidance and update the business case analysis. Additionally, program officials say that, because of limitations in their own information systems, they typically rely on cost and performance data generated by the contractors information systems to monitor performance-based logistics contracts. The program 41

43 offices, however, have not determined whether the contractor provided data are sufficiently reliable to update their business case analysis. Although the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA) are most commonly used to monitor higher risk contracts, such as cost plus contracts, they are potential resources available to assist program offices in monitoring fixed price performance-based contracts. In doing so, these DoD agencies have the capability to verify the reliability of contractors information systems and collect cost and performance data needed to update the business case analysis. Until program offices follow DoD s guidance and update their business case analysis based on reliable cost and performance data, DoD cannot evaluate the extent to which performancebased logistics arrangements are achieving expected benefits and being effectively implemented within DoD. With respect to these findings the GAO recommends to take the following two actions: Reaffirm DoD guidance that program offices update their business case analyses following implementation of a performance-based logistics arrangement and develop procedures, in conjunction with the military services, to track whether program offices that enter into these arrangements validate their business case decisions consistent with DoD guidance. Direct program offices to improve their monitoring of performance based logistics arrangements by verifying the reliability of contractor cost and performance data. The program offices may wish to increase the role of DCMA and DCAA in overseeing performance-based logistics contracts. However, a White Paper called Performance-Based Logistics - The Changing Landscape in Support Contracting [PBL, 2006] shows that in spite of unprecedented success in improving operational readiness and stemming rampant weapon system support costs, PBL continues to face resistance. In a recent General Accountability Office (GAO) report on PBL, 16 programs utilizing PBL support strategies were examined. GAO findings showed that of the 16 exceeded the performance requirements specified in their PBL agreements, and the remaining 5 programs met all performance requirements A 0% success rate in terms of meeting the objective of buying performance 42

44 outcomes. No previous DoD support strategy has approached that level of success, yet GAO still found room to question whether the success could be attributed directly to their use of performance-based logistics arrangements. Clearly, there are still challenges ahead. DoD financial processes, particularly those that dictate the use of various colors (appropriations) of money are problematic. While most weapon system support costs are funded with Operations and Support (O&S) funds, full scope sustainment also requires Procurement and Research, Development, Test, and Evaluation (RDT&E) funding for modifications to counteract obsolescence and improve support processes. PBL transfers many of the make or buy decisions to the prime support contractor, yet DoD financial rules still require government managers to include separate appropriation funding requirements in contracts. In other words forcing them to estimate what kind of support decisions the support contractor will make, and in doing so setting arbitrary boundaries that constrain contractor flexibility to make best value decisions. Industry has done a great job in joining with DoD in utilizing PBL to deliver real results on today s battlefields. Systems such as the Stryker, F/A-18 Super Hornet, C-17, and Joint STARS have all historically demonstrated high mission availability rates in both Operations Iraqi Freedom and Enduring Freedom. Still, PBL has yet to be implemented on very complex system of systems platforms, such as Navy Carriers, or the developmental Army Future Combat System and Joint Strike Fighter programs. PBL s concept of buying customer (war fighter) performance outcomes will be challenged with these multi-user, multi-variant, and in some cases multinational systems. In spite of the doubters, there are PBL champions as well. On September 21, 2005, Ken Krieg, the new USD/AT&L spoke to the National Defense Industry Association (NDIA), and said, Obviously, there are a number of tools, but one answer is Performance-Based Logistics. When Performance- Based Logistics, or PBL, is done right, it focuses energy on the necessary outputs and can provide both effectiveness and efficiency. PBL has produced too many wins to warrant slowing its progress. DoD desperately needs consistent operational readiness and more reliable, easily deployable systems in today s global engagement threat environment, and PBL has shown consistently that it can achieve those results. DoD should press ahead with 43

45 vigor, and work towards alleviating any remaining financial, statutory, or policy barriers that limit the full potential of PBL. DoD has made a commitment, through continued downsizing of the base and Depot infrastructure, to rely on public-private partnerships for weapon system support. There is indeed best value in utilizing the immense capabilities, flexibility, and entrepreneurial approach of the private sector. PBL is the best available strategy that takes full advantage of those benefits, and should receive commensurate continued support and implementation emphasis 2.4 Summarized The cooperation between the defense organizations and the industries has been motivated by shortening lead times, better control and increased performances. Operational availability is the most important aim. PBL-contracts mostly concern the supply of spare parts and optimizing the maintenance process. The industry has their own stores on site and the spare parts are no property of the defense organizations, but they have been earmarked for the basis concerned. In the maintenance process the industry has been involved in the repair of specific components, which cannot be carried out in an efficient manner by the defense organizations. The defense organizations also show that they have specialists, carrying out highly technological work and that there were clear commitments between the defense departments, concerning distribution of work. PBL-contracts contain measurable objectives for performance improvement in the maintenance process in the field of lead times and costs. Experience from these organizations proves that it is wise to step by step develop PBL contracts with the industry and not in a short time. PBL contracts will improve increasingly in the future. The contract has a maximum term of five years. Longer terms are cheaper, but not allowed by American law. The defense organizations have a positive attitude towards the cooperation with the industry. Problems in the implementation exist; however, they have mostly to do with overdue delivery of spare parts by subcontractors. A system of penalties and rewards has been included in the contract, depending on 44

46 supplied performance. Most important condition for good cooperation is mutual trust and the willingness to share information. 45

47 3. AMC Feasibility study 3.1 General For this purpose a case Integrated Maintenance ( Integrale Instandhouding ) has been started. The aim of the case is to obtain experience in the implementation of maintenance control by system-effectiveness and operational use of maintained systems. The Royal Netherlands Naval Maintenance and Service Establishment responsibility and boundary conditions to the internal customers are described in a contract called a Service Level Agreement (SLA). The SLA describes the planned system performance in terms of active time, system-effectiveness, reliability and availability versus costs of installation during a fixed period. By describing the system performance and costs in an SLA the customer has the means to optimize the balance of the system performance, costs and his operational needs. The pilot project has not answered all questions in order to be able to fully implement the ILS concept. The purpose of this dissertation is to research a structured method of implementing a performance driven maintenance approach and system-effectiveness into a defense organization and to determine if this is a profitable approach. Maintenance within the Royal Netherlands Navy (RNLN) was customer driven. The Royal Netherlands Naval Maintenance and Service Establishment have maintained the military equipment in accordance with an obligation of best intends described in a covenant, between the commander in chief RNLN and the maintainer. The maintenance is scheduled in accordance with the operational schedule of the maintained equipment. The covenant describes the maintenance tasks, available budget, and resources. The maintenance activities are mainly driven by input of the user/customer. This approach has no or minor reference to system or installation performances for control over the budget and resources assigned to the maintainer. The assumption is that this approach will not fulfill future demands due to an increase of complexity, maintenance related costs, and operational demands upon the naval ships. Approach 46

48 The applied research method for this dissertation is based on a feasibility study of used material (M- Frigate) and an organization analysis with a new application PRIMA. To be able to reach the goals set out in the aim of the dissertation, the following steps have been taken: the research is based on a description of the standing organization of the Royal Netherlands Naval Maintenance and Service Establishment; desk research on organization theory: o the desk research is focused on examining the literature regarding the available implementation methods; o the data gathered during the desk research has been analyzed. desk research on performance driven maintenance and system management (AMC approach) approach in a cost-effective way: o the desk research is focused on examining the literature regarding the preferred organization to practice this AMC approach [TQM manual, 2006] o based on the data of the desk research on AMC, this and the wishes of the organization, an organization for performance driven maintenance is defined. based on the analysis recommendations for the implementation of performance driven organizing have been drafted; the aim of the feasibility study is to validate the theoretical method as found during the desk research and to test the theoretical method in practice; the data gathered during the feasibility study will be analyzed; a questionnaire has been drafted based on the implementation theory of TQM manual and the comparison of the organization. Target group: middle management, upper management, and potential partners in SLA.; an analysis of the organization will be done with PRIMA (PRocess Improvement Application); The results of this analysis shall be translated into a conclusion and recommendations. 47

49 3.2 Tools The applied research method for this dissertation is based on feasibility study and an analysis with the new software application PRIMA (Process Improvement Application). This is very useful when a limited amount of time is available to address a complex strategic situation. Feasibility studies examine the economic, marketing, technical, managerial, and financial aspects of your proposed business idea. While independent, the study is based on information provided by you. Whether one is applying for a government-backed business loan, seeking funds for expansion or plant modernization, or deciding what steps come next in growing the business, a detailed feasibility study will provide the required ammunition to make one s case, or help adjust the proposal to meet the requirements of lenders and other funding sources. What are the benefits of feasibility studies? Implementing feasibility studies can: map out for lenders your proposal s strengths and potential; realistically analyze the impact of expansion; show you the pros and cons of your idea; analyze the business idea. [ After getting familiar with the topic, the feasibility study will be conducted. This will be done in the second part of the data collection period to get acquainted with the subject and to be able to do a more in-depth questioning. The aim of this feasibility study will be: 1. gain knowledge about the subject; 2. collect new ideas about alternative solutions concerning the problems; 3. get feedback on ideas resulting from the literature study. The feasibility study will be prepared in advance to make it as efficient as 48

50 possible. This will improve the quality of the feasibility study. Furthermore onsite observations will be carried out. These will consist of visits to the research site. PRIMA PRocess Improvement Application Analysis, (PRIMA). In view of this project, PRIMA analysis compares the situation in which AMC is implemented in the organization with the cons and pros. A PRIMA analysis is mostly performed to identify success factors based on the environmental scan. In this case the PRIMA analysis is used to investigate the probability of success that AMC approach can have for Defense Materiel Organization. This may imply that some of the Defense Materiel Organization weaknesses can be opportunities for AMC approach. 3.3 Lay-out of the Study A general plan of the research can be found in figure How to get the best value for money? R e s e a r c h D e f i n i t i o n How to control the Total Cost of Ownership? Which system costeffectiveness is really needed? How to improve performances and/or reduce cost? Is there a way yet to implement performance driven maintenance and system management approach within a Defense Maintenance Organization? T h e o r e t i c a l A s s s e s m e n t F i n d i n g s AMC Review IM case PRIMA Analyses & Results Conclusions & Recommendations Figure Lay-out of the study. 49

51 3.4 Value of the study The Value of the study in the Defence Materiel Organisation will be, to improve: the approach of Asset Management Control. the management control of process-, organization-, personal- and information management aspects; which AMC processes should be executed by each actor (based on acceptable risks) within this organization? how to organize an organization where each actor can contribute his own specialty and autonomy of each actor is ensured; information support environment. Furthermore the research might be used for future research. 50

52 51

53 4. AMC review on the Integrated Maintenance Case 4.1 Introduction The Integrated Maintenance project was initiated to tackle the problem of implementing the ILS/LCM. One of the final results of this project for that matter was primarily intended to realize a Competence Center for Integrated Maintenance for the management of the Royal Netherlands Naval Maintenance and Service Establishment. A Competence Center for Integrated Maintenance requires that the Naval Maintenance and Service Establishment are capable of entering into business performance contracts, made up of the following basic elements; system definition (functions, capability), yearly service plan, performance standards and a cost allocation report. As far as the maintenance of the materiel is concerned, the Royal Netherlands Navy centers its focus on minimizing life cycle costs during assigned operational readiness. Methods and techniques have been developed for this purpose, allowing for the integrated management of the materiel life cycle. The Royal Netherlands Naval Maintenance and Service Establishment tend to the maintenance of a large portion of the RNLN (Royal Netherlands Navy) materiel. The realization of Royal Netherlands Naval Maintenance and Service Establishment products and services was often segmented and differentiated. As a result, the Royal Netherlands Naval Maintenance and Service Establishment s product-focused management failed to fully fit in with the RNLN ambition to approach maintenance in an integral form. With the development and implementation of IM, the Royal Netherlands Naval Maintenance and Service Establishment is capable of offering products and services which fit in with the ambitions of the RNLN and its own objectives; realize the required system effectiveness at minimum costs. IM enables the RNLN to make cost-effective considerations in regard to maintenance. To that end, performance per ship (as system) is, at installation level versus maintenance costs, expressed in terms of active 52

54 time, availability, reliability and capability. By expressing system effectiveness in this way it will be possible to enter into Service Level Agreements (SLA) per ship, per period, and the customer can base his choices on system performance and operational needs. IM is based on Asset Management Control (AMC). This is a new approach that has been developed for managing the material logistic process across the entire life cycle of capital goods. Based on the Logistic Process Cycle a system model is set up, with which all processes of the entire life cycle can be planned, directed and controlled. In line with this, being 'in control' of the cost-effectiveness of assets (e.g. the marine fleet) applies in equal measures to profit and non-profit organizations. With the AMC approach, not only can every euro be accounted for, but it can also be justified, given that the relation between operational needs, imposed by the customer/user, and costs (people, resources and materials) can be clearly indicated and controlled. For organizations working with much capital-intensive material, the objective in the next few years will be to: reduce Cost; improve Performance. An integrated approach is necessary for: guaranteeing the required system effectiveness at minimum costs through: ILS implementation; grip on system effectiveness; preparing for enterprise resource planning (ERP) 53

55 YEARLY COSTS (Mil.Euro) ACQUIRE MAINTAIN OVERHAUL DISPOSE LIFETIME (years) Figure Reduce cost [Stavenuiter, 2006]. Costs are attached to realizing specific system effectiveness. During the entire life cycle of the materiel, efforts should be centered on realizing the required material availability at minimum life-cycle costs. The life-cycle costs of a system/installation can be divided into investment costs, operation costs (maintenance costs and costs of use) and disposal costs. The level and development of maintenance costs are indicative to the effectiveness which the system and installation management are put in practice. For charting the costs in the framework of IM, an LCM model will be drawn up to gain short & simple transparency into: costs of maintenance in man-hours (so-called costs ); costs of spare parts (so-called outlays ). These variable costs constitute a significant part of the maintenance costs and serve as a good indicator for the efforts required for readying and maintaining the system or installation for use (the so-called conditioning and sustainability ). Better transparency will be achieved when the investment costs are also incorporated, something that has not (yet) occurred within the RNLN. 54

56 INSTALLATION PERFORMANCE PERFORMANCE active time AVAILABILITY transportability down time mission time maintainability RELIABILITY failure rate quality load CAPABILITY quality suitability testability serviceability traceability adaptability compatibility flexibility Figure Improve Performance [Stavenuiter, 2004]. The performance or system effectiveness of the material is generally affected by three main factors, i.e. availability, reliability and capability. Each of these factors is in turn affected by one or more underlying factors. These factors, too, can be further analyzed. For IM it is expected that the forecast and the realized system effectiveness will be analyzed at least up to the level of the factors specified in the diagram. Zoom in, only if there is cause for such an examination, in case of large anomalies, for example. Important properties of technical systems are reliability or operational reliability and maintainability. Failure of systems/installations will be unavoidable during operational phase. The average time between two failures is an important parameter in this connection. A high level of material maintainability is for the user a precondition for the shortest possible down time of the equipment. For this purpose one can consider a modular construction of the material or the use of quick-release couplings. The average repair time is indicative of the maintainability. If, in practice, the material appears to be less reliable or maintainable than agreed, one 55

57 may want to consider expanding reliability or maintainability, and thus also (inherent) system effectiveness modifications, for example. To enable analyses, it is important to know the different factors that have been considered during the construction of the main components. Usually breaking these down into pure source data such as key times (corrective and preventive) and the various waiting times (for spare parts, key capacity and other), will suffice. I2 and performances! Figure Consider the combined cost [Stavenuiter, 2004]. 4.2 The Basis: Contracts per System / Ship These contracts are entered into the form of a Service Level Agreements (SLAs). The IM SLA is made up of the following fundamental elements; system definition (functions, capability); yearly service plan, performance standards; a costs allocation report. A system is a complex interconnection of installations, on which many an actor within the Royal Netherlands Naval Maintenance and Service Establishment work to guarantee the required availability. That is why a system contract is made up of several service contracts (per installation). 56

58 Premised on the SLA quote, the best possible capital assets/desired service level combination will be sought in consultation with the customer/user. As illustrated in an Activity Diagram (see figure ) Contents of Performance contract (SLA) System definition (functions, capabilities) Yearly service plan: type of maintenance; why is that maintenance specified; when will that maintenance be implemented. Performance standards per installation: active time (days per year that an installation should be available); availability (% of AT without logistic interruptions); reliability (% of risk on a mission without logistic interruptions); capability (% of proper functioning based on FST standards). Costs per installation & per activity (product/actor) Contract terms and conditions Appendices For the customer, the provision of information starts with a (concept) SLA. An SLA is a contract with which maintenance can be specified as follows: the parties involved; the agreed level of service;, the conditions under which service is provided; costs and warranties. For this, a yearly service plan is agreed at system level (class/ship). The yearly service plan is a plan that is geared to the mission profile in which concrete arrangements are made with respect to the performance of the 57

59 functional chains. e.g.; Anti Air Warfare(AAW);Anti Submarine warfare (ASW) Command, Control & Communication (C3), etc., specifically for that period. The entire range of Royal Netherlands Naval Maintenance and Service Establishment products and services, the related costs and terms and conditions, are incorporated in the yearly service plan. (E.g. an AMICO Installation Diagram, see page 63) The PBSC as 1-on-1 input for the LCM model and SLA Performance Based Service Contract [format conform input AMICO/LCM model] Installatiegegevens Performance Requirements Life Cycle Period (status): IO(Operationeel) of MJO of TTO Active Time dagen UKC: Availability 0-0 % BSMI: Reliability 0-0 % Aanschafprijs (EURO): Capability 0-0 % Jaar: 2003 (-1) of (-2) Opmerkingen: Installatiemanager: Organisatie: BWS of OWS of C3 Kostenverdeelstaat Uitvoering (Actor) BBS code Product ME blok Uren Uurloon Kosten Uitgaven Totaal CZM GES Opdrachtst./voortgangsbew. 0 0 Portfoliomanagement Klantcontact, pln.en coord. 0 0 Productie ondersteuning Orderplanning & uitgifte 0 0 Schip OLM (1-ste lijns onderhoud) 0 0 Productgroep ILM (2-de lijns onderhoud) 0 0 Materiaalplanning Materiaalvoorziening 0 0 Maintenance Engineering Installatie management 0 0 System Engineering Systeem management 0 0 Tekenkamer Technische documentatie 0 0 Diagnostiek / Analyse Bedrijfszekerheid informatie 0 0 Meet- & Kalibratiecentrum Kalibratie en metingen 0 0 Instandhoudingskosten (totaal): Figure Performance Based Service Contract input. For the SLA, baseline data are drafted per installation in the form of Performance Based Service Contract (PBSC) see figure This compilation of data is presented at ship-system level in a Service Level Agreement. The maintenance process is managed on the premise of the SLA and the PBSC s per installation. In fact, a form of Contract Management is created, which is be set up as follows. Organization/Communication: agreement to implement maintenance to the material on the basis of SLA s; agreement per SLA (intrinsic agreement on product, time and 58

60 money); coordinate per SLA; agreement per PBSC (intrinsic agreement on product, time and money); coordinate per PBSC. Management Control: controlling anomalies at system level (system effectiveness, costs, expenditures); controlling anomalies at installation level (Availability Killers (AK)/Cost Drivers(CD), modifications); SLA adjustments to (new) customer requirements; PBSC adjustments to (new) customer requirements; controlling fluctuation in work at system level; controlling fluctuation in work at installation level. Provision of up-to-date information: SLA report (on product, time and money, per 4 months.); PBSC report (on product, time and money, per 4 months); cost/performance update on web portal (per 4 weeks). Updated source data (at least every 4 weeks): hourly wages on the premise of WO (Werk Opdracht, Work Order)/ BBS (Bedrijf Beheers Systeem, Company ERP System), ATW s (Aanvraag Tot Werk, Work Order Management System), (OLM Service/Ship); expenditures on the strength of VAS (Voorraad Administratie Systeem, inventory administration system)/bbs registrations; OPDEFs on the strength of CZSK/Ship statements; failures with downtime on the strength of MATRACS (Modificatie Administratie Systeem, modification administration system) registrations by Ship; 59

61 progress of modifications on the strength of MOD (Modification) portal Project Leader MODifications (PL-MOD). This work method can also serve as an important basis for implementing the INK and the ISO certification processes 4.3 The Multi-purpose-Frigate Case Integrated Maintenance Case Multi-Purpose Frigates Royal Netherlands Navy Figure Integrated Maintenance Case. Figure The Multi-purpose Frigate Background information. In the beginning of the nineties the Multi-purpose Frigates of the Karel Doorman class replaced the Wolves- and Van Speijk class - Frigates. M. - Frigates are usable on the Atlantic Ocean and the North Sea. The chosen hull is able to maintain its high speed at sea. The rudder roll stabilization design enables operation with helicopters during bad weather. To reduce the risk of discovery, the M. - frigates have a lot of facilities, varying from low-noise cavitations to a reduced radar reflection. Specifications: displacement ton; length 122,2 meters; width 14,4 meters; 60

62 draught 6,2 meters; propulsion: o o 2 gas turbines main engines (power 12,75 MW); 2 diesel cruise engines (power 3600 kw. speed 29 knots (55 km /hour); crew 152 (men and women). Armaments: NATO Sea Sparrow guided missile system against air targets (Anti Air Warfare); Harpoon Weapon system against surface targets (Anti SUrface Warfare); Lynx - helicopter for submarine combat / surface observation, search and rescue and transport (ASW, S&R); Counter Targeting Systems: Electronic attack Systems (Electronical Warfare, EW); Chaff launchers SRBOC (Super Rapid Bloom Off board Chaff). Torpedo Weapon System anti submarines; (Anti Submarine Warfare,ASW); Goalkeeper Close in Weapon System (AAW, ASuW, self defense) Oto Melara 76 mm gun (long distance gun for (ASuW); 2 x point-50 machine-gun s (crew served weapon). Within the Royal Netherlands Naval Maintenance and Service Establishment the control of these installations has categorized this class of ships in, functions and installations. System Functionalities of a Multipurpose Frigate are divided in two technical varieties, Sensor Weapon COmmando (SEWACO) and Platform systems: 1. SEWACO function: 61

63 Primary (AAW, ASuW, ASW, EW, helicopter operations and self defense); Support (Communication, Navigation and C2I Support). 2. Platform function: Support (Auxiliary, Mobility, hotel facility, representation and ship and crew survivability0. Each of these system functionalities has technical functions (181) and their installations (183). For nearly each installation an Installation Manager is assigned. For these systems/installation there is a total of 2000 actors. This is a very complex process/system which is not easy to manage. For a Life Cycle Management model of an M-Frigate see Appendix 9. Approach The Royal Netherlands Naval Maintenance and Service Establishment have, as Integrated Maintenance (IM) competence center, entered into service contracts with the operational user (CZSK). The system contract comprises several service contracts (per installation). The SLA is intended to provide the customer with an accurate picture of system effectiveness, and maintenance activities performed in that year. To implement this system approach in a structured manner, IM has opted for a short & simple method: Keep It Short & Simple (KISS) is the first phase in this approach. The entire approach is incorporated throughout this project in a simplified (KISS) way. An SLA report, on the basis of which management can decide whether and if yes, how IM can be continued in the future, is submitted at the conclusions and recommendations (see also results in IM AMC eindrapportage [Lobregt, 2004] Materiel-oriented Operational Management The IM control structure is developed to provide a material-oriented operational management. In principle, IM covers the material s entire life cycle. Good service planning is essential, because it is here that the 62

64 foundation is laid for the rest of the entire operation. By representing the Technical System (read 'ship') in functions and installations and the Logistics process (read 'the maintenance') as chains of maintenance activities, the IM control structure can be categorized into 3 primary management functions: Process Management, Installation Management and System Management The SLA baseline The results to date show that IM can be applied for all RNLN materiel. This, on the premise of yearly service plans per unit. The yearly service plan is geared to the mission profile in which concrete arrangements are made, specifically for that period, in regard to the performance of functional chains. In the yearly service plan is incorporated the entire range of Royal Netherlands Naval Maintenance and Service Establishment products and services, related costs and terms and conditions. These are the standards for the actual maintenance Maintenance Management Management of maintenance is based on the premise of performance indicators. The most important material-oriented performance indicators are system cost-effectiveness, active time, availability, reliability and capability. Data are delivered as Performance Based Service Contracts to the System Manager. The LCM model is additionally supplemented with failure and downtime information from the ships and VAS & BBS data from the Royal Netherlands Naval Maintenance and Service Establishment Organization For this case, management decided to introduce a project-based IM for the SEWACO system of the M-frigates. The project is done by the Royal Netherlands Naval Maintenance and Service Establishment Management and the ILS council is appointed as steering group. The actual execution 63

65 takes place within the SEWACO Division. Other divisions were involved as much as possible. Following the formation of the project group, a look will be taken at how the concepts can be fleshed out. To fulfill all IM roles within the project, the following work groups, in addition to the Direction committee, where put together: System management group; Installation management group; Data management group. A sounding board group representing all stakeholders was also formed Maintenance Operation IM is tested in practice through the following products: 8 SLAs for maintenance of SEWACO subsystem of M-frigates; for 28 installations, the underlying Performance Based Service Contracts (PBSC); an overview of actors, products and costs per installation; contract terms and conditions Status Report Where management of the contracts is concerned, much hard work has been put into the four monthly status reports (Lobregt, 2004). Unearthing the required data proved to be a daunting task and there appears to be a great quantity of 'gray work'. These are installation-oriented activities on BSMI which cannot be automatically associated with the PBSC in question System Portal (Information technology) To keep the entire suite of information controllable and transparent, full advantage has been taken of the web technology available in the PDM group. A specific System Portal, to which all relevant material information was linked, has been set up for the M-frigates (see figure ). 64

66 Figure System Portal M-Frigate 4.4 Product Description of SLA General The SLA covers a limited number of installations of the SEWACO system. Where a SEWACO system is concerned, it is important to bear in mind that the operational software falls under the responsibility of CAMS. Terms and conditions concerning delivery reliability and turnaround times. General terms and conditions concerning fundamental principles, changes, defects and negligence. Principal shall be accountable for the correct management, use and maintenance of the SEWACO installations on board the ships. Principal shall provide the Royal Netherlands Naval Maintenance and Service Establishment with information concerning onboard maintenance and performance measurements such as: MATRACS, HAKOG, configuration management, stock replenishment, and periodic maintenance tests etc. The quality and timely delivery of these figures are crucial to the maintenance process. Service provider shall be accountable for on-shore transport and 65

67 maintenance, including logistic tasks and onboard assembling and disassembling. Service provider shall be accountable for acceptance and final testing after MJO, TTO and IO, including timely reports. Service provider shall account for all costs and expenditures concerning ILM and DLM in the BBS and VAS system in order to guarantee correct hours/costs registration. Principal shall account for all costs and expenditures for OLM in the company registration system on board (to be specified in detail) and shall report this periodically (every 4 weeks) to the MB to guarantee correct hours/costs registration. Service provider shall be accountable for reporting on the fulfillment of the contract Communication Model: o CZSK - Portfolio manager M - Frigates on planning and execution; o CZSK - System manager M - Frigates on contract terms and conditions regarding system and functional performances, analyses (SATs) and budgets concerning costs and expenditures; o CZSK Installation management on installation performances, costs, expenditures and modifications Description of Maintenance Activities The maintenance activities will be based on the V&O schedule (BENOPS). The maintenance activities are documented in the: Yearly service plan with the agreed activities; LCM model; 4.5 The Analysis and Control Tool As supplement to the analysis and control tools, a computer program has been used for modeling the system/capital assets the ship and 66

68 all the required activities throughout the life cycle. This program, AMICO, is made from three modules: System Effectiveness Module with which the technical system is modeled; Logistic Process Module with which all logistic activities associated with each other are mapped out; Cost Information Module with which all costs are collected and specified in different cost units and cost types. The design of the entire model is chosen such that it is generally applicable, therefore not only for naval ships, but also for, offshore, petrochemical, railway and aviation industries, and Public Works and Water Management.. Figure Analyze and control tool Function Diagram The Function Diagram (FD) indicates the system status at the highest level. Something is going on with the Functions and Installations in red. If one scrolls down from system level by following a red function task, one will arrive at the basic functions and installations (functional packages) which cause the problem. If the mouse is put on a basic function (the function to which installations are linked) and the screen bar Installation Diagram (ID) (top left) is opened, the Installation Block Diagram of the relevant basic function will be shown. 67

69 Figure Function Diagram from AMICO model M-Frigate Installation Diagram The actual system architecture is modeled with the Installation Diagram (ID) and the FD. By means of relations, impact factors and the like, the System Engineer can model the actual system such that it can be further calculated at different levels with the help of performance indicators. To provide insight into the interrelated relationships and the ranking order of the installations, an Installation Diagram is set up for each basic function. In combination with the Function Diagram, the entire system is placed in a model in this way, which can then be calculated further. This can then make the consequences of inadequately reliable installations visible at a higher level, in terms of both performance and costs.. 68

70 Figure Installation Diagram from AMICO model M-Frigate Activity Diagram Scroll down to a material logistic process, which to a large extent determines the installation performances, and place the mouse on an installation and click on the screen bar Activity Diagram. A process diagram has been incorporated for each installation and each Y-P, which shows who is responsible for what. The relations: primary responsibility, normative, supplying and supporting, are shown in the model through the symbol arrangements. By clicking on a red Activity Block a data window will appear with: baseline, actual and what-if, information. Underlying information, e.g. who is the manager, the WOs attributed from the ERP system, more information, etc. can be retrieved via the menu on the right. As supervisor, one can also incorporate messages in the memo field. New actors, products, installations, etc. can be entered via the menu option Model. In reality, these AD are drawn up in relation to the actors involved, among other things, based on: project plans, maintenance concepts, service plans, etc. For underlying information a web page of the System Portal can be opened from different data windows. 69

71 Figure Activity Diagram from AMICO model M-Frigate. Since everything is set up digitally, and is easily accessible via Internet and intranet, it is possible to run through the model from system level (e.g. commander, the general manager) to activity level (first-line management, production chief) and consult all vital information via data windows. It is also possible to present and print all AMC data in different report formats and the application can perform LCC calculations in different ways Information on the Web Portal During the IM pilot, these types of installation overviews constituted the core of the SLA trimester reports for the Integrated Maintenance of the M-Frigates. The purpose of this page (see figure ) is to provide an overview of the actual system-effectiveness in relation to the baseline as provided in the SLA. Based on red-colored Availability Killers (AKs) and Cost Drivers (CDs) anomalies are reported and improvement actions indicated. The basis for this information is the updated data within the LCM model, which is set up in AMICO. The model is filled with 70

72 maintenance and user data that are supplied by the various (Maintenance) Engineering departments. The so-called baseline data are supplied to the System Manager in the form of a Performance Based Service Contract (PBSC). Afterward, the LCM model is periodically updated with current data from the legacy systems (BBS, VAS, and MATRAC) that are supplied by the RM&A department. The actual System Cost-effectiveness, Function-effectiveness and the Installation Performance of the underlying system functions are calculated using the LCM model. Per ship/ukc, an overview is provided of data in table format, supplemented with a clarification from System management, if necessary. A vital information source is the trimester reports in relation to the installation-focused performance contracts (PBSCs). The underlying process for this is structured maintenance, which forms the basis of IM and should be further integrated as IM work method in the organization. It also serves as an important basis for the still ongoing implementation of INK and the ISO certification. Figure Cost drivers and Performance Killers (Demo Data) [Lobregt, 2004] Point of interest: at first it may seem like performance is appearing opposite costs; the problem in nonprofit organizations such as the RNLNMSE 71

73 always results in the same thing, allocation of costs; the traditional approach to maintenance management as applied in the industry and profit organizations shows a strong tendency toward the capitalization of loss; this is not consistent with the (current) thought within nonprofit organizations such as the RNLNMSE. How can we move beyond this? It seems that whenever the effort is focused on availability and reliability, this supposed contradiction is not as big as it appears to be at first time; improvement of system-effectiveness (product or availability, reliability and capability) often appears to have optimization of the costs as a side effect. In other words, Cost Drivers are useful also Availability Killers. 4.6 Findings and conclusions [Lobregt, 2004] The goal of the research to find out if it is possible and how to implement Asset Management Control in a non-profit maintenance organization, on a cost effective manner, has resulted in the following conclusions M-Frigate Case conclusions. 1. integrated Maintenance based on performance contracts is feasible. 2. we have or can gain system information and knowledge rather easily. 3. a performance contract has a cost-reducing effect. 4. the requirements for cost transparency are clear. 5. we have or can obtain fair access to the required management information. 6. performance indicators can be defined. 7. Contract Management can be applied in each organization. 8. a Performance Contract can also be drafted for complex systems 9. adequate control is feasible with the right approach 72

74 4.6.2 Contract (SLA) conclusion Conclusions of reports [Lobregt, 2004] are, that 80% of the costs and waiting times are caused during the logistic process. On board, many components are replaced and have to deal with long logistic waiting times. In other words, the highest savings are at Logistic Services, based on: periodic consumption; maximum logistic waiting times Points of improvement: registration of hours disciplines (IMG action); registration of hours of PU s and ME s to a valid BSMIs [existing installations] (IMG action); registration of hours on the right maintenance category (action all) The Change of Maintenance Maintenance has changed. A modern outlook on maintenance takes account of risks and functionality versus costs. Risks are not only fallout times due to technical failure, but also include labor laws and the environment. Moreover, it is a fact that a large portion of potential costs for maintenance are already tied up in the design. To minimize costs for management of the installation early involvement is an absolute requirement. 73

75 Figure Development in the daily work of the Installation Manager. As a result of future perspective carried out by the Management of the Royal Netherlands Naval Maintenance and Service Establishment, it has been decided that the company will be set up as a Competence Center for maintenance. One of the fundamental principles in this is an integrated approach based on the Integrated Logistics Support (ILS) thoughts. An integrated approach of this kind is essential to guarantee the system-effectiveness required by the customer at minimum costs. The Product Unit therefore is set up to make a useful contribution in all phases of a product s Life cycle. Thus the unit must have the essential knowledge and experience to make a contribution to the service planning of new building projects. A contribution of this kind can help project managers make the right decision in the choices they make for new material. The unit should also be capable of making the right contribution to the construction and transfer of new material. The largest activity is, however, the maintenance of material during the use phase. In conclusion, the unit should be capable of making a contribution to the sales or disposal of material. Material-focused management makes it possible to get a grip on the system-effectiveness of installations and chains of installations, where ultimately the ship, as a system, can carry out the customerrequired tasks. The foundation or norm for this is formed by the maintenance concepts that need to be drafted for the different installations. A maintenance concept is realized on the strength of expertise within 74

76 the unit, and on users and other information sources. Through this system, the best possible service plan is formulated (who, what, why, how) on the strength of defined focus points [Boer, Vermeer, 2003] Compatibility with the DMO business model The establishment of (Weapon) System Management is the responsibility of the System Plan, deposited at the DMO. A System Plan is a plan for a class of ships, in which material logistic standards and guidelines for the maintenance phase are documented. This is drafted for a class of systems. The System Plan is the document in which all information associated with the (sub) system for the system management is incorporated. The system plan contains guidelines for the use of the (sub) system and its maintenance. Via AMICO, the required performances at system and function level are translated into required performances at installation level. The installations constitute the foundation for control. Hereof, maintenance concepts are drafted, supported by the STORM (Support application for Technical Overview, Reliability and Maintainability) application. The method of structured maintenance (implementation of ILS/LCM) developed and introduced by the Royal Netherlands Naval Maintenance and Service Establishment is compatible with the processes that are written for the new DMO organization. System Management is recognized at top level. For the RNLN this is in regard to the (classes of) ships. A ship/system delivers a number of functions which are often realized with collaborating installations, which are extremely complex. Within the Royal Netherlands Naval Maintenance and Service Establishment the control of these installations is categorized into functions, systems and installations. Hence the reason that the RNLNMSE will be playing a role in: o meeting structures for system management; o guidelines for handling material, containing a description of: 1. development of the plan of use into a use profile 75

77 (the material-logistic translation of the User Plan ); 2. preconditions per ILS-aspect: maintenance; stock replenishment; documentation; trainings; facilities; personnel. 3. cross reference to ILS-Plan(s) for the system (and/or subsystems) 4. cross reference to the Configuration Control Plan o Material logistic management of the class of systems, with a development of normative Process Indicators (PI s) per ILS aspect: RAMT; Life cycle costs; degree of service; turnaround time; supply / delivery reliability; etc. The maintenance concepts are highly compatible with the maintenance method implemented at Defense and in particular at the Royal Netherlands Navy. This compatibility with the Royal Netherlands Navy organization is a conscious choice to obtain the best possible fit between the structured approach and the Royal Netherlands Navy environment, which are Royal Netherlands Naval Maintenance and Service Establishment biggest customer. Other coordination is possible, but the choice for more potential end-products increases the control burden and reduces the level of standardization. It is also a fit with ISO 9001 standard. In terms of the INK model, this means a shift 76

78 from activities/process-oriented work to system-oriented work for the Royal Netherlands Naval Maintenance and Service Establishment. As suggested previously, structured maintenance constitutes a basic work method of the maintenance organizations. The structured approach fits in with the work method that can be deduced from the control models of the DMO. The CO (via DMIP), too, has expressed much appreciation as to how maintenance is controlled at Royal Netherlands Naval Maintenance and Service Establishment, or as they call it is in control. The further implementation of structured maintenance would then constitute an obvious choice. 77

79 5. PRIMA analysis of the Maintenance Organization 5.1 General The long term objective as stated in the URORKM document of the RNLN Maintenance Establishment is filling in the need for control of the activities of the RNLN Maintenance Establishment which are beyond the level of installations, i.e. on a system level (ship/ship s class), concerning cost effectiveness of maintenance and logistics support. This control function is coordinating and supporting in its essence with the asset view (i.e. ship/ship s class) as object of interest. The essence is visualized in the production model see figure PBSC s LCM models PK/CD reports System Plans Service Level Agreements Direct (i.e. consult and decide ) for the life cycle management of assets Concept SLA s SLA reports Change proposals for system cost effectiveness Actions for PK/ CD s System Information Portals + LCM teamsites Fig Production Model Figure Production Model [TQM, 2006]. Installation Management is the responsibility for the line divisions of the RNLN Maintenance Establishment i.e. Platform and SEWACO product units/material groups in which engineering, material scheduling and production are organized around installations. 78

80 5.2 PRocess IMprovement Application (PRIMA) Introduction For the real implementation of integrated quality control a choice is made for a dynamic treatment. This is realized by the web application PRIMA (PRocess IMprovement Application). PRIMA is based on 4x4 Process Definition Matrix where each element has been defined as a function area. In line with the Total Quality Manual [TQM, 2006] these function areas have been defined and described with their mutual relations. The dynamics, ongoing improvements, are reached by using a self evaluation, by periodically reviewing how the current actor chain actually performs with respect to required process (the baseline, fixed as in the TQM Manual[TQM, 2006]. The organization must supply the company-specific data. By means of a generic step-by-step plan the process is structured and coordinated on the specific assets (dependent on their complexity, financial value, value for the processes in which they act) and requires the materiel availability against minimum costs. The application PRIMA aims at the following advantages: to make ongoing improvement operational; to perform the process as a result of self evaluation (the improvement points) to conduct improvements, uniformity, and a clear communication; transparency, to maintain pressure to improve; transparency, to have directives for real improvements in-depth analysis of the status of Life cycle Management (Asset Management Control) in the own organization; overview of asset and/or company specific bottlenecks; recommendations concerning optimum improvement approach; links to references from the ISO-9001 standard and the INK model. 79

81 improvement process of the organization and to make ongoing improvement operational; process and results of evaluations (action improvement plan) make it uniform, transparent and communicable; management of improving actions. For a detailed description of PRIMA see Appendix 3. How to proceed in the future in the new Royal Netherlands Naval Maintenance and Service Establishment setting and its environment? A further implementation of Integrated Maintenance and embedding it in the entire MATLOG organization (OCKM, DMO, and RNNMSE) appears to have become an irreversible process. The concern is now to determine the best way to run through the rest of the process. The (new) actors or organizations playing a large part in this are: the operational user (CZSK); the Defense Material Organization (DMO); the Royal Netherlands Naval Maintenance and Service Establishment (RNNMSE); the DICTU and DTO. Objective First of all, the objective of the IM is to ensure that the existing knowledge is guaranteed and expanded, if necessary, so that it can fulfill its role as member of a competence center for maintenance. For the further implementation, IM will have to be supported as much as possible by line management. Related, still running projects are: Operational management on board (OCKM); ISO-KAM implementation and certification (RNNMSE); Set-up Structured Maintenance within the MB; System-oriented stock replenishment (DLD/MB); ILS implementation (MATLOG/DMO); 80

82 Approach IWSM vs. DMIP (DMO), ERP implementation. Provide the required system effectiveness at minimum costs. In the present situation this goes down by doing more with less, since maintenance is (still) too expensive and system effectiveness too low. In other words: Reduce Cost, Improve Performance. Cost-savings and performance improvement are and will remain the ongoing driving force. It contributes to the defense objectives and the Royal Netherlands Naval Maintenance and Service Establishment s right to continuity. In the game of problem recognition, prioritization, finding solution paths, coordination and realization, the IM pilot manal [Stavenuiter, 2004] serves as fundamental principle and guideline. The series of processes, actors, of which primary field of activity and responsibility fall within the line management, are at the core of the IM and the operational management. For realizing its objectives or tasks, line management can count on Management and supporting departments for the most suitable organization, methods, techniques and information technology. The following management functions will be directly involved in this: portfolio management, material planning, system management, system engineering, installation management, and data management, information management (ICT) and Human Resources Management. 5.3 Results evaluation of the organization related to the asset M-Frigate, with PRIMA For each type of the asset, the impressionable Value to Control and the Measure or Perfection has to be determined, the concerning process can be compared. This happens on the basis of objects and company information, which must be imported by the person responsible for the 81

83 asset. This baseline (the reference area) is specifically specified for the organization and the concerning materials/objects/assets With the Quick scan it is possible to reflect this reference area and the Life cycle Management approach. Algorithms to indicate Measure of Perfection MOP = Measure of Perfection MOP = function of (VtC, RtC) VtC = Value to Control (the financial value of the assets) RtC = Risk to Control (the risk = chance x impact) Formula for MOP = VtC + RtCf + RTCs + RtC e [0<%MOP<0] (see also table A1 in Appendix 3 and note 3) Calculation by using following data: o VtC = 3 (Total Cost of Ownership is >0 M ) o RtC financial = 2 (Cost of unforeseen failures are > then k ) o RtC safety & Health = 1 (Small injuries 1 or more times/year) o RtC environmental = 2 (Regularly returning environment incidents). MOP = = 8 = 80 % Figure showed the results of filling in the questionnaire, of 15 closely involved actors (managers and engineers) in PRIMA, with a MOP of 80%. See for results of the questionnaire in Appendix 8. 82

84 Figure Result of the analysis with PRIMA Analysis Business studies have taught that there is no sense in wanting to arrange one aspect within an organization to perfection when the rest is still lagging far behind. It is, however, possible for an organization to grow to a higher level of perfection if it develops while maintaining a certain degree of balance. The method of structured maintenance developed provides the opportunities to grow in the measure of perfection. The interesting question is: Where is the optimum threshold between costs and measure of perfection? In order to obtain the answer, the past has to be observed. In the eighties this was at about 80%. [Stavenuiter, NVDO presentation] Perhaps clever use of IT prospects has induced this optimum threshold to rise? No matter, for us, the first challenge is to reach an MOP of 80% across the entire line System Plan Absolute score (arithmetic average) 55% Corrected score (calculation) 68% 83

85 Point of improvement: use the System Plan as a reference (standard); increasingly use and improve the use of the System Plan in the organization; keep the System Plan a living document and adapt modification on the basis of modified insights; make the specifications accessible for involved actors; complete the specifications of the standards; complete and correct the materiel specifications; complete the User Plan / Exploitation Plan; specify the responsibility to establish and maintain the System Plan; acquire the correct competences to be used with the System Plan; carry out a risk analysis with regard to performances (availability and reliability of to function asset) and with regard to costs Life Cycle Management model Absolute score (arithmetic average) 62% Corrected score (calculation) 77% Points of improvement: define performance indicators with regarding to cost effectiveness; establish standards to check and validation of system performances; carry out a Life Cycle Analysis Contract management Absolute score (arithmetic average) 45% Corrected score (calculation) 56% Points of improvement: accomplish the suppliers and trains these; implement Contract Management in the organization; 84

86 improve the competencies within the organization in the field of contract management Service Level agreement Absolute score (arithmetic average) 42% Corrected score (calculation) 52% Points of improvement: use a larger extent of Service Level Agreements in the organization increase the availability and accessibility of the current maintenance planning for relevant actors make specifications clear (SMART) available/accessible for relevant actors make an integrated cost overview (Total Cost or Ownership) make information about guarantees available and accessible for relevant actors specify quality/service requirements regarding maintenance define more requirements regarding checking and validation of made agreements increase products/services insight in pricing and lead times in relation to provided functionality and performances Organizational Plan Absolute score (arithmetic average) 58% Corrected score (calculation) 72% Points of improvement: make quality and service requirements available and accessibly for relevant actors; further elucidate that AMC treatment results in a cost effective treatment Actor Definition Model Absolute score (arithmetic average) 58% Corrected score (calculation) 72% 85

87 Points of improvement: elucidate the expectations regarding to the functioning of the employees; clarify that AMC treatment results in a cost effective treatment Resource management: Absolute score (arithmetic average) 68% Corrected score (calculation) 85% Point of improvement: verify the implementation of action regarding the performance and assessment interviews Material Logistics Organization: Absolute score (arithmetic average) 67% Corrected score (calculation) 83% Points of improvement: frequently evaluate the team objectives and the performance of the team members use the competences of the team members organize missing competences communicate to attain the team objective and everyone s role/assignment of tasks make sure the team members accept their role and assignment of tasks Activity Plan: Absolute score (arithmetic average) 58% Corrected score (calculation) 72% 86

88 Points of improvement: keep the Activity Plan active and current in the organization; implement continuous improvements in the organization (with feedback) Team building: Absolute score (arithmetic average) 66% Corrected score (calculation) 82% No points to improve Team management: Absolute score (arithmetic average) 52% Corrected score (calculation) 65% Points to be improved use the process design as a standard and reference area for Team Management; use a team design as a standard and reference area for Team Management; explain that Team Management is effective; make an improvement plan based on the results of the (their own) evaluations; apply workshop treatment; carry out evaluations with respect to training and development of the people in the organization; carry out evaluations Team Work: Absolute score (arithmetic average) 57% Corrected score (calculation) 71% Point of improvement: Carry out evaluations. 87

89 Control plan: Absolute score (arithmetic average) 52% Corrected score (calculation) 65% Points of improvement: analyze the costs and profits report and define structural points to be improved; analyze the jamming report and define structural points to be improved; monitor the implementation of corrective and preventive maintenance action; monitor the implementation of performance-specific appointments; monitor the implementation of the Action Plan to improve cost effective commitment of the assets; evaluate the implementation of performance-specific appointments/agreements and justify if necessary; verify and validate the requirements from the Control Plan; carry out evaluations System Information Portal: Absolute score (arithmetic average) 40% Corrected score (calculation) 50% Points of improvement: use the web portal as a source of information for announcing priorities and taking decisions; make contractual information SLA s and PBSC's visible and accessible for relevant actors; make information of system tests visible and accessible for relevant actors; specify a report over a period longer than 5 years so that development of costs and performances can be made visible; specify responsible actors to realize the acquired characteristics; 88

90 show information on the web portal which proves the cost-effective commitment of the assets; make sure all relevant actors have access to the information of the required asset Management Control: Absolute score (arithmetic average) 40% Corrected score (calculation) 50% Point of improvement: stipulate, define improvement actions on the basis of customer satisfactions research System Cost Effectiveness: Absolute score (arithmetic average) 45% Corrected score (calculation) 56% Points of improvement: analyze the costs/turnover report and carry out trend analyses; analyze the jamming report and define structural points to be improved; analyze changes in the use/user intensity of the assets on established maintenance appointments; give feedback on user/maintenance experiences and formulate lessons learned; give feedback on user/maintenance information from the exploitation organization to maintenance organization; clarify the relation between costs and the performances of the assets; make the management information visible and accessible for relevant actors. 5.4 Summary of PRIMA Matrix The goal of the research to find out if it is possible and how to implement Asset Management Control in a non-profit maintenance 89

91 organization, on a cost effective manner, has resulted in the following points of improvement and directives for management, see also table below This approach with PRIMA leads to get a better insight in the organization of: the process; result orientation. Process analysis gives: status of the maintenance; strong and weak points of the organization Points of Improvement. Process Function Elements Process Realization Process Management Process Model arrangement Process plan Points of Improvement responsibility and competencies evaluation of competencies and the role and task of the team members competencies van Contract management evaluation for learning and development of people establish standards use of web pages the use of the System Plan analysis of data (cost, jamming and changes in user/ user intensity Table Summarized results of improvements 90

92 5.4.2 Procedures and directives Process- Function- Elements Process Realization Process Management Improvement plan for Procedures / directives make Service Level Agreements implementation of Contact Management get the right competencies stipulate/ define improvements actions Process Model arrangement Process plan to make information (data) visible use System plan as directive make clear that AMC treatment is cost effective in Actor Definition Model and Organizational Plan Table Summarized results of procedures / directives 5.5 Summarized: the hardware and data systems; The education and thinking of people; The organization structure and management has to give directives. 91

93 6. Conclusions and Recommendations 6.1 General The research goal is to find out how to implement Asset Management Control in a non-profit maintenance organization, in a cost effective manner, The implementation of this is no sinecure for an organization such as the RNLN Maintenance Establishment. The systems(assets) are complex, as are the materiel logistics processes around them. This means that the choices regarding the methods and techniques to be used should be considered thoroughly and substantiated properly. A range of methods and techniques seems necessary. An intensive education and training program is needed to give all actors the opportunity to master this. Information and communication are keywords. 6.2 Organization Structure Typical are the many communication lines and the interrelated relations and coherence of products from the various subgroups in the maintenance organization. Much attention has been given to set up and maintain these lines. Partly due to differences in fundamental principles at the start of the project and the difference in the use of data. This requires a more extensive investigation. 6.3 Management Control The M-frigate case results in a well accepted work method with respect to structured maintenance. Structured maintenance has been a working method for the Maintenance Organizations. The structured treatment fits the working method of the DMO business models. The implementation of structured maintenance seems the right choice. 6.4 The M-frigate case [ Lobregt, 2004 and Stavenuiter, 2004] M- Frigate Case integrated maintenance based on performance contracts is feasible; system information and knowledge is available or can be gained 92

94 rather easily; a performance contract has a cost-reducing effect; the requirements for cost transparency are clear; fair access to the required management information is available or can be obtained; performance indicators has to be defined as good; contract management has to be applied in each organization; a Performance Contract can also be drafted for complex systems; adequate control is feasible with the right approach The contract (SLA) Conclusions about SLA reports are that 80% of costs and waiting times are caused during the logistic process. On board, many components are replaced and have to deal with long logistic waiting times. In other words, the highest savings are at Logistic Services, based on: periodic consumption; maximum logistic waiting times. 6.5 Points of improvement [ Lobregt, 2004 and Stavenuiter, 2004] registration (hours) disciplines; adjustment of order structure BBS; the hardware and data systems; The education and thinking of people; The organization structure; and management has to give directives; data management needs to be improved on many fronts. 6.6 Follow-up activities the interpretation and perception of the various actors roles needs to be given further shape through training and coaching. The role models need further development through a combination of training and coaching: much profit can be gained from early involvement of the maintainer in the development phase. 93

95 the organization of data reception, processing, data defining and information models is an important subject to further development; knowledge is explicitly based on expertise. This Follow-up activities requires further investigation. 6.7 Recommendation o o Keeping it short & simple (do not do everything at once); Use the knowledge that is present within the organization (make expert teams); o o o o o o Do not overestimate the value of DATA; Do not underestimate the effort to acquire the right DATA; Support from Management is necessary (directives); Fill in knowledge management. Provide training if necessary; Implementation always demands time, patience and coaching; GOAL has to be focused on relationship with the customer; o Give directives to work with contracts per system (SLA) / installation(pbsc). 94

96

97 Appendix 1. Resources Literature will mainly be extracted from the following resources: Various literature, including reports, books magazines, etc; Internal papers of the Defense Materiel Organization; Information resulting from interviews, discussions and other conversations; Appropriate IT facilities; Internet databases/websites; Royal Netherlands Naval Maintenance and Service Establishment library; Library of Hogeschool Zeeland and other universities; Information, lectures, presentations collected during the course. Congresses

98

99 Appendix 2. References A 2.1 Bibliography 1. Blanchard, B.S., Logistic Engineering and Management, Prentice Hall Inc, Upper Saddle River, USA, ISBN Boer.J de, W. Vermeer, RNLN Handboek ILS (in Dutch), versie 1.4, RNLN Directoraat, The Hague, Brochure DMO (in Dutch), versie , Centrale Organisatie. 4. DEFENSE MANAGEMENT DOD Needs to Demonstrate That Performance-Based Logistics Contracts Are Achieving Expected Benefits, GAO , United States Government Accountability Office (GAO), September Grijpstra J, AMC in Shipping, May HZ/IMS, Brochure Asset Management Control Master Course (in Dutch),, International Master School. Handbook MSc Dissertations, NL. 8. ISO-9001 standard. 9. Jones, J.V., Integrated Logistic Support Handbook, McGraw-Hill, Inc., New York, USA, ISBN JSP 336 (3rd Edition) Volume 3 Part 2 Pamphlet 2 Section 1, Version 1.00, 01 Mar Kirkels H, Ploos van Amstel W, NL-ARMS Netherlands review of military studies 2004, ISSN Lobregt H., IM AMC eindrapportage (in Dutch), versie 1-1, Marinebedrijf, Performance-Based Logistics congres Performance-Based Logistics - The Changing Landscape in Support Contracting, University of Tennessee and Supply Chain Visions, PRIMA program description (in Dutch), 16. Rustenburg J.W.A system approach to budget-constrained spare parts management. 17. Schouwers, A (2003-4), Nice boat! But what s the upkeep like? Delft Outlook, Delft University. 18. Stam A.J., Evaluatie Installatie Management Groep IM, Marinebedrijf (in Dutch), 19. Stavenuiter, J., Cost Effective Management Control of Capital Assets, Asset Management Control Research Foundation, Medemblik, NL, ISBN X; 20. Stavenuiter, J., IM_pilotboek_versie_1 (in Dutch). 21. Stavenuiter J., IM by KISS projectuitvoeringsplan, Marinebedrijf (in Dutch), Stavenuiter J, NVDO Innovatiemodel presentatie (in Dutch), 23. TES - RMG guidance notes reliability & maintenance issues affecting contracting for availability issue 1, TES, 24 April 2006

100 24. The performance based management handbook A Six-Volume Compilation of Techniques and Tools for Implementing the Government Performance and Results Act of 1993,volume 1, PBM SIG, September 2001( 25. The acquisition handbook Edition 6, UK DOD, Through Life Management (TLM UK MoD) DEFSTAN and SMART Acquisition Handbook. 27. Through Life Management, report by the comptroller and auditor general, HC 698 Session , Ministry of Defence, 21 May Total Life Cycle System Management (TLCSM US DoD) - DoD Directive and TQM Manual System Management Marinebedrijf/CPIM 18 september 2006 (in Dutch). A 2.2 Internet Source: a. b. c. d. e. f. g h i. j. k. &doc=2 l. m. n. o. p.

101 Appendix 3. Description of Process Definition Matrix application Process Definition Matrix Introduction For the real implementation of integrated quality control a dynamic treatment is chosen. This is realized by the web application PRIMA (PRocess IMprovement Application). PRIMA is been based on 4x4 Process Definition Matrix where each element has been defined as a function area. In line with the Total Quality Manual [TQM, 2006]) these function areas have been defined and described with their mutual relations. The dynamics, ongoing improvements, are obtained by using self evaluation, by periodically reviewing how the current actor chain really performs with respect to the required process (the baseline, fixed as in the TQM Manual[TQM, 2006]. The organization must deliver the company-specific data. By means of a generic step-by-step plan the process is structured and coordinated and is required for the specific assets (depending on the complexity, financial value, value for the processes in which these act), the maximum availability of material at minimum cost. The PRIMA application aims at the following advantages: to make ongoing improvement operational; to perform the process as a results of self evaluation (the improvement points) to conduct improvements, uniformity, and a clear communication; Transparency to maintain pressure to improve; in-depth analysis of the status of Life cycle Management (Asset Management Control) in its own organization; overview of asset and/or company specific bottlenecks;

102 recommendation concerning optimum improvement approach; links to references from the ISO-9001 standard and the INK model. Generic applicable step-by-step plan On the basis of the i2-pilot book [Stavenuiter, 2004] and the ISO-9001 standard the Process Definition Matrix has been set up, which has lead to the Process Standard (i.e. the description of the function areas with the in and outputs). A quick scan can be carried out using evaluation questions. Together with the required measure of perfection this will give a better perception of the status of the specific asset type and in the whole organization. The improvement points can be determined as well as the working methods (i.e. the procedures and directives from the TQM Manual [TQM, 2004] realize these improvements. Figure A2 Process improvement cycle [NVDO model]

103 The Process Definition Matrix The Process Definition Matrix is divided in 16 function areas (primary elements /areas for special attention/ process functions), which can be analyzed separately, but have a mutual logical consistency. The function areas (business function areas) have been classified to both of the phases from a chain process (chain elements) and the aspects of a single process (process elements), in accordance with character mentioned below. The 4 x 4 matrix appears as a good compromise between an overview on the one hand, and on the other hand a measure to specify the domain s fields concerned. This Process Definition Matrix is intend to offer a better understanding of the outlines from which we can guide improvement of the processes. PROCESS PHASES SPECIFY ORGANIZE PERFORM CONTROL SERVICE LEVEL AGREEMENTS LIFE CYCLE MANAGEMENT TEAM TEAM WORK SYSTEM COST EFFECTIVENESS CONTRACT MANAGEMENT RESOURCE MANAGEMENT TEAM MANAGEMENT MANAGEMENT CONTROL LIFE CYCLE MANAGEMENT MODEL ACTOR DEFINITION MODEL TEAM BUILDING SYSTEM INFORMATION PORTAL LCM SYSTEM PLAN ORGANIZATIONAL PLAN ACTIVITY PLAN CONTROL PLAN AMC DOMAIN ASSET RELATED Figure A3 Process Definition Matrix [TQM Manual, 2006] The description is a process standard for a function area and is formulated such that it applies as a generic and absolute reference area. For each type of the asset, the impressionable Value to Control and the Measure or Perfection to be determined, the concerning process

104 can be compared. This happens on the basis of objects and company information, which must be imported by the person responsible for the asset. This baseline (the reference area) is specifically specified for the organization and the concerning materials/objects/assets. With the Quick scan it can be possible to reflect this reference area and the Life cycle Management approach. From that the coming improvement points are then presented within the process improvement cycle as action/improvement plan. Algorithms for to stipulate Measure or Perfection MOP = Measure or Perfection MOP = f (VtC, RtC) VtC = Value to Control (the financial value of the assets) The higher the financial value of the assets, the more important it is that a good system is used for managing the asset with respect to its life cycle. That means that the Measure of Perfection must be higher. RtC = Risk to Control (the risk = chance x impact) of occurrence of unforeseen events with financial, safety/health and environmental consequences seen from the asset itself and coupled with management of the asset during its life cycle. The higher the risks, the more important it is that there is a high Measure Of Perfection in managing the asset during its life cycle. Checklist of hazards: incorrect, too late, incomplete information; lack of tools; lack of sufficient and correct training; lack of supplies and components; technical properties of the asset (for example innovative material/concepts or correct, robust and proven design);

105 properties of the organization within which the Life Cycle Management (LCM) is carried out during the life span of the asset; properties of the surroundings/the context within which LCM is carried out (for example political aspects). MOP criticality matrix gives insight in the impact of none and/or insufficient system management for a specific type of asset (class of simultaneous assets, system group). THE MOP is therefore specified by type of asset. NB 1: The parameters VtC and RtC each have one of the four values 1, 2, 3 or 4. The criticality matrix has been built up such that each (next) value includes the previous value (for example RtC financial = 2 is RTC financial = 1 + addition, RtC environmental = 3 is RTC environmental = 2 + addition, etc.). NB 2: This criticality matrix must be regarded with respect to the life span of the assets (i.e. the period of which the management can be influenced). Therefore it does not only apply to failures of installations or components in the asset, but also to interferences in processes and their deliverables (for example risk of overdue delivery of the design specification for asset, risk during construction and production of the asset, etc.). The different gradations of criticality have been described in the table A1 below:

106 VtC RtC Value or parameter VtC and RtC part or TCO (Total Cost or ownership) Financial/economical (see note. 1) Impact on CE Safety & Health (see opt. 2) Environmental (see note. 3) >1 M (M= million) Costs unforeseen failures > k /years Number of unforeseen (reasonably) failures less than 1/year. asset is functioning (SE=90-0%). Small injury. Limits (1 or more times/year) No health complaints. costs>k Small local impact (for example leakage of not toxic substances). Number of environment incidents less than 1 per year. Costs>k >M >0M >00M 1 + Several unforeseen failures/year. Asset function limits (SE=75-90%). 1 + Injury with staff absence (1 or more times/year) No health complaints Costs>0k 1 + Environment incidents several times/year. Local larger impact (for example leakage of toxic substances) Costs>0k 2 + Costs unforeseen failures> k /years Regularly returning unforeseen failures. Asset is no longer functioning (SE=50-75%). 2 + Injury with long-term several times/year. Health complaints. To cost > 1m 2 + Regularly returning environment incidents. Regional impact (for example leakage of toxic substances) To cost > 1m 3 + Costs unforeseen failures > 0k /years. Asset is no longer function (SE<50%) 3 + Injury with longterm staff absence, regularly returning. health complaints. Deadly victims Costs>m 3 + Extensive impact of environment incidents (environment calamity) Costs>m Table A1 Value or parameter VtC and RtC [TLM report, 2003] Note. 1: The financial/economic hazards say something about the impact of unforeseen events on the cost effectiveness (CE = SE/LCC). What are the performance killers and cost drivers (PK/CD's)? This concerns loss of income and increasing costs (to remedy failures). The consequence will be cost of damage. Note. 2: Costs concern taking (among other things securities and health) actions to remedy failures. The consequence will be cost of damage.

107 Note. 3: This more or less concerns the eco points of the asset during its lifecycle. Therefore factors such as energy use, toxic substances, dismantling, environmental taxes at calamities (fire, earthquake, flood etc.) are concerned as well. Costs concern taking (environmental) measures to prevent recurrence of failures. The consequence will be cost of damage. To keep it simple the number of values that the MOP can have is restricted to four possible values. These are: MOP = 0% if MOP as f (VtC, RtC) >= 12; MOP= 80% if 9 =< MOP as f (VtC, RtC) <= 11; MOP= 60% if 6 =< MOP as f (VtC, RtC) <= 8; MOP = 0% if MOP as f (VtC, RtC) < 6 => does not apply. Example for a M-frigate: Quick scan MOP = VtC + RtCf + RtCs + RtCe = = 12 => MOP = 0% On the basis of the Process Standard the Quick scan (with interview technique) enables determination of how the processes can be improved and to what extend this contributes to the cost-effectiveness of the assets, concerning their life cycle. At the highest level the result is visualized by indicating the status per area of special attention, with color coding, (green = okay, yellow = moderate, red = problem).

108 SERVICE LEVEL AGREEMENT MATERIAL LOGISTICS ORGANIZATION TEAM WORK SYSTEM COST- EFFECTIVENESS incomplete need courses unclear little consistency CONTRACT MANAGEMENT RESOURCE MANAGEMENT TEAM MANAGEMENT MANAGEMENT CONTROL not filled in sufficient level implicit present in development LCM-MODEL ACTOR DEFINITION MODEL TEAM BUILDING INFORMATION PORTAL sufficient level not filled in incomplete sufficient level SYSTEM PLAN ORGANIZATIONAL PLAN ACTIVITY PLAN CONTROL PLAN overall present sufficient level overall present not present Figure A3 Result Quick scan (as an example) The Quick scan has ten questions per function area in the innovation matrix. The questions have been built up as follows: Strategically: (questions concerning the organization): is the elementary matter present in relation to the Process Standard? Tactically (questions concerning the planning): how (well) is this controlled? is enough knowledge and experience available in this area? Operational (questions concerning the implementation): to which (detail) level are process elements covered? A table has been included in Appendix 7 for total overview of the typification of all questions. With these questions understanding is obtained of what the process is concerning and of how to fulfill the Process Standard (diverted from ISO-9001 standaard. On the basis of the corrected score (i.e. the corrected standard for the specific asset on the basis of the measures of perfection) the action/improvement points (Points of Improvement PoI) are initiated,

109 from rough to fine (for example: 0<score<50% then PoI-a, 50<score<70% then POI-b, different then continue in the same way). The possible action/improvement points have been introduced on the basis of analyses, for instance of the procedures, directives and the standards from the TQM Manual. In the action/improvement point table and per function area, a list of action/improvement points is now rendered (including a link with the procedures, directive, etc. concerned from the TQM Manual). On the basis of this overview management is now possible through action/improvement points, which indicates the time span in which this must be realized and what the ROI is. This is based on expert opinion and/or information from other systems. This serves as a basis for making decisions with respect to prioritizing or for carrying out improvement actions. To determine the methods and/or techniques for the best action/improvement point and how this can be realized, the next step is to judge the situation and possibilities concerned. To make wellconsidered choices the Work Method checklist (WMC), the TQM manual [TQM Manual, 2006] is the guideline and refers of components from ISO-9001 standard [ISO-9001-standaard] and the INK model [ 2006].

110

111 Appendix 4. Relation to previous work Relation to previous work The main focus of the IM pilot project is to obtain and test the control structure within the maintenance facility and to test the control structure between the customer and maintenance facility. It did not answer questions addressing the organizational models that are needed to imbed the LCM concept into the organization. Blanchard (1998) stated that Logistics Management involves; planning, organizing, directing, and controlling of all activities necessary to fulfill the system operational and effectiveness requirements. In this content the dissertation will focus on organizing for Logistics Management. Organizing is defined as the combining of resources in such a manner as to fulfill a need. The ultimate objective, of course, is to achieve the most cost-effective utilization of human, material and monetary resources through the establishment of decision making and communication processes designed to specific objectives. For the Royal Netherlands defense organization the cost effective utilization of resources becomes more relevant because of: major cuts in defense budgets (defense white paper 2000) and; new environmental danger for the higher echelon maintenance of the armed forces that are to be subjected to what is known as competitive service assessment (Defense and strategic agreement 2002). Jones (1995) gives a brief description of an ILS organization. According to Jones the manner in which the disciplines are organized may depend on the acquisition phase of the specific product, the company size, and the type of products supported. He shows the relation between the different ILS tasks. The key to successful

112 program management is a clear definition of responsibilities. The ILS program manager is the person who bears the total responsibility for the ILS program. Jones describes extensively the ILS function, but he does not describe the development and implementation of ILS within an organization. J.Stavenuiter s Cost Effective Management Control of Capital Assets research (Stavenuiter, 2002) focuses on the development of a new Asset Management Control (AMC) approach to improve costeffectiveness of capital assets. In chapter 9 Stavenuiter arranges the findings of different studied methods and techniques from a technical, economical, and organizational/social point of view. He states that from an organizational/social point of view specific asset management related organizational /social methods have not been found, except the Total Productive Maintenance (TPM) method. Total Quality Management (TQM) is defined as an organizational method that seems to dovetail with methods such as ILS and Activity Base Costing (ABC). It is recognized that TQM covers the entire field of asset management and logistics. Although TQM has been described as a complete business management method the more specific methods such as Human Resource Management (HRM), Business Process Reengineering (BPR) and the Balance Score Card (BSC), also cover the whole field of asset management and logistics. The overview of studied methods and techniques shall be the point of departure of this dissertation.

113 Appendix 5. Relation to the Program of the course The AMC approach [Stavenuiter, 2002] Asset Management Control (AMC) is defined as a Life Cycle Management (LCM) approach to manage all the processes (specify, design, produce, maintain and dispose) needed to achieve a capital asset (e.g. a ship, an offshore platform, an aircraft, etc.) capable to meet the operational need in the most effective way. The increasing complexity, cost and size of capital assets, in combination with a shorter economic life time of high-tech system components has stimulated the need for management tools able to analyze the system effectiveness and life cycle costs. The maritime environment has been chosen as the primary research domain. The maritime environment, in particular the Royal Netherlands Navy, is familiar with asset management and material logistics. The maritime environment is an aggressive environment. Maritime systems and their equipment often operate in adverse conditions, suffer considerable wear and tear and have a high depreciation rate. Especially under these conditions cost-effectiveness is hard to attain. A reliable and well-organized AMC system is essential to ensure reliable operations. The design, referred to as LCM-systems, aims to support the management control of the logistics processes throughout the life cycle with respect to the functionality of the technical system. The System Design is divided into six modules: the Structuring Module to set up the system-, process-

114 and information structure; the Analysis Module to indicate the system elements, logistic products, processes, actors and budget needed; the Training Module to provide a skilled Life Cycle Management team; the Program Module to set up Logistic Programs for all different life cycle periods; the Representation Module to achieve insight and understanding of the interdependence between functions, system installations, logistic products and processes, actors and cost; the Control Module to inform and communicate with all involved actors. During the first case study LCM-systems is experienced as a new AMC approach for the RNLN. Based on the case study results it can be concluded that the LCM-model supports AMC to meet the main objectives by providing insight into the system performances for all actors. The system modeler (AMICO) has proved to be applicable to represent the real combat-system to support AMC. The availability of unambiguous procedures and guidelines is essential to bring across the various roles and their relationship of the actors. Reliable system data are the basis for the logistic communication and activities, information management is considered to be a key factor for AMC. For these reasons, an AMC system based approach would appear interesting for the whole maritime sector. It is expected that the principles and results of this research will be also useable in many other sectors where capital assets play an important role. System Analyses Method The Analysis Module is based on the (integrated) Logistics Process

115 Cycle (LPC) composed of eight discerned entities. The elaboration of the system- and logistics process structure is based on the following reasoning. Starting point is the assumed fact that the logistics process structure is directly related to the installation entities (functional packages). The installations are considered to be the physical elements for which a logistic actor (or group of actors) is responsible. For this reason a logistic actor is recognized as a significant element in the logistics process. In this context an actor could be: the design department, the workshop, the specialized contractor and so on. Meeting the required installation performances requires logistic products and services such as: design, production, installation, testing and maintenance. As systems become more complex, installations become more complicated. This means that more logistic control products and services are necessary such as: documentation, instruction, training, configuration management, etc. Providing the required products and services, on schedule, demands well-tuned logistic activities for the whole life cycle of an asset. In this context logistic activities could be: designing, production, maintenance, etc. Performing these activities requires well-equipped logistic actors. To equip these actors various resources are essential, such as: personnel, infrastructure, material, tools, etc. It can therefore be concluded that the logistics process can be structured with following entities: Resources; Actors; Activities; Products and services. A more detailed overview is given in J. Stavenuiter, Effective Management Control of, Capital Assets, The Netherlands, 2002

116 To determine if AMC will be implemented in a cost-effective way, it is necessary to have a realistic insight in the operational and maintenance costs. As stated before, this research focuses on the cost-effectiveness of maintenance. It is generally known that better control can downsize the costs, but control itself is costly too. An optimum should be determined to achieve the most cost-effective way.

117 Appendix 6. LIST OF ABBREVIATIONS AND CONCEPTS A AAW ABC ADG AIM AMC AK AMCS AMICO APB ASP ASUW ASW AT ATW BBS BOS BPR BSC BSMI BW S C C3 C3I CAD CAE CALS CAM CBS CD CDM CDS CE CELSA CfA CLS COEA COQ CPIM CSA CVM CZM Availability Anti Air Warfare Activity Based Costing Activity Diagram Asset Information Management Asset Management Control Availability Killer Asset Management Control System Asset Management Information & Communication Acquisition Policy Board Active Server Page Anti Surface Warfare Anti Submarine Warfare Active Time Aanvraag Tot Werk(Application To Work) Bedrijf Beheers Systeem (Company management system) Bedrijf Ondersteunend Systeem ( Business support system) Business Process Re-engineering/Re-design Balanced Score Card Basis Standaard Materieelindeling (Basic Standard Materiel Classification) Bovenwatersystemen (Above surface systems) Capability Command, Control en Communication communication) Command Control Communication & Information Computer Aided Design Computer Aided Engineering Continues Acquisition and Life-cycle Support Computer Aided Manufacturing Cost Breakdown Structure Cost Driver Cost Data Module Chef Defensie Staf (Defense, Chef of Staff) Cost Effectiveness Cost Estimation for Logistics Support Analysis Contracting for Availability Contract Logistic Support Cost & Operational Effectiveness Analysis Cost Of Quality Centrale Planning & Instandhoudingmanagement (central planning & maintenance management) Customer Supplier Agreements Concept Variation Model Commandant Zeemacht (Commander of Naval Forces)

118 CZSK DARS DBI DCAA DCMA DDSEW DEF-STAN DFE DLM DLO DMG DMIP DMKM DMO DMS DoD DPA DQI DSMC DT DTC ECC ECDM ECP EDI EFQM ELFF EM EMS EMW EP ERP FDG FE FMCC FMECA FOM FST FTA GAO GES GWA H.R.H. HNLMS HOQ HRM Commando Zee Strijd Krachten (Commando Naval Forces) Data Attribute Rating System Database Interface Defence Contract Audit Agency Defence Contract Management Agency Directeur Divisie SEWACO (Director Of SEWACO Division) Defence Standard Design For Environment Depot Level Maintenance Defense Logistic Organisation Data Management Groep Defensie Materieel Instandhoudingproces (Defense materiel maintenance process) Directeur Materieel Koninklijke Marine (Director Materiel KNLNRNLN) Defensie Materieel Organisatie (Defense Materiel Organization) Document Management System Department of Defense Defense Procurement Agency Data Quality Indicator Defense Systems Management College Downtime Design To Cost Equipment Capability Customer Environmentally Conscious Design & Manufacturing Engineering Change Proposal Electronic Document Interchange European Foundation for Quality Management Expected Life Failure Frequency Environmental Management Environmental Management System Electromagnetic Warfare Exploitatieplan (Operating plan) Enterprise Resource Planning Function Diagram Function Effectiveness Failure Mode/Cause Combinations Failure Mode Effectiveness & Criticality Analysis Figure Of Merit Functionele Systeem test (functional system test) Failure Tree Analysis Government Accountability Office Groep Escorte Schepen (escort ship group) Geleide Wapen Analyse (guided weapon analysis) Her Royal Highness Her Netherlands Majesty House Of Quality Human Resource Management

119 HTML Hypertext Markup Language IM Integrale Instandhouding (integrated maintenance) ICE Integrated Cost Estimation ICEA Integrated Cost & (operational) Effectiveness Analysis ICT Information & Communication Technology IDEF0 Integrated Definition for Function modeling (type 0) IDG Installation Diagram ID-nr. Identification number IF Impact Factor IHC Instandhoudingconcept (maintenance concept) ILM Intermediate Level Maintenance ILS Integrated Logistics Support IMG Instalation Managementr IMG Installatie Management Groep (installation management Group) INCOSE International Council on Systems Engineering INK Instituut Nederlandse Kwaliteit (Dutch Quality Institute) IP Installation Performance IDA Integrated Project Team IPPD Integrated Product & Process Modeler IR Infra Red IS Information System IWSM Integraal Wapen Systeem Management (integrated weapon system management) KAM Kwaliteit, Arbo & Milieu (quality, labor law & environment) KBG Klankbordgroep (sounding board group) KISS Keep It Short & Simple KM Koninklijke Marine (Royal Netherlands Navy) KPI Key Performance Indicators LCA Life Cycle Analysis/Assessment LCC Life Cycle Cost LCCA Life Cycle Cost Analysis LCCB Life Cycle Cost Budgeting LCCM Life Cycle Cost Management LCC-OPT Life Cycle Cost & Optimization LCF Lucht Commando Fregat(Air command frigate) LCI Life Cycle Indicator LCM Life Cycle Management LO Learning Organization LORA Level Of Repair Analysis LP Logistics Program LPC Logistics Process Cycle LPD Landing Platform Dock LPM Logistics Process Module LRT Logistic Response Time LSA Logistics Support Analysis LSAR Logistics Support Analysis Record MADS Maintenance Analysis Data system

120 MAS MATRACS MATLOG-IV MB MBO MBS MBV MCS MD MEA MEAR MF MIL-HDBK MIL-STD MIS MLA MLM MMI MoD MOD MOP MRP MT MTA MTBF NATO NDIA NPDM NPV OAM OEE OLM ORS OT OWS OZB OZD PBSC PCB PCT PDM PIM PLF POS Modificatie Administratie Systeem (modification administration system) Modificatie Administratie Systeem (modification administration system) Materieellogistieke Informatievoorziening (materiel logistic information services) Marinebedrijf Management By Objectives Materieel Beheer Systeem (material management system) Mijnen Bestrijdingsvaartuig (mine countermeasure vessel) Materieel Configuratie Systeem (materiel configuration system (network application) Mijnendienst (minesweeping service) Maintenance Engineering Analysis Maintenance Engineering Analysis Record Multi Purpose Fregat (Multi-purpose frigate) Military Handbook Military Standard Management Information System Maintenance Level Analysis Mid Life Modernization Man Machine Interface Ministry of Defense Modification Measure Of Prefection Material Resource Planning Mission Time Maintenance Task Analysis Mean Time Between Failures North Atlantic Treaty Organization National Defense Industry Association Nato Product Data Model Net Present Value Operation Aggregation Model Overall Equipment Effectiveness Operational Level Maintenance Onderhoud Registratie Systeem (maintenance registration system) Organizational Transformation Onderwatersystemen (subsurface systems) Onderzeeboten (submarines) Onderzeedienst (submarine service) Performance Based Service Contract Printed Circuit Board Performance Cost Time Product Data Management Product Information Management Platform (system) Periodiek Onderhoud Systeem (periodic )maintenance system)

121 PP PUP QAT QF QFD R RCM PRIMA RGG RAMT(S) RNLN ROC RTC SA SATCOM SCM SDM SE SEM SEMP SEP SEW SEWACO SF SHOPSY SLA SMART SMG SOM SOW SPARC SSE&M ST&E STORM TBK TD TDC TDM TDP TOF TLM TLMP TLMSM TOR TPM TQM Production Performance Project Uitvoeringsplan (project implementation plan) Quality Action Team Quality Factor Quality Function Deployment Reliability Reliability Centered Maintenance PRocess IMprovement Application Regiegroep (direction committee) Reliability, Availability, Maintainability & Safety Royal Netherlands Navy Regionaal Opleidings Centrum Risk To Control Support Analysis Satellite Communication Supply Chain Management System Development Methodology System Effectiveness System Effectiveness Module System Engineering Management Plan System Enginering Plan SEWACO (system) Sensor, Weapons & Command (system) Service Factor Ship Operation System Service Level Agreement Specific, Measurable, Achievable, Relevant, Time bound Systeem Management Groep (system management Group) Support Options Matrix Statement Of Work System for Production & Resources Consumption Systems Support Engineering & Management System Test & Evaluation Support application for Technical Overview, Reliability and Maintainability Thema bij eenkomst (theme meeting) Technische Dienst (technical department for platform/ship system) Technical Data Center Technical Document Management Technical Data Package Technische Onderhoud Functie (technical maintenance function) Through Life Management Through Life Management Plan Through Life Management System Management Terms Of Reference Total Productive Maintenance Total Quality Management

122 UK UKC UT VAS VTC V&O V&O VMB WD Y-P United Kingdom Uniforme Kosten Code (uniform costs.) Uptime Voorraad Administratie Systeem (inventory administration system) Value To Control Vaar & Onderhoud (navigation & maintenance) Vorming & Opleiding (training & education) Varende Materieelbeproeving (Sea Acceptance Trials) Wapentechnische Dienst (WE with regard to SEWACO systeem) Year-Period

123 Appendix 7. Questionnaire for PRIMA Questions 1. System plan 1 Is a general specification available of the materiel concerned: presently, entirely, particularly and well accessible? 2 Are users specifications/plans for example; required production capacity, task, missions, security, etc.; well specified, and for all actors accessible? 3 Is a risk analysis available, which is based on reliability and availability requirements and cost estimates, per function/installation? 4 Are the main points clear and property defined regarding the complete maintenance process? 5 In this area, are sufficient competences present/available? 6 Has a proper Exploitation Plan been established or is a similar document present? 7 Has the responsibility to establish or maintain the System Plan, been covered/recognized in the organization? 8 Is the System Plan being properly used within the organization? 9 Is the System Plan properly managed, maintained and adjusted? Is the System Plan frequently used as a reference? 2, Life cycle management 1 Has a Life Cycle Analysis been performed or is it available for any asset? 2 Have the cost effectiveness and the performance indicators been defined? 3 Is a structured overview or activities per Life Cycle phase available? 4 Is a specification of maintenance activities or product/actor combinations in terms of product, time (for example number of man-hours) and money (tariffs and costs) available? 5 Are the actors (employees carrying out the work) identified and specified (required qualifications)? 6 Are (technical) contract conditions (terms) available? 7 Is system engineering (for example function model and physical product model or the assets) convened/recognized in the organization? 8 Is an overview of the required competences (knowledge and skills) available? 9 In this area, are sufficient competences present/available? Have requirements/standards been established regarding verification and validation (system tests & evaluation)?

124 3. Contract management 1 Has a Need Analysis for product and services been carried out? 2 For cost effectiveness and performance indicators, have suppliers (prime actors) been defined? 3 Is a structured overview of all contract types for services and products available? 4 Is a specification of the products and services available per supplier? 5 Has the supervisor of the supplier been identified and educated? 6 Have (technical) evaluation criteria and cycles been defined? 7 Is Contract Management covered/recognized in the organization? 8 Has a Performance Based Service Contract (PBSC) been concluded/employed with the suppliers? 9 In the field of Contract Management, are sufficient (own) competences present/available? Have requirements/standards been established, with respect to checking and validation of the real situation, with the agreements made in the contract? 4. Service Level Agreements 1 Are specifications regarding the functionality to provide performance capacity available (costs, times, capability, availability, reliability)? 2 Is it evident that this results in a cost effective approach? 3 Is an integrated cost overview (Total Cost of Ownership) available? 4 Is a user/maintenance planning available? 5 Are guarantees available? 6 Regarding maintenance, are qualities and service requirements available? 7 Have requirements and conditions, regarding the use of people, resources and material (for example components) tasks been drawn up? 8 Is the perception, regarding pricings and lead times (benchmarking) sufficient? 9 Is the responsibility for set up, managing and maintaining of requirements and agreements in the SLA well covered in the organization? Are the requirements and appointments frequently being verified and validated? 5. Organizational plan 1 Are specifications regarding the settled competences available? 2 Is it evident that this results in a cost effective approach? 3 Has a clear customer supplier relation been settled (concerning make/buy decisions both external and internal customer supplier relations)? 4 Is a current user/maintenance planning available? 5 Are job descriptions available and accepted? 6 Are qualities and service requirements available regarding maintenance? 7 Is the perception regarding pricings and lead times (benchmarking) sufficient?

125 8 Are the aim and the function of the organization parts covered in the organization? 9 Are the principles/main points, concerning the structure and culture of the organization settled and working entirely as agreed upon? Are the requirements frequently verified or validated? 6. Actor Definition model 1 Are the hierarchy and operational and functional structure communicated to customers and employees? 2 Is it evident that this results in a cost effective approach? 3 Have the responsibilities and competences been settled? 4 Is a current capacity planning available? 5 Has an evaluation/performance interview been planned with actors, are these carried out and does this lead to improvement? 6 Are the requirements concerning the expected functioning clear for every actor/employee? 7 Is sufficient capacity (qualitatively and quantitative) available for the actors to catch special situations (long term sick leave, jobs with a destiny or priorities, etc.)? 8 Are the relations between the competences (tasks and job descriptions) and the operational need of the assets (production capacity, missions, security, etc.) well-known? 9 Is the training plan leading? Are the requirements, appointed to the organization, for the environment frequently verified and validated? 7. Resource management 1 Is the capacity (numbers and knowledge) of own staff or third parties staff and subcontractors known? 2 Have attainable specifications (qualities, quantities and delivery periods) been included in all contracts? 3 Are the internal and external contacts known? 4 Is a capacity planning (required versus available) available? 5 Are the general training requirements, work permission procedures etc., regularly checked (in advance)? 6 Is an introduction program for new actors (own employees, employees of third parties) available? 7 Is there sufficient capacity to catch special situations (long-term sock leave, jobs with a destiny or priorities)? 8 Is the training plan of the own organization and the contractors available? 9 Is there a perception of the sick leave, respectively retirement of senior employees (natural cause) and is an action plan available to reduce sick leave, or to solve the retirement of senior employees? Are performance and assessment interviews with employees and subcontractors carried out and which actions resulting from thes e interviews are planned and verified? 8. Material Logistics Organization 1 Is the capacity need (knowledge) known for the coming year? 2 Are the team budgets known? 3 Is a regular discussion of progress and information-exchange between the teams being conducted?

126 4 Are the team objectives clear to the team members and do they believe in these objectives? 5 Is the role/task assignment within the teams clear to the team members in relation with the team objectives? 6 Do the team members call each other to account on reaching the team objective and their role in this? 7 Are the mutual competences of the team members clear for everyone and do they use these? 8 Do the teams have ineffective, missing competences? 9 Has a training plan for structurally missing competences been drawn up and is this carried out? Are the team objectives and the requirements to the team members frequently being evaluated? 9. Activity Plan 1 Is a description of the processes (who, what, how, when) available? 2 Are the user plans like required production capacity, tasks, missions, security, etc, well specified and entirely accessible for all actors? 3 Have the actors been indicated and do they know the working method they have to use and the required techniques? 4 Is a package of measurements for security, environment, liability, etc. available? 5 Is the Activity Plan really used (established, managed, maintained) within the organization? 6 Are the necessary competences known, both qualitatively and quantitatively? 7 Has the manner of Configuration Control been described with regard to the processes (change in working methods)? 8 Has Asset Management Control been arranged, particularly the information flow regarding Cost Performance Indicates (CPI's)? 9 Is feedback being provided concerning ongoing improvement? Is the Activity Plan anchored/embedded in the organization (training/workshops, etc.), so that it becomes something durable?. Team Building 1 Is a process design (Activity Plan) available (has it been developed)? 2 Has the process design (Activity Plan) been reviewed with respect to the practice; it is working in practice according to the process design? 3 Has a clear specification of the teams been made, their aims/tasks and their role in the processes? 4 Has a clear specification of the actors (actor definition model) and their roles in the teams/processes been made? 5 For the teams, have communications and decision-making structure been described; do they work according to this structure? 6 Has the process design been set up and certified according to (inter) national models (for example TQM, EFQM, INK) and/or (for example ISO-9001)? 7 Has the organization (both the team members themselves and other actors and possibly outside the organization) been informed about the teams (aim, composition, aimed at results, responsibilities and powers)? 8 Are the teams formed formally covered in the organization? Do the teams have formal responsibilities and powers? 9 Is the process of Team Building managed/maintained and regularly (annually) being adjusted? Has it been shown that teams result in a cost effective treatment of the organization?

127 11. Team Management 1 Is it working according to the workshop treatment? 2 Are employee/actor evaluations (regularly) being carried out, have improvement actions been developed and have these been communicated? 3 Is this management resulting in a cost effective process? 4 Is it perceptible that evaluations (both of our own function and from the organization parts (teams, departments, etc.)) are carried out and that they are effective and always improved? 5 To carry out activities on a SMART manner, have these been specified? 6 Are evaluations frequently being carried out on the aspects of learning, management and professional? (Individual /team) improvement? 7 Is an improvement plan available on the basis of evaluations and are these improvements actually being carried out? 8 Does the process design (see Activity Plan and Actor Definition Model) apply as a standard and/or reference area or a feedback? 9 Is the team design (see Team Building) considered as a standard and/or reference or a feedback? Does the management pay attention to improvements of the process design, asset design and organization/team design? 12. Team Work 1 Are the improvement plans, the team development plans for the teams actually being carried out effectively? 2 Are the actors acquainted with the process chain and is their role clear, both in the team (s) as in the team process? 3 Are the actors playing the role which is expected of them? 4 Is the team cooperating well (effectively and efficiently)? 5 Do (harmonization) problems get solved adequately? 6 Is management information (CPI's) available? 7 Is an overview of problems during the implementation of work available? 8 Are current improvement plans/team development plans available? 9 Are evaluations being carried out? Are the results of the teamwork regularly verified and validated? 13. Control Plan 1 Have reports (formats, frequencies, distribution) been defined and is the cost effective commitment of the assets under control? 2 Is a periodical report available concerning the cost effective commitment of assets? 3 Is an Action Plan available which is monitoring the cost effective improvement commitment of assets? 4 Has an inspection plan been developed or a situation dependent maintenance plan? 5 Is the corrective and preventive maintenance implementation being monitored? 6 Has a jamming report with analyses been drawn up?

128 7 Have costs and turnover analyses per asset or parts of it (function, functional package) been drawn up? 8 Are the requirements of the expected functioning of the assets being shared and are these clear? 9 Are the requirements and main points and conditions which are put in the Control Plan for Life Cycle Management (regularly) being evaluated, verified and validated? Have the performance specific appointments been made, has the implementation hereof been monitored and the appointments evaluated and if necessary adjusted? 14. System Information Portal 1 Is asset information structurally available on a web portal? 2 Do all relevant actors have access to this asset information? 3 Is the information concerning the cost drivers and the performance killers available? 4 Is this information giving insight in acquired characteristics, improvement actions and who is responsible for this? 5 Is the information giving insight in the developments of the maintenance costs and performances (capability, availability, reliability) of the assets over the past 5 years? 6 Is contractual information (SLA and/or PBSC's) transparent? 7 Is the information of system tests (functional tests) that results in the capability figures of assets transparent? 8 Does the organization (for example LCM-team) use the web portal as a communication platform which is based on priority and decision-making propositions, referring to the implementation of activities? 9 Is the web portal providing information elucidating that Life Cycle Management results in cost effective results? Have requirements been developed which cause the Systems Information Portal to be (regularly) verified or validated? 15. Management Control 1 Has a clear choice been made for carrying out the work in-house or have it outsourced? 2 Is a system available for drawing up and evaluating budgets by life cycle? 3 Is a report concerning the usage of spare parts available? 4 Is a regular customer satisfaction research being performed, improvement actions defined and are these carried out? 5 Is benchmarking possible with maintenance costs with respect to operational costs both within a group of equal assets or unequal types? 6 Is a report concerning the performance or the infrastructure available? 7 Is a report concerning assets and the installation performance available? 8 Is a report concerning assets and the installation Life Cycle Costs available? 9 Is it perceptible that Life Cycle Management is cost effective? Are the requirements for Management Control (regularly) evaluated, verified and validated?

129 16. System Cost Effectiveness 1 Are the performances of assets (running hours, operational environment, jamming, etc.) and implementation of maintenance tasks structured by the users/operators and is feedback given to the maintenance organization? 2 Are the requirements of products and services known? 3 Is a jamming report with analysis available? 4 Is a cost analysis by product type with respect to recent development analyses available? 5 Has a clear relation been established between costs and benefits (performances of the assets)? 6 Is management information (CPI's) available? 7 Is an evaluation regarding usefulness, quality and costs of the maintenance and supplying available? 8 Did bad experiences get a feedback and have actions been undertaken? 9 Is the impact of modifications in use intensity analyzed and if necessary processed in the appointments concerning cost effectiveness commitment of the assets? Is improvement management (ongoing improvement of the system cost effectiveness) considered?

130

131 Appendix 8. Results of the questionnaire for PRIMA Questionnai re 1. System Plan 0-59 % % 80-0 % Result s 0-59 % % 80-0 % Result s 0-59 % % 80-0 % Result s 0-59 % % 80-0 % Result s 0-59 % % 80-0 % Result s Is a general specification available of the materiel concerned: presently, entirely, particularly and well accessible? Are users specifications/plans for example; required production capacity, task, missions, security, etc.; well specified, and for all actors accessible? Is a risk analysis available, which is based on reliability and availability requirements and cost estimates, by 0-59 % % 80-0 % Result s 0-59 % % 80-0 % Result s 0-59 % % 80-0 % Result s 0-59 % % 80-0 % Result s 0-59 % % 80-0 % Result s Averag e function/installation? Are the main points clear and property defined regarding the complete maintenance process? In this area, are sufficient competences present/available? Has a proper Exploitation Plan been established or is a similar document present? Has the responsibility to establish or maintain the System Plan, been covered/recognized in the organization? Is the System Plan being properly used within the organization? Is the System Plan properly managed, maintained and adjusted? Is the System Plan frequently used as a reference? , Life Cycle Management Has a Life Cycle Analysis been performed or is it available for any asset? Have the cost effectiveness and the performance indicators been

132 defined? Is a structured overview or activities per Life Cycle phase available? Is a specification of maintenance activities or product/actor combinations in terms of product, time (for example number of man-hours) and money (tariffs and costs) available? Are the actors (employees carrying out the work) identified and specified (required qualifications)? Are (technical) contract conditions (terms) available? Is system engineering (for example function model and physical product model or the assets) convened/recognized in the organization? Is an overview of the required competences (knowledge and skills) available? In this area, are sufficient competences present/available? Have requirements/standar ds been established regarding verification and validation (system tests & evaluation)? 90 90, Contract Management Has a Need Analysis for product and services been carried out? For cost effectiveness and performance indicators, have suppliers (prime actors) been defined? Is a structured overview of all contract types for services and products available? Is a specification of the products and services available per supplier? Has the supervisor of the supplier been identified and educated? Have (technical) evaluation criteria and cycles been defined? Is Contract Management covered/recognized in the organization?

133 Has a Performance Based Service Contract (PBSC) been concluded/employed with the suppliers? In the field of Contract Management, are sufficient (own) competences present/available? Have requirements/standar ds been established, with respect to checking and validation of the real situation, with the agreements made in the contract? Service Level Agreement Are specifications regarding the functionality to provide performance capacity available (costs, times, capability, availability, reliability)? Is it evident that this results in a cost effective approach? Is an integrated cost overview (Total Cost of Ownership) available? Is a user/maintenance planning available? Are guarantees available? Regarding maintenance, are qualities and services requirements 6 available? Have requirements and conditions, regarding the use of people, resources and material (for example components) tasks 7 been drawn up? Is the perception, regarding pricings and lead times (benchmarking) 8 sufficient? Is the responsibility for set up, managing and maintaining of requirements and agreements in the SLA well covered in 9 the organization? Are the requirements and appointments frequently being verified and validated? Organizational Plan 1 Are specifications regarding the settled competences

134 available? Is it evident that this results in a cost effective approach? Has a clear customer supplier relation been settled (concerning make/buy decisions both external and internal customer supplier relations)? Is a current user/maintenance planning available? Are job descriptions available and accepted? Regarding maintenance, are qualities and service requirements available? Is the perception regarding pricings and lead times (benchmarking) sufficient? Are the aim and the function of the organization parts covered in the organization? Are the principles/main points, concerning the structure and culture of the organization settled and working entirely as agreed upon? Are the requirements frequently verified or validated? Actor Definition Model Are the hierarchy and operational and functional structure communicated to customers and employees? Is it evident that this results in a cost effective approach? Have the responsibilities and competences been settled? Is a current capacity planning available? Has an evaluation/performan ce interview been planned with actors, is this being carried out and does this lead to improvement? Are the requirements concerning the expected functioning clear for every actor/employee? Is sufficient capacity (qualitatively and quantitative) available for the actors to catch special situations (long term sick leave, jobs with a destiny or

135 priorities, etc.)? Are the relations between the competences (tasks and job descriptions) and the operational need of the assets (production capacity, missions, security, etc.) well-known? Is the training plan leading? Are the requirements, appointed to the organization, for the environment frequently verified and validated? Resource Management 0 Is the capacity (numbers and knowledge) of own staff or third parties staff and subcontractors known? Have attainable specifications (qualities, quantities and delivery periods) been included in all contracts? Are the internal and external contacts known? Is a capacity planning (required versus available) available? Are the general training requirements, work permission procedures etc., regularly checked (in advance)? Is an introduction program for new actors (own employees, employees of third parties) available? Is there sufficient capacity to catch special situations (long-term sock leave, jobs with a destiny or priorities)? Is the training plan of the own organization and the contractors available? Is there a perception of the sick leave, respectively retirement of senior employees (natural cause) and is an action plan available to reduce sick leave, or to solve the retirement of senior employees? Are performance and assessment interviews with employees and subcontractors carried out and which actions resulting from these interviews are

136 planned and verified? Material Logistics Organization Is the capacity need (knowledge) known for the coming year? Are the team budgets known? Is a regular discussion of progress and information-exchange between the teams being conducted? Are the team objectives clear to the team members and do they believe in these objectives? Is the role/task assignment within the teams clear to the team members in relation with the team objectives? Do the team members call each other to account on reaching the team objective and their role in this? Are the mutual competences of the team members clear for everyone and do they use these? Do the teams have ineffective, missing competences? Has a training plan for structurally missing competences been drawn up and is this carried out? Are the team objectives and the requirements to the team members frequently being evaluated? Activity Plan 0 Is a description of the processes (who, what, how, when) available? Are the user plans like required production capacity, tasks, missions, security, etc, well specified and entirely accessible for all actors? Have the actors been indicated and do they know the working method they have to use and the required techniques? Is a package of measurements for security, environment, liability, etc. available? Is the Activity Plan really used (established,

137 managed, maintained) within the organization? Are the necessary competences known, both qualitatively and quantitatively? Has the manner of Configuration Control been described with regard to the processes (change in working methods)? Has Asset Management Control been arranged, particularly the information flow regarding Cost Performance Indicates (CPI's)? Is feedback being provided concerning ongoing improvement? Is the Activity Plan anchored/embedded in the organization (training/workshops, etc.), so that it becomes something durable? Team Building Is a process design (Activity Plan) available (has it been developed)? Has the process design (Activity Plan) been reviewed with respect to the practice; it is working in practice according to the process design? Has a clear specification of the teams been made, their aims/tasks and their role in the processes? Has a clear specification of the actors (actor definition model) and their roles in the teams/processes been made? For the teams, have communications and decision-making structure been described; do they work according to this structure? Has the process design been set up and certified according to (inter) national models (for example TQM, EFQM, INK) and/or (for example ISO- 9001)? Has the organization (both the team members themselves and other actors and possibly outside the organization) been informed about the teams (aim,

138 composition, aimed at results, responsibilities and powers)? Are the teams formed formally covered in the organization? Do the teams have formal responsibilities and powers? Is the process of Team Building managed/maintained and regularly (annually) being adjusted? Has it been shown that teams result in a cost effective treatment of the organization? x Team Management Is it working according to the workshop treatment? Are employee/actor evaluations (regularly) being carried out, have improvement actions been developed and have these been communicated? Is this management resulting in a cost effective process? x Is it perceptible that evaluations (both of our own function and from the organization parts (teams, departments, etc.)) are carried out and that they are effective and always improved? To carry out activities on a SMART manner, have these been specified? Are evaluations frequently being carried out on the aspects of learning, management and professional? (Individual /team) improvement? Is an improvement plan available on the basis of evaluations and are these improvements actually being carried out? x Does the process design (see Activity Plan and Actor Definition Model) apply as a standard and/or reference area or a feedback? Is the team design (see Team Building) considered as a standard and/or reference or a feedback? Does the management pay attention to

139 improvements of the process design, asset design and organization/team design? 12. Team Work Are the improvement plans, the team development plans for the teams actually being carried out effectively? Are the actors acquainted with the process chain and is their role clear, both in the team (s) as in the team process? Are the actors playing the role which is expected of them? Is the team cooperating well (effectively and efficiently)? Do (harmonization) problems get solved adequately? Is management information (CPI's) available? Is an overview of sticking points by the implementation of work available? Are current improvement plans/team development plans available? Are evaluations being carried out? Are the results of the teamwork regularly verified and validated? Control Plan Have reports (formats, frequencies, distribution) been defined and is the cost effective commitment of the assets under control? Is a periodical report available concerning the cost effective commitment of assets? Is an Action Plan available which is monitoring the cost effective improvement commitment of assets? Has an inspection plan been developed or a situation dependent maintenance plan? Is the corrective and preventive maintenance implementation being monitored?

140 Is a jamming report with analysis available? Have costs and turnover analyses per asset or parts of it (function, functional package) been drawn up? Are the requirements of the expected functioning of the assets being shared and are these clear? Are the requirements and main points and conditions which are put in the Control Plan for Life Cycle Management (regularly) evaluated, verified and validated? Have the performance specific appointments been made, has the implementation hereof been monitored and the appointments evaluated and if necessary adjusted? System Information Portal Is asset information structurally available on a web portal? Do all relevant actors have access to this asset information? Is the information concerning the cost drivers and the performance killers available? Is this information giving insight in acquired characteristics, improvement actions and who is 4 responsible for this? Is the information giving insight in the developments of the maintenance costs and performances (capability, availability, reliability) of the assets over the 5 past 5 years? Is contractual information (SLA and/or PBSC's) 6 transparent? Is the information of system tests (functional tests) that results in the capability figures of 7 assets transparent? Does the organization (for example LCMteam) use the web portal as a communication platform which is based on priority and decision-making 8 propositions, referring

141 to the implementation of activities? Is the web portal providing information elucidating that Life Cycle Management results in cost effective results? Have requirements been developed which cause the Systems Information Portal to be (regularly) verified or validated? Management Control 0 Has a clear choice been made for carrying out the work in-house or have it outsourced? Is a system available for drawing up and evaluating budgets by life cycle? Is a report concerning the usage of spare parts available? Is a regular customer satisfaction research being performed, improvement actions defined and are these carried out? Is benchmarking possible with maintenance costs with respect to operational costs both within a group of equal assets or unequal types? Is a report concerning the performance or the infrastructure available? Is a report concerning asset- and the installation performance available? Is a report concerning assetand the installation Life Cycle Costs available? Is it perceptible that Life Cycle Management is cost effective? Are the requirements for Management Control (regularly) evaluated, verified and validated? System Cost Effectiveness 0 Are the performances of assets (running hours, operational environment, jamming, etc.) and implementation of maintenance tasks structured by the users/operators and

142 is feedback given to the maintenance organization? Are the requirements of products and services known? Is a jamming report with analysis available? Is a cost analysis by product type with respect to recent development analyses available? Has a clear relation been established between costs and benefits (performances of the assets)? Is management information (CPI's) is available? Is an evaluation regarding usefulness, quality and costs of the maintenance and supply available? Did bad experiences get a feedback and have actions been undertaken? Is the impact of modifications in use intensity analyzed and if necessary processed in the appointments concerning cost effectiveness commitment of the assets? Is improvement management (ongoing improvement of the system cost effectiveness) considered?

143 Appendix 9.