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<Background and Purpose>

Following the increase use of Performance-Based Logistics(PBL), which is aimed at efficient sustainment of weapon systems in terms of Total Life Cycle System Management, there is an urgent need to establish a guideline for the cost estimation of PBL projects.

   ◎ Currently, there are no specific guidelines for the cost estimation of PBL projects.

       - Each PBL project has been using different cost estimation methods without a unified criteria.

       - As a result, PBL projects have faced various problems such as conflicts among relevant parties, frequent project delays, as well as continued controversies over the costs. 

       - In addition, there could be potential controversies surrounding the fairness of cost estimation across different projects, possible loss of opportunities for cost reduction, concerns on redundant investment, and impediment to effective cost negotiations.

<Research Results> 

This research proposes a standardized criteria to cost estimation of PBL projects.

   ◎ Basic principles in standardizing PBL cost estimation

       - Associate cost estimation with "availability of weapon systems", the ultimate goal of PBL.

       - Determine the costs based on the contractors' "substantial responsibilities" as decided by the PBL contract.

       - Focus on "performance", a key objective of PBL, rather than on "individual task" conducted by each contractor.

   ◎ Basic principles in standardizing PBL cost estimation

       - Proposed a standard cost structure consisting of: parts purchase and maintenance, inventory investment/inventory investment compensation, support facility/equipment, technical assistance, project management, logistics, and computer transactional system operation.

       - Presented a cost estimation criteria with reference to the cases of existing PBL projects, the US PBL contracts, as well as to the standards employed for other public, private, and national defense undertakings.