How strategic sourcing saved
a cool $18M
In a nutshell

Costly legacy commercial contracts were burning a big hole in the MCPSPO’s
wallet. They called us to streamline and optimise their model. Through
facilitated workshops, in-depth data analysis, and contemporary contracting
mechanisms, we developed a new contract model, delivering greater
equipment availability and almost $18M in savings.

“Our support services
injected new thinking.”
Who we worked with

Maritime Cross Platform Systems
Program Office (MCPSPO) is
transforming. From an inventory
procurement organisation, to a
Systems Program Office.

Beyond prioritising the delivery of maritime products, this engineering team
was introduced to improve on the previous construct which hindered
cross-function engagement. Essentially, functional ‘silo’ operations were
leading to obsolescence issues.

What was the challenge?
Defence looked into a number of
disparate, inefficient and potentially
costly commercial contracts.

MCPSPO was tasked with transforming these arrangements into strategic,
performance-based contracts. These contracts delivered all elements of
in-service support (including maintenance, configuration and logistics
management).

MCPSPO didn’t have the in-house capability or capacity to explore innovative
contracting models. Additionally, the original equipment manufacturers (OEMs)
and agency suppliers of the cross-platform equipment weren’t familiar with
contemporary strategic sourcing approaches.

What did we do?
Helped with strategic sourcing. We
were brought in by MCPSPO’s team to
provide specialist procurement and
contracting services.

We were tasked with delivering more capable performance-based contracts
to meet MCPSPO’s sustainment needs. This included developing or
optimising contracts for:

  • LM2500 Gas Turbine Systems
  • MTU Diesel Systems
  • Mini-Typhoon, Typhoon and Toplite Systems
  • Infrared Search and Track System

Collaborating with Defence and Industry stakeholders (including Platform
SPOs, OEMs and in-service support providers), we facilitated workshops to
identify MCPSPO’s intricate requirements. These enabled us to identify the
key measures of success (such as improving capability availability and
reliability). The resulting contract model would significantly reduce
transactional requirements for the Commonwealth, while still delivering the
required capability.

With these success measures informing our approach, we analysed historical
cost and system availability. We benchmarked these metrics across the
commercial Maritime industry and overlaid them with Navy’s operational
profiles. We built a detailed cost forecast to test the market and identify
potential support partners.

Our support services injected new thinking. This was seen in the MTU Diesel
Systems, which extended across Navy and Army capability at a fixed annual
fee – a first of its kind for Defence. Our solutions also leveraged scale. We
used the Joint Logistics Command’s (JLC) maintenance services contract for
the maintenance and logistics support of the RAN’s M242 cannons.

During our engagement we were the Commonwealth’s lead negotiator in
setting up In-Service Support Contracts. Our analysis of proposals and
negotiation ability saved the Commonwealth millions of dollars under these
performance-based contracts.

Through astute negotiations and understanding Industry’s appetite to
become holistic support contractors to cross-platform products, the contracts
were executed and phased-in.

The results
Collaborating with our commercial
team, the new contract models
supported MCPSPO’s need for greater
efficiency. They delivered:
  • Reduced transactional activity, allowing APS teams to focus on governance
    and assurance
  • Improved risk management by ensuring that the party most empowered to
    manage each risk is required to do so under the contract
  • Improved cost transparency and certainty for budgeting through recurring
    services model contracts with OEM in-country agents
  • Cost savings (direct and indirect) by reducing historical sustainment costs
    and removing the high-transactional burden of CoA SPO personnel
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