Attachment_0023_-_DMSMS_Guidebook.pdf

DISTRIBUTION STATEMENT A: Approved for public release by DOPSR on 12/01/2015;

SR Case # 16-S-0314 applies. Distribution is unlimited.

DISTRIBUTION STATEMENT A: Approved for public release by DOPSR on 12/01/2015;

SR Case # 16-S-0314 applies. Distribution is unlimited.

SD-22 – Diminishing Manufacturing Sources and Material Shortages (DMSMS)

A Guidebook of Best Practices for Implementing a Robust DMSMS Management Program

Defense Standardization Program Office

8725 John J. Kingman Road, Stop 5100

Fort Belvoir, VA 22060-6220

703-767-6888 https://www.dsp.dla.mil https://www.dsp.dla.mil/

SD-22 – January 2016

Message from the Director

Because Department of Defense (DoD) system life cycles are longer than technology life cycles, Diminishing Manufacturing Sources and Material Shortages (DMSMS) issues are inevitable. DoD cannot afford to be reactive in this area—reactivity may lead to a combination of schedule delays, readiness degradations, and higher cost.

Leadership attention must be brought to bear on this problem and adequate resources must be provided to minimize its impact. The return on investment from these resources can be substantial because resources devoted to proactivity lengthen the window of opportunity to take corrective action. There will be a larger number of low-cost options available when the window to address the issue is longer.

Therefore, cost-effectiveness improves. This is the primary theme of the better buying power initiatives— better value for the warfighter.

This guidebook—SD-22, Diminishing Manufacturing Sources and Material Shortages: A Guidebook of Best Practices for Implementing a Robust DMSMS Management Program—provides best practices for robust and proactive DMSMS management. It explains things to do and why those things are important.

Examples include the following:

Fully fund DMSMS management activities and resolutions and ensure that the right people are trained and involved.

Get the contract language right. This is critical to proactive DMSMS management.

It’s never too early to begin. Starting early in design, proactively monitor critical, highly vulnerable items, software, assemblies, and materials to identify potential problems before negative impacts occur.

Link DMSMS health assessments with the program’s product roadmaps to mitigate issues before they materialize.

Ensure that resolutions minimize life-cycle costs; solutions that are inexpensive upfront may have significant future cost.

Obtain comments from the DMSMS community on designs and redesigns to avoid the inclusion of obsolete items.

This guidebook, while designed primarily for the DMSMS practitioner, should also be useful for program managers, engineers, and life-cycle logisticians. It is updated periodically. This version of the SD-22 replaces the version published in February 2015. Recommended changes to this document should be addressed to the Defense Standardization Program Office, 8725 John J. Kingman Road, Stop 5100, Fort Belvoir, VA 22060-6220, or e-mail at DSPO@dla.mil.

, Defense Standardization Program Office mailto:DSPO@dla.mil

Contents

SD-22 – Diminishing Manufacturing Sources and Material Shortages (DMSMS) ................................................ iv

A Guidebook of Best Practices for Implementing a Robust DMSMS Management Program .................................. iv

Message from the Director

Contents 2

1. Introduction

1.1. Scope and Objective

1.2. DMSMS Mechanisms

1.3. The Importance of a DMSMS Management Program

1.4. Overview of the DMSMS Management Process

1.5. Organization of This Document

2. DMSMS Management Links to the Defense Acquisition System

2.1. DMSMS Policy

2.2. DMSMS Guidance for the Program Manager

2.3. Design Effectiveness and DMSMS

2.4. Process Efficiency and DMSMS

2.5. Technology and Supply Chain Management

3. Prepare: DMSMS Management Program Infrastructure

3.1. Establish the Strategic Underpinnings for DMSMS Management

3.2. Develop a DMSMS Management Plan

3.3. Form a DMSMS Management Team

3.4. Establish DMSMS Operational Processes

4. Identify: DMSMS Monitoring and Surveillance

4.1. Prioritize Systems

4.2. Identify and Procure Monitoring and Surveillance Tools

4.3. Collect and Prepare Item Data

4.4. Analyze Item Availability

4.5. Collect and Update Programmatic and Logistics Data

4.6. Develop Health Assessments

5. Assess: DMSMS Impact Assessment

5.1. Identify Data Needs

5.2. Assess Impact of a DMSMS Issue

6. Analyze: DMSMS Resolution Determination

6.1. Identify Resolution Cost Elements

6.2. Identify and Define DMSMS Resolution Options

6.3. Determine the Preferred DMSMS Resolution

7. Implement: Implementation of DMSMS Resolutions

7.1. Secure DMSMS Resolution Funding

7.2. Implement DMSMS Resolution

Appendix A. Obsolescence and Its Relationship to DMSMS

Appendix B. Developing DMSMS Workforce Competencies

Appendix C. Contracting

C.1. Determining Whether to Contract for DMSMS Management

C.2. DMSMS Management Activities in Contracts by Life-Cycle Phase

C.3. Examples of DMSMS Management Contract Language

Appendix D. DMSMS Management Questions for Systems Engineering Technical Reviews

Appendix E. DMSMS-Related Questions for Logistics Assessments

Appendix F. Counterfeit Items and DMSMS

F.1. Background

F.2. Summary of DoD Counterfeit Policy and Key Definitions

F.3. The Impact of Counterfeit Items on DMSMS Management

Appendix G. Accessing Organic Services and Capabilities to Mitigate DMSMS Issues

Appendix H. DMSMS Knowledge Sharing Portal

Appendix I. DMSMS Quality Assurance Process

I.1. Quality Plan

I.2. Metrics

I.3. Process Analysis

Appendix J. DMSMS Program Capability Levels

Appendix K. Lead-Free Electronics and DMSMS Resolutions

Appendix L. Complete Department of Commerce Cost Survey Results

Appendix M. Abbreviations

Figures

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Tables

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1. Introduction

1.1. Scope and Objective

A Diminishing Manufacturing Sources and Material Shortages (DMSMS) issue is the loss, or impending loss, of manufacturers or suppliers of items, raw materials, or software.1 The Department of Defense (DoD) loses a manufacturer or supplier when that manufacturer or supplier discontinues production and/or support of needed items, raw materials, or software or when the supply of raw material is no longer available. While traditionally thought of as applying to electronic items, it is important to be cognizant that a DMSMS issue can arise regarding any item within a system, including software and non-electronic components—materials and structural, mechanical, and electrical (MaSME) items.

DMSMS issues can be caused by many factors—such as low-volume market demand, new or evolving science or technology, changes to detection limits, toxicity values, and regulations related to chemicals and materials—that significantly affect the DoD supply chain and industrial base. Another aspect of DMSMS is when an item, although still available commercially, no longer functions as intended because of hardware2–electronic and MaSME items, software, and/or requirements changes to the system. This is often referred to as functional obsolescence.3 Any of these situations may endanger an ongoing production capability and/or the life-cycle support of a weapon system or any training, support, or test equipment already in the field.4 Ultimately, DMSMS issues affect materiel readiness and operational availability, which, in turn, affect both combat operations and safety.

No system or program is immune from DMSMS issues; they are inevitable. They affect short- and long-lived systems; repairables and consumables; space-based, air-based, ground-based, and sea-based equipment (including support and test equipment); and so on. DMSMS issues are not confined to piece parts or devices; obsolescence may occur at the part, module, component, equipment, or system level.

DMSMS issues are also not limited to defense-unique items; commercial off-the-shelf (COTS) items represent a significant obsolescence problem, because such items are most susceptible to market forces.

Consequently, robust DMSMS management is needed. DMSMS management is a multidisciplinary process to identify issues resulting from obsolescence, loss of manufacturing sources, or material shortages; to assess the potential for negative impacts on schedule and/or readiness; to analyze potential mitigation strategies; and then to implement the most cost-effective strategy. DMSMS management has been most closely associated with electronics. However, DMSMS management also should be concerned with materials, mechanical items, and software.5 This standardization document, which replaces the February 2015 version of SD-22, is intended primarily for the DMSMS practitioner community. It is a guidebook of best practices for implementing an effective DMSMS management program throughout the system life cycle. Because DMSMS considerations affect how a system is designed and sustained, program managers (PMs), engineers, and life-cycle logisticians (including supply chain managers, inventory managers, and maintainers) are also affected. Consequently, as beneficiaries of DMSMS

1 The term “software” encompasses COTS, custom, or any combination thereof of firmware, middleware, wrappers, gateways, firewalls, application programs, and operating systems.

2 Hereafter, except if otherwise specified, if “hardware” is used alone, it refers to both electronic and MaSME items.

3 The term “obsolescence” is similar, yet different, from DMSMS. The differences are small—DMSMS encompasses (1) items that are not obsolete but where there are shortages and (2) obsolete items that are out of production and there is demand. Both terms are used interchangeably throughout this document with a distinction being made where needed for clarity. For more information on the relationship between obsolescence and DMSMS, please see Appendix A, “Obsolescence and Its Relationship to

DMSMS.”

4 The word “system,” as used in this document, encompasses weapon systems and training, support, and test equipment.

5 Generally, the use of the word “item” in this document is intended to be all-inclusive of parts, assemblies, software, and material.

management best practices, these communities and their associated policymakers are also part of the intended audience.

The purpose of this document is fivefold:

Create awareness of the extent and impact of DMSMS issues on DoD systems.

Define a robust DMSMS management process that a PM can use to build an effective DMSMS management program.

Define DMSMS support metrics to measure the effectiveness of a robust DMSMS management program.

Promote affordable and efficient program support through rapid and cost-effective DMSMS management best practices and resolutions that take into account equipment life cycles, technology changes, and planned obsolescence.

Promote the exercise of DMSMS management best practices throughout the acquisition life cycle.

1.2. DMSMS Mechanisms

Whether dealing with hardware–electronic and MaSME items or software, obsolescence is ultimately driven by one of a number of DMSMS mechanisms, influenced by the short life cycle of technology as compared to the long life cycle of defense systems. Figure 1 illustrates the symmetrical nature of both first-order and lower-order obsolescence mechanisms for hardware and software. Although the figure may give an impression of a sequential progression of events, that is not the case. Hardware and software obsolescence may occur simultaneously. To help drive home the point that both hardware and software are part of the same process, the figure shows “hardware and software monitoring” and “DMSMS resolution identification” as single boxes, rather than hardware- and software-specific boxes.

Both hardware and software may also become functionally obsolete, as a secondary impact of some other change to the system.

There are two broad obsolescence mechanisms: first-order obsolescence and lower-order, or derived, obsolescence. First-order obsolescence is directly driven by market factors and regulation changes that affect DoD’s ability to buy, license, obtain support for, or use hardware and software. Lower-order obsolescence is functional obsolescence caused by hardware or software changes made to address first-order obsolescence, perform a proactive upgrade, or respond to a requirements change. Hardware and software monitoring identifies instances of first-order obsolescence. This monitoring also identifies functional obsolescence, resulting from proactive upgrades to hardware and software, in addition to, at least in part, driving the need to make proactive upgrades.

Figure 1 Mechanisms for Hardware and Software Obsolescence

First-order obsolescence situations should be identifiable from hardware and software monitoring of the effects of market forces. When first-order obsolescence does occur, though, some of the root causes are as follows:

Hardware–electronic items. Sales and support may be terminated because of some combination of low demand, demand for new technologies and capabilities, lack of profitability, vulnerabilities, loss of production capability because of modernization or disposal of manufacturing equipment or mergers/acquisitions, unavailability of items, unavailability of materials, loss of repair support expertise, and so forth. For example, manufacturing tooling may be disposed of after production is completed.

Software. Competitive market forces can also lead to diminished capability. Companies generally do not find it sufficiently profitable to apply resources to support old versions of software; they prefer that customers upgrade to the most recent products. Mergers and acquisitions may lead to a similar situation. A program’s ability to use software is inextricably linked to obtaining a license or being able to purchase the software from a reliable source. Consequently, diminished ability to use software may occur when newer versions of the software are available or there is no longer an ability to read the digital media on which the software is delivered. In addition, there is a diminished ability to use software when its support terminates. Software support includes product enhancements to increase capability or to decrease vulnerability to malicious attacks, error correction, and general support for its application in particular environments. If support is no longer obtainable, updated security patches will not be available, bugs cannot be fixed, routine maintenance cannot occur, and modifications can no longer be made. For example, current software may not satisfy an emerging information assurance policy requirement or a cybersecurity protection requirement. Software support also terminates when the software development tools for building, testing, and integrating the software are no longer available, for example, compilers, databases, regression testing capability,6 and configuration management (CM) software. Regardless of the market force that leads to diminished software capability, programs should be aware of associated security concerns and evaluate potential information assurance implications.

Hardware–MaSME items. Market forces also lead to DMSMS issues for hardware–MaSME items, but not quite in the same way as for electronic items and software. Unlike electronic items, MaSME items are typically on the market for long periods of time and, depending on the situation or support posture, are often repairable. Manufacturing processes for structural, mechanical, and electrical items have also remained relatively stable over time. Principal factors for DMSMS issues pertaining to materials (including critical materials resident within the supply chain) and structural, mechanical, and electrical items include the following:

o Hazardous materials are being used. Regulations on hazardous materials may become stricter (e.g., Restriction of Hazardous Substances). Such materials may be banned completely or become difficult and/or prohibitively expensive to use or obtain (e.g., Freon or lead).

o The supplier goes out of business or through a merger and acquisition in which the existing product line no longer fits in the new product portfolio. This is more likely with small and/or financially vulnerable suppliers that supply items to larger companies that use the items to assemble their product. Item lines that are sold from original companies to other businesses are vulnerable to being discontinued.

o The supplier’s business case is no longer viable. This may occur with low-demand products potentially containing exotic materials that are difficult to manufacture or involve major disruptions to more profitable business activities. This may also occur as a result of regulation changes (e.g., tungsten rhenium wire was affected because of energy-related regulations on the disuse of incandescent light bulbs; Freon).

o Supply-constrained materials are used. There may be U.S. or foreign regulations or supplier policies that affect availability. For example, a foreign source may limit its exports or not be willing to sell its product for a DoD application. The United States Code, Title 10, §2533b imposes restrictions on some specialty metals, for example, steel (specific mixes); metal alloys containing nickel, iron-nickel, and cobalt base alloys; titanium and titanium alloys; and zirconium and zirconium base alloys.7

6 Regression testing seeks to ensure that software changes have not introduced new faults.

7 10 U.S. Code §2533b, “Requirement to buy strategic materials critical to national security from

American sources; exceptions,” Cornell University Law School, Legal Information Institute website, www.law.cornell. edu/uscode/text/10/2533b, accessed July 31, 2015.

o The tooling is no longer available. Depending on the specific situation, resolving this issue may involve substantial time and cost.

Technology change may also be a factor, but this is often associated with COTS items for which the market situation is variable. Some COTS items (e.g., photographic equipment or network controllers) behave similarly to electronic items and software. Other COTS items (e.g., motors and pumps) behave more like MaSME items.

When a program takes an action to resolve first-order obsolescence or to proactively upgrade, the first-order changes implemented have the potential to cause lower-order or derived obsolescence. Below are descriptions of the different factors that influence the need for hardware or software changes and how such changes can cause lower-order obsolescence:

First-order hardware changes can result from one of three factors. First, robust DMSMS management seeks to refresh items before they become obsolete. Proactive technology refresh results in a hardware change. Second, hardware changes may be driven by implementing engineering resolutions to address DMSMS issues caused by the termination of sales or support of existing hardware. The resulting engineering resolutions range from the use of a simple substitute that relies on an existing replacement item to the redesign of the item to redesign at a higher level of assembly. Finally, a new performance requirement may necessitate a hardware change. Regardless of the factors influencing first-order hardware changes, lower-order hardware or software obsolescence may result because the existing hardware or software no longer functions as intended. For example, legacy software may not work, or may not work correctly, on new hardware configurations for a variety of reasons, such as data transmittal, storage, access, processing, display, interface issues, operating system capability issues, or timing concerns.

Similarly, legacy hardware may suffer from physical incompatibility.

First-order software changes can result from factors that are analogous to the three factors that cause first-order hardware changes. Software upgrades or technology refreshments are not always compatible with other software applications that have been tested on or with earlier versions. For example, an upgrade to a COTS operating system may no longer support the assumptions made by the existing firmware; consequently, the firmware may become functionally obsolete. DMSMS resolutions implemented because of the inability to use software also lead to a first-order software change. Finally, first-order software obsolescence may be driven by changes to performance requirements that necessitate a software change. For example, scalability may be an issue if the transaction volume changes significantly. Greater processing power and memory size may also be required. The above rationale for first-order hardware changes leading to lower-order software or hardware obsolescence is directly applicable to first-order software changes leading to lower-order software or hardware obsolescence.

1.3. The Importance of a DMSMS Management Program

Ultimately, DMSMS management is important for a simple reason: it protects programs. Robust DMSMS management of inevitable obsolescence is the most cost-effective and efficient way to minimize the scope of DMSMS-related out-of-cycle redesigns when they cannot be eliminated or avoided, eliminate DMSMS-caused production schedule impacts, and eliminate readiness degradations caused by DMSMS issues.

These three objectives of DMSMS management minimize the impact on the cost, schedule, and performance of a program, three primary concerns of a PM.

Because DMSMS management has a significant effect on many aspects of a program, it is not a standalone function, nor does it benefit a single stakeholder. DMSMS management is inherently linked with reliability, maintainability, supportability, and availability. Within this context, it is important to plan for, minimize, and manage the risks associated with DMSMS issues, due to their detrimental impact on materiel readiness, operational mission capability, safety of personnel, and affordability.

Materiel readiness is an immediate and urgent concern for the warfighter. Missions are affected if equipment cannot be supported; either the equipment is not available for the mission, or it cannot be sustained throughout the mission. DMSMS issues can negatively affect supportability if the items needed to repair a system are not available or are in scarce supply. It is unacceptable for a system to be non-mission-capable due to a DMSMS issue. To allow a DMSMS situation to progress to the point of affecting a mission (because items are not available) is contrary to DoD policy and is an indication of ineffective DMSMS management. In addition, ineffective DMSMS management can cause the costs for items to rapidly escalate.

A robust DMSMS management program is the most effective and efficient way to minimize readiness risks due to DMSMS issues, deliver better buying power, and improve overall life-cycle management.

DMSMS resolutions are based on the most cost-effective approach to managing the problem before operations are affected. The cost avoidance by being proactive can be substantial, as discussed below:

The B-1 program office was informed by the original equipment manufacturer (OEM) that a radar system was experiencing obsolescence and the recommended system upgrade needed to resolve the problems would cost $350 million. DMSMS monitoring and surveillance indicated only minimal obsolescence existed, and the analysis team identified readily available alternate parts to replace the ones identified as obsolete. The bottom line was that obsolescence and supportability issues were easily overcome, allowing adequate cost-effective system support through continued organic depot repair with an estimated 10-year cost avoidance of $316 million.

The Apache obsolescence working group shares power equally between the government and contractor. Issues and details are discussed and resolved within this small team with an expansion of participation as needed from other functional disciplines. An empowered Apache program office champion drives recommendations to reality. This model has resulted in early discovery and intervention of obsolescence risks in an environment of agreed-to mitigation plans.

The benefit has been no part shortages or schedule delays, identification of funding to mitigate obsolescence that does not require “robbing Peter to pay Paul,” and required redesign blended into planned design updates. The success of this model and this program is best represented by the cost avoidance by being proactive—over $200 million—realized by this working group across all configurations and life-cycle phases of this system.

The Virginia-class submarine program integrated DMSMS management into the construction program early in the design/build process. To ensure consistency and repeatability of results, the program office established a technology refreshment integrated product team (IPT), formalized a standard operating procedure, developed a memorandum of agreement with the Naval Supply Systems Command for the advanced procurement of spares, and established a budget. As a result, the program resolved more than 1,260 obsolescence issues and reaped more than $159 million of documented cost avoidance by being proactive since inception.

A foreign military sales (FMS) DMSMS team was asked to look into an obsolete part (a digital display indicator) needed for critical support equipment used by FMS customers. The OEM was unable to fulfill a request for the support equipment due to the obsolete part and quoted $2.6 million for redesign. The FMS DMSMS team examined an available drawing, identified the original component manufacturer part number, researched the supply system, located the original component manufacturer, and was able to obtain 50 of the parts needed (more than the required quantity) for $327,000, resulting in a $2.3 million cost avoidance by being proactive. The extra parts were transferred to the inventory of another platform using the same equipment.

The examples demonstrate how DMSMS management can result in better value for the taxpayer and the warfighter. However, benefits extend well beyond these examples. Since 2010, the Under Secretary of Defense for Acquisition, Technology and Logistics has signed and issued several memorandums, one building on the other, providing specific guidance for improving the way DoD does business. The 2014

“Better Buying Power 3.0” white paper augmented and modified the 2012 “Better Buying Power 2.0” memorandum, establishing the following focus areas:8

1. Achieve affordable programs.

2. Achieve dominant capabilities while controlling life-cycle costs.

3. Incentivize productivity in industry and government.

4. Incentivize innovation in industry and government.

5. Eliminate unproductive processes and bureaucracy.

6. Promote effective competition.

7. Improve tradecraft in the acquisition of services.

8. Improve the professionalism of the total acquisition workforce.

Robust DMSMS risk management is a contributor especially important to focus areas 1, 2, 3, 4, 6, and 7.

DMSMS management helps target affordability and control cost growth (focus areas 1 and 2) in several ways. By accounting for DMSMS issues during design (trades), future operating and support (O&S) costs will be controlled and possibly reduced. For example, the use of standardized parts and the latest technologies can reduce the impact of DMSMS issues during sustainment by enhancing the interchangeability, reliability, and availability of items. Robust DMSMS management may enable programs to control cost by achieving “should cost” estimates.

To incentivize productivity and innovation in industry (focus areas 3 and 4), robust DMSMS management will cultivate long-term relationships with suppliers using performance-based logistics precepts and other means. Given such relationships, suppliers should be less likely to discontinue an item, and if they decide to discontinue the item for business reasons, the government is more likely to have advanced warning, placing it in a better position to plan an alternative course of action. This planning could be done in coordination with industry. A new initiative in “Better Buying Power 3.0” is to emphasize technology insertion and refresh in program planning. DMSMS management results should be a key driver of technology refresh plans. The ultimate goal is to replace items before they become obsolete.

Promoting effective competition (focus area 6) by developing alternate sources of items with DMSMS issues is also a key element of robust DMSMS management. Both open systems architecture and data rights in designs enable competition by providing a framework for decomposing a system into items and obtaining the necessary technical information for them. Modular open systems architecture is not only a driver of innovation, it is also an important DMSMS-related design consideration, because substitution of alternative items becomes easier. Robust DMSMS management will secure data rights and bills of materials (BOMs) for items highly likely to face DMSMS issues.

Service contracts (focus area 7) are often used for system support. Clauses in these contracts may require a contractor to manage DMSMS issues. Those clauses must have the right incentives for robust DMSMS management, including effective metrics and notification of issues to the government as soon as they are discovered. For example, if the contractor is concerned only with availability, then costs may get out of control. The proper incentives must be in place for the contractor to manage DMSMS issues, 8 Under Secretary of Defense for Acquisition, Technology and Logistics, memorandum, “Better Buying Power 2.0: Continuing the Pursuit of Greater Efficiency and Productivity in Defense Spending,” November 13, 2012.

Under Secretary of Defense for Acquisition, Technology and Logistics, memorandum, “Implementation Directive for Better Buying Power 2.0—Achieving Greater Efficiency and Productivity in Defense Spending,” April 24, 2013. Under Secretary of Defense for Acquisition, Technology and Logistics, “Better Buying Power 3.0,” September 19, 2014.

considering both industry and government perspectives. This is where the initiative to improve tradecraft in the acquisition of services comes into play.

1.4. Overview of the DMSMS Management Process

The DMSMS management process is straightforward. As illustrated in Figure 2, it has five steps:

Prepare. Develop the DMSMS strategic underpinnings (e.g., vision and focus) and a DMSMS management plan (DMP) to implement the strategic underpinnings for the program. Form a DMSMS management team (DMT) representing all stakeholders. Establish, document, and resource DMSMS management processes for the DMT to execute the DMP.

Identify. Secure access to logistics, programmatic, and item data and to monitoring and surveillance tools. Identify items with immediate or near-term obsolescence issues.

Assess. Considering the population of problem items, identify and prioritize the items and assemblies most at risk for current and future readiness or availability impacts.

Analyze. Examine the problem items with near-term readiness or availability impacts first.

Develop a set of potential DMSMS resolutions for the items and their higher-level assemblies.

Determine the most cost-effective resolution.

Implement. Budget, fund, contract or arrange for, schedule, and execute the selected resolutions for the high-priority items.

Figure 2 Steps in the DMSMS Management Process

Each of these steps applies throughout the life cycle, from early technology development through sustainment. Although it is best to begin these activities early in the life cycle, they may be initiated at any point in the process. Robust DMSMS management is a dynamic process that never ends. Once a program solves one issue, it should move on to the next. When a program has gone through its list of issues, it should start again; something will have changed. A program should repeat this process until its system retires. Ultimately, the DMSMS management process constitutes DMSMS risk management.

1.5. Organization of This Document

The five steps of the DMSMS management process constitute the core organizing principle for this document:

Section 1 provides an overview of DMSMS as both a concept and a multidisciplinary process.

Specifically, it describes the DMSMS scope and objective, the mechanisms that drive obsolescence, the importance of establishing a DMSMS management program, and an overview of the DMSMS management process steps.

Section 2 discusses the link between DMSMS management and the defense acquisition system, with particular focus on systems engineering (SE) and life-cycle product support. This section provides important input to and context for the rest of the document.

Section 3 addresses the Prepare step of DMSMS management. Specifically, it describes best practices for establishing a strong infrastructure—data, people, processes, management reports, and financial resources—for successful DMSMS management.

Section 4 focuses on the Identify step, which encompasses DMSMS monitoring and surveillance throughout the life cycle and includes best practices for determining where to focus DMSMS management efforts.

Section 5 discusses the Assess step of DMSMS management. It begins with a discussion of the monitoring and surveillance data collected; it also describes how to measure the operational impacts of the risks and how to prioritize them.

Section 6 focuses on the Analyze step, which deals with analyzing alternative approaches for resolving DMSMS issues and identifying the preferred alternative. This section lists DMSMS resolution options and provides a basis for estimating their cost. It also identifies risk factors associated with these options.

Section 7 addresses the Implement step, which covers the implementation of the preferred resolution option. It discusses potential sources of implementation funding, the roles of the DMT during implementation, and some considerations associated with common implementation issues.

Appendixes A through L contain supporting detail about DMSMS activities, such as questions that need to be addressed for SE technical reviews and logistics assessments (LAs), examples of contract language related to DMSMS management, DMSMS workforce competencies and the capabilities of a robust DMSMS management program, DMSMS implications of counterfeit parts and lead-free electronics, best practices for the quality assurance (QA) of DMSMS processes, and ways to access additional DMSMS knowledge and organic services and capabilities. Appendix M defines abbreviations used throughout this document.

Figure 3 shows the high-level interrelationships of the five DMSMS steps, the corresponding sections of this document, and the supporting appendixes. The figure does not show Appendix H, which contains reference information about all DMSMS activities.

Figure 1. Interrelationships among the DMSMS Processes and the Document’s Components

2. DMSMS Management Links to the Defense Acquisition System This section addresses the relationship of defense acquisition system policy and guidance to DMSMS management policy and guidance. Considering overarching DoD policy and guidance, the DoD Components have created their own policies, which can be found in the DMSMS Knowledge Sharing Portal (DKSP) described in Appendix H. The DKSP also contains DoD Component guidance documents.

2.1. DMSMS Policy

DoD Instruction (DoDI) 5000.02, “Operation of the Defense Acquisition System,”9 has established

DMSMS policy in its Enclosure 6 on life-cycle sustainment as follows: “Ensure identification of obsolete parts in specifications and develop plans for suitable replacements in accordance with P.L. 113-66, Section 803.”10 The public law requires the Secretary of Defense to “implement a process for the expedited identification and replacement of obsolete electronic parts included in acquisition programs of the Department of Defense.” The following, taken verbatim from the public law, are characteristics of that process:

(1) include a mechanism pursuant to which contractors, or other sources of supply, may provide to appropriate Department of Defense officials information that identifies—

(A) obsolete electronic parts that are included in the specifications for an acquisition program of the Department of Defense; and

(B) suitable replacements for such electronic parts;

(2) specify timelines for the expedited review and validation of information submitted by contractors, or other sources of supply, pursuant to paragraph (1);

(3) specify procedures and timelines for the rapid submission and approval of engineering change proposals needed to accomplish the substitution of replacement parts that have been validated pursuant to paragraph (2);

(4) provide for any incentives for contractor participation in the expedited process that the Secretary may determine to be appropriate; and

(5) provide that, in addition to the responsibilities under section 2337 of title 10, United States Code, a product support manager for a major weapon system shall work to identify obsolete electronic parts that are included in the specifications for an acquisition program of the Department of Defense and approve suitable replacements for such electronic parts.”

That policy has been amplified in DoDI 4140.01, “DoD Supply Chain Materiel Management Policy,” which states the following:11

“DoD materiel management shall operate as a high-performing and agile supply chain responsive to customer requirements during peacetime and war while balancing risk and total cost. The DoD supply chain shall provide best-value materiel and services in support of rapid power projection and operational sustainment of U.S. forces as required by the National Military Strategy. Potential disruptions within and outside the DoD supply chain shall be identified, monitored, and assessed in order to mitigate risk to supply chain operations. Life-cycle management controls shall be applied to guard against counterfeit materiel in the DoD supply chain. Energy efficient products or services shall have preference in all procurements, except those products or services procured for combat or combat-related missions.”

“Resourcing for all elements of the DoD supply chain shall be optimized through collaboration between support providers and customers. DoD investment shall be sufficient throughout the life cycle of new or existing weapons systems, equipment, and major end items to respond to warfighter needs. Performance and cost evaluations of supply chain operations and inventory shall be conducted periodically with the objective of ensuring that assets are available for use or reuse in the DoD supply chain to satisfy customer requirements.”

9 DoD, “Operation of the Defense Acquisition System,” DoDI 5000.02, January 7, 2015, p. 113.

10 Public Law 113-66, “National Defense Authorization Act for Fiscal Year 2014,” December 26, 2013.

11 DoD, “DoD Supply Chain Materiel Management Policy,” DoDI 4140.01, December 14, 2011.

DoD Manual (DoDM) 4140.01, “DoD Supply Chain Materiel Management Procedures: Materiel Sourcing,” implements that policy for DMSMS as follows:12

“The Military Departments and [Defense Logistics Agency] (DLA) will: (1) Proactively take timely and effective actions to identify and minimize the DMSMS impact on DoD acquisition and logistics support efforts. (2) Develop and fund a standard DoD strategy and program to resolve problems created by DMSMS and to resolve those problems in a way that reduces or eliminates any negative impacts. (3) Proactively consider DMSMS through a system’s life cycle by anticipating potential DMSMS occurrences and taking appropriate logistics, acquisition, and budgeting steps to prevent DMSMS from adversely affecting readiness or total ownership cost.”

“The Military Departments and DLA will designate a focal point to plan and coordinate actions to minimize the impact of DMSMS.”

“When items are difficult to obtain because they are obsolete, out-of-production, or for other reasons, weapon system program managers and materiel managers will take measures to prevent potential counterfeit materiel or unauthorized product substitution items from entering the supply system.”

“Commanders of activities with responsibility for design control, acquisition, and management of any centrally managed item used within weapon systems or equipment will implement the DMSMS program by establishing internal procedures.”

“When an item is identified as DMSMS, the managing Military Department or DLA [will implement] the most cost effective solution consistent with mission requirements.”

“The Military Departments and DLA will send to the cognizant materiel manager the information that was originally obtained from industrial sources about an actual or prospective announcement of a manufacturer’s intent to stop production. … The cognizant materiel manager will notify the [Government-Industry Data Exchange Program] to establish a DMSMS case.”

“The Military Departments and DLA will ensure that the [Inventory Control Point] maintains post-action surveillance throughout the life of DMSMS items in the DoD supply system.”

“DLA or the managing Military Department as well as security assistance customers who use the specific items will respond to requests for requirements information needed to decide the best course of action for ensuring continued supply of DMSMS items.”

2.2. DMSMS Guidance for the Program Manager

DoD Directive (DoDD) 5000.01, “The Defense Acquisition System,” contains principles, policies, and procedures for managing all acquisition programs. One such policy establishes the importance of cost and affordability over the life cycle of a DoD system:

All participants in the acquisition system shall recognize the reality of fiscal constraints. They shall view cost as an independent variable, and the DoD Components shall plan programs based on realistic projections of the dollars and manpower likely to be available in future years. To the greatest extent possible, the MDAs [Milestone Decision Authorities] shall identify the total costs of ownership, and at a minimum, the major drivers of total ownership costs. The user shall address affordability in establishing capability needs.13

Figure 4 depicts the acquisition life cycle.

12 DoD, “DoD Supply Chain Materiel Management Procedures: Materiel Sourcing,” DoDM 4140.01, Vol. 3, February 10, 2014, pp. 24–47.

13 DoD, “The Defense Acquisition System,” DoDD 5000.01, May 2003 (certified current as of November 2007), p. 5.

Figure 2. Acquisition Life Cycle

Adapted from DoDI 5000.02, January 7, 2015, p. 5.

SE is the technical management approach used to ensure the consideration of affordability throughout the life cycle. According to DoDD 5000.01, acquisition programs shall be managed through the application of a systems engineering approach that optimizes total system performance and minimizes total ownership costs. A modular, open-systems approach shall be employed, where feasible.14

DoDD 5000.01 also provides the PM with the responsibility and authority to ensure that cost and affordability are considered throughout the life cycle. This is termed total life-cycle systems management:

The PM shall be the single point of accountability for accomplishing program objectives for total life-cycle systems management, including sustainment. The PM shall apply human systems integration to optimize total system performance (hardware, software, and human), operational effectiveness, and suitability, survivability, safety, and affordability. PMs shall consider supportability, life-cycle costs, performance, and schedule comparable in making program decisions. Planning for Operation and Support and the estimation of total ownership costs shall begin as early as possible. Supportability, a key component of performance, shall be considered throughout the system life cycle.15

The role of the PM changes over the life cycle of a system. DMSMS management assists the PM in fulfilling his or her responsibilities in each phase of the defense acquisition system. Before the establishment of initial operational capability (IOC), the PM is responsible for the design, development, and production of the system, with two primary goals: meet performance requirements and minimize life-cycle costs. Once the system is fielded, the PM is responsible for affordably supporting the system as it is used for both training and operations.

Robust DMSMS management is important to these PM responsibilities, because it accomplishes the following:

Establishes criteria for evaluating design alternatives from a DMSMS management perspective

Helps ensure the availability of all items and material required to design, produce, or repair the system or equipment

Controls and possibly reduces total ownership cost

14 Ibid., p. 9.

15 Ibid., p. 10.

Provides for risk mitigation as it applies to DMSMS issues

Identifies potential DMSMS issues early enough to allow all applicable resolution options to be considered

Evaluates all of the applicable approaches to resolve DMSMS issues

Collects metrics to monitor program effectiveness.

The importance of DMSMS management to the PM for ensuring cost and affordability throughout the system life cycle has also been highlighted by the Defense Acquisition University (DAU): “Obsolescence and DMSMS will eat your lunch (along with breakfast and dinner if you’re not careful).”16

The PM should establish an aggressive set of DMSMS management strategic underpinnings and develop and adopt a plan to execute those strategic underpinnings. This will help ensure that design, product support, modifications, and service life extensions will be effective from a supportability perspective.

Continuous modernization and technology insertion/refreshment are important enablers. In fact, DMSMS management should guide the program’s broader plans. DMSMS health assessments—which integrate estimated obsolescence dates, usage rates, items due and stocks on hand, to highlight when an item or assembly will no longer be supportable—should guide the program’s overall technology management strategy, plan, and roadmaps to synchronize efforts to address technology trends and requirement-driven product upgrades.

The Defense Acquisition Guidebook (DAG) establishes a framework for the PM to carry out cost- and affordability-related functions, as shown in Figure 5.17

Figure 3. Framework for Ensuring Affordable System Operational Effectiveness

16 Bill Kobren, “10 Things Great Program Managers Know About Product Support,” Defense AT&L, November–December 2011.

17 See https://dag.dau.mil/Pages/Default.aspx, accessed February 11, 2014.

https://dag.dau.mil/Pages/Default.aspx.%20accessed%20February%2011

Source: Defense Acquisition Guidebook.

According to the DAG, affordable system operational effectiveness is achieved by designing for the optimal balance between performance (technical and supportability), total ownership cost, schedule, and process efficiency that enables production, operation, and sustainment. The concept of affordable system operational effectiveness is important, because it is what the warfighter sees in terms of how well the system performs its missions over a sustained period, as well as how well it supports a surge, given the operating budget. In this concept, the emphasis is not only on the system’s ability to execute its mission or its reliability and maintainability, but also on the cost-effective responsiveness of the supply chain.

The framework should not be viewed as static. Initially, the design is a driver of the product support strategy. However, one of the tenets of evolutionary acquisition is incremental block development. Future increments of design are influenced by new technical performance requirements, the current degree of supportability, the current product support concept, and affordability. Consequently, life-cycle cost and process efficiency affect supportability in future increments of the system.

The following two subsections expand upon the framework’s two major elements: design effectiveness and process efficiency.

2.3. Design Effectiveness and DMSMS

The DAG describes how design effectiveness reflects the key design features of technical performance and supportability.18 These characteristics should be designed into the system and with full knowledge of the expected system missions within the context of the proposed system operational, maintenance, and support concepts. To be effective, technical performance and supportability objectives should be defined in explicit, quantitative, and testable terms. This is important to facilitate tradeoffs, as well as to support

18 Supportability encompasses the extent to which design characteristics and logistics resources enable the attainment of availability goals.

the selection and assessment of the product and process technologies needed to achieve those objectives.

2.3.1. DMSMS as a Consideration in Design

Design effectiveness is an overarching outcome of SE. This is where the product support manager (PSM) provides advice about design tradeoffs. Section 4.3.18 of the DAG, “Systems Engineering Design Considerations,” discusses how design is a complex task that must balance a large number of performance, support, safety, environmental, security, regulatory, and other requirements and constraints. Because a feasible solution can rarely satisfy all of these things in a cost-effective way, the SE process guides design tradeoffs, including the consideration of DMSMS-related interests and concerns, to develop a balanced solution for all stakeholders. This section provides guidelines regarding the DMSMS trade space for initial design and subsequent redesign phases resulting from DMSMS considerations.

DMSMS is one among many product support design considerations in the DAG. Design decisions made early in a program—for example, during the materiel solution analysis, technology maturation and risk reduction, and engineering and manufacturing development phases—have a substantial impact on operations and support costs later in the program.