2015-04-20 By Robbin Laird
Lt. General Robling recently retired as Commanding General, Marine Corps Forces Pacific (CG MARFORPAC) and is now serving as the CEO of PKL Services, Inc.
(PKL), an aerospace services firm.
PKL is headquartered in Poway, California, and throughout its now ten years of operation, has employed over 500 people and operated throughout the United States and overseas at four international operating sites.
The discussion with LtGen Robling focused on two emerging challenges supporting customers:
(1)the tradeoff of price versus value as core contracting metrics within the US Domestic market space;
and (2) working with international clients as they pursue their own unique value proposition when working with a US-based firm like PKL.
Over the past few years, with the advent of Sequestration and reduced DoD operating budgets, there’s been a growing trend within US procurement and contracting circles to select Lowest Price/Technically Acceptable (LPTA), vice an alternative called Best Value, as the preferred selection criteria for new contracts.
While on the surface LPTA appears to make sense in light of the aforementioned Sequestered budgets, the reality is far more complicated.
What LtGen Robling and other experienced CEOs are realizing, and forcefully arguing, is there is a deeper and more insidious cost to the customer, in the form of a deferred readiness bill, that will have to be paid later.
When the Government trades a near term imperative (cost) for a long term end state (value), there is almost always a gradual loss in readiness and material condition over time.
LPTA runs counter to the operational logic of defense forces where performance indicators and combat effectiveness, vice cost and efficiency, are crucial to wartime performance.
Getting the best price to achieve the value outcome is the real goal, not simply forcing competition to the bottom of the price barrel without overall performance, endurance, and life cycle considerations.
We have seen this LPTA problem emerge in a number of platform acquisitions but this is clearly not best practice is this shortsighted mindset is affecting the logistics and sustainment field as well.
Question: Looking through PKL’s literature, it seems that your company is providing full spectrum support to your domestic and international clients, to include on- and off-aircraft maintenance support, pilot training, simulator training, maintenance upgrade training, curriculum development, and leadership development.
Is that a correct read?
Robling: It is.
Like most companies, PKL started out with a very discrete core competency and niche, which was US Marine Corps and US Navy aircraft maintenance augmentation.
That competency, tied to PKL’s then 8(a) small business status, expertly positioned the company for the type of aerospace services in high demand as a result of operations in Iraq and Afghanistan.
This initial big bang growth, and the past performance and technical capability associate with this work, solidified PKL as a proven and highly respected company within the aerospace sector.
Building on this initial momentum, PKL was able to then expand into US Air Force contract maintenance support, ground logistics, and most recently, Foreign Military Sales contracts supporting the Republic of Singapore Air Force and the Royal Saudi Air Force.
And most recently, we’ve developed a very unique leadership development program that really rounds out our portfolio of services.
We are particularly proud of, and encouraged by, these FMS contracts with Singapore and Saudi Arabia.
For example, PKL initially won the Singapore contract via open competitive bid; a five year, multi-faceted contract combining F-15 pilot training, simulator training, maintenance, and supervisory oversight based out of Mountain Home Air Force Base, Idaho.
Based on PKL’s performance, the Government of Singapore awarded to PKL, via a sole-source contract award, another 5-year contract.
For Saudi Arabia, we operate in Kingdom providing maintenance upgrade training across all echelons of maintenance, up to level seven training (equivalent to a senior technician in the US Air Force).
We have just entered our third year on this contract, and once again, based on PKL’s superior performance, the contract has expanded in scope and complexity based on our customers high satisfaction with our work.
Though not currently in operation, PKL has in the past supported every helicopter in the US Marine Corps’ inventory, and several of the Corps’ fixed wing aircraft, enabling PKL to claim extensive past performance and technical mastery across a broad array of aircraft types.
Moreover, PKL has gradually made inroads into ground logistics, supply chain management, and material management, supporting Army Tracked Vehicles and USMC ground logistics Depot maintenance.
Based on the above, I’ve asked my staff to base our growth strategy on two core objectives: Exploit those sectors in which PKL already has mastery and experience, and Explore new sectors in which real opportunity is emerging.
An example of the later is FMS—particularly in Asia.
I like to think of this strategy akin to basic portfolio management:
As our US domestic market constrains and tightens (think bonds for example), we are looking to re-weight and re-allocate our investments into International markets where we see growth (think equities).
But let’s be clear; other large US companies see this and are pursuing this same strategy.
Staying competitive with the larger companies has been difficult for smaller companies like ours, principally for the reason I mentioned earlier: LPTA. As U.S. contracting agencies increasingly award contracts based on lowest price, we are seeing across the board the reality that, in actual performance, the contractors cannot deliver a sustainable, high value outcome.
To get to the lowest price on the proposal, the winning contractor has to somewhat gut the workforce, often removing the high priced (but enormously important) supervisory skills.
These LPTA contracts do not necessarily provide the customer with best value, and likewise, the contractors lose as they are forced into what we call a “billet vacancy shell game;” gaping and transferring personnel between and amongst vacant billets as a way to save money and increase profit margins.
This is unquestionably a lose-lose proposition for both parties.
For military customers, whose real metrics are performance and warfighting readiness, not simply lowest cost, we must provide contract criteria allowing us to deliver value, and more so, deliver it over the entire length of the contract, from the first day until the last day.
Based on my recent experience there is a clear need to relook at the LPTA practice, take a more holistic look at value versus cost, and accept the reality that shortsighted tradeoffs we make today.
Although on the surface the Department may be saving a few dollars, it will in the future not only degrade the very readiness we seek to obtain, but cost us twice us much to achieve at a later date when we have to restore and reclaim capability at tomorrow’s inflated dollar.
Question: The pool of qualified labor is pretty small and relatively static, so LPTA practices clearly must have an impact on that pool of labor?
Robling: The pool of available and qualified people, especially in high performance and technically complex aircraft like U.S. military jets and helicopters is finite.
What normally happens when an incumbent loses a fixed-price contract to a lower bidder is this: the low-cost contractor will try to re-hire those technicians at lower wages.
This puts the technician in a dilemma; either he accepts the lower wage offer or he moves on, causing a vacancy in the contract that could take months to fill. For example, if I am paying someone $50 per hour, and lose the contract to a lower bidder, the technician may now be offered $35 per hour. He either takes the lower wage or seeksother employment, which is often the case.
Like I mentioned earlier, this practice creates vacancies in the contracts, which many contractors skillfully manage to make up for the low bids.
The customer is not getting all the people, and more worrisome, loses expertise at the supervisory levels, which are required for the scope of the contract, causing either degraded readiness or delays in producing combat power. Either way the government loses.
Question: It appears International partners have not gone down the LPTA path, at least not as extensively as the US. So it does seem to make sense for PKL to try to expand your global footprint?
Robling: That is our core idea.
Many of our partners in Asia and the Middle East fly very good aircraft but are not necessarily yet achieving their desired levels of readiness, material condition, and organic maintenance mastery.
This is exactly the emerging opportunity we see and intend to explore: They have a real need; PKL has a proven answer. PKL’s value proposition to these international firms is this: Your foe right now is lagging readiness and not yet fully experienced or deep-enough workforces.
PKL can directly attack this foe by sourcing, tailoring, and rapidly employing at your sites the supervisors and skilled artisans to arrest those problems and teach your folks to gain the mastery to become self-sufficient.
That is the key difference between PKL’s value proposition and offers made by other companies.
PKL states to our international clients, up front and before we start work, two core commitments:
First, PKL is not selling you any aftermarket materials to bloat contract expense and drive up your costs; and
second, we seek a long-term and intimate relationship focused on creating organic mastery and capability in your workforce.
PKL works to make you, our customer, independently capable, not dependent on PKL.
Those are not cosmetic commitments; we are telling our international customers that we seek to make them the masters of their destiny, and the highest praise we’ll ever receive from them is for them to see us as a trusted partner, and in the end, that they don’t need our augmentation anymore because we helped them be truly self-sufficient.
It may seem like a counter-intuitive business model, to actually tell a client you don’t desire to develop co-dependency, but I find the opposite to be true.
Give them the assurance up front PKL will deliver the end state that lets them master their own fate.
If we do that job well, we don’t have to sell PKL through cold calls and late night knocks on the door. People who seek value will willingly seek out PKL.
I trust that, and we will anchor our ethos and business ethic on that principle.
We have proven this model works in Singapore and Saudi Arabia; now, we will expand this model throughout those geo-areas based on the same sound principles.
Question: That sounds like a forward-leaning strategy.
Sounds like you are betting on personal relationships, value, and broader end states than just tactical or technical outcomes.
So, how do you get your own people to buy into that strategy?
Robling: Though PKL’s Ethos. We built our company around an ethos we call Row True.
We have a single, powerful image of a manned, oared boat cutting sharply through the water, toward the horizon.
Under that powerful image we have the words Row True.
What this means to all of us, at every level of the company, are these cornerstone principles: First, every one of us has our own hands on an oar, and thus, we must daily be accountable for our attitude, behaviors, and actions.
Personal discipline and personal accountability.
Second, we man the boat together.
We are all rowing together, in unison and coherence, toward a shared vision and towards a distant end state. This is Teamwork. By recruiting and building a talent strategy around our ethos of Row True, we cultivate the leaders who aspire to excellence, meaning, and purpose.
That is how we get our people to look beyond paychecks and near-term gain, and instead invest their energy and creativity towards cultivating trustworthy partnerships like those I mentioned in Asia and the Middle East.
I truly believe this “ethos centering” is what sets PKL apart and is definitely what makes PKL unique.
Let’s face it; lots of people can rightly claim they fix aircraft and train workforces.
That in itself isn’t unique.
But very few companies, very few, can say they deliver, every day and in every clime and place, the tenets of Row True.
We are basing our future on this bet; that by building self-mastery in ourselves first, then reaching out in that spirit to our customers, that we’ll offer a solution that will not only be worth paying for, but more so, will be a service worth coming back to and recommending to others.
That is the art of the long view.
That is PKL’s cornerstone principle.