Is Your Organization Compromising Reliability Performance Due to a Reliability Conflict of Interest?

Kirk Gray wrote the article titled Exposing a Reliability Conflict of Interest on Accendo Reliability. He talked about a recent article discussion the maintenance costs for the F-35 fighter jet program and how the companies designing the system make a significant profit selling spare parts or maintenance services.

If you count on the profit from the system you design failing, you have an inherent conflict of interest concerning creating a reliable system.  If you create a reliable product you lose money.

Not Just a Problem for Military Suppliers

The problem Kirk described is not just with military projects. The reliability conflict of interest arises anytime the team designing an item profit from spares or maintenance services.

With extended warranty contracts, the better the reliability performance of a product the more profitable the extended warranty contracts become. In contrast if your organization generates profit when an item fails by providing spares or maintenance services, there is little incentive to improve reliability.

For military project there are typically cost plus type arrangements which effectively cap the profit the organization can generate performing design and development services. On the other hand, once the system is fielded, if the same organization is the sole provider of spares or maintenance services, they really can and do charge to create significant profit.

For example, if you have a product idea one common approach is to engage a firm that can design and build your product. If they are also the organization that provides spares, repairs, and warranty management, they create a profit from those action only when the product they designed is un-reliable.

Another example is a repair service. If they make money when doing a repair independent if it actually works or not, there is little incentive to actually fix the problem. The more times they see the same item, the more often they invoice for ‘repair’ services.

Check the contracts and systems you have concerning your products. These reliability conflicts of interest may be hampering your ability to create reliability products for your customers.

One Idea to Squash this Conflict of Interest

In the discussions and comments around Kirk’s article on Accendo Reliability and Linkedin one idea from Andy caught my attention. Andy suggests:

Contract should be for the useful operational hours of the equipment, purchase them on a lease basis with the supplier responsible for the OEE, that would concentrate their minds! — Andy Gailey

If you want a reliable product contract for a reliable product. There are real costs to un-reliability that far outweighs the costs associated with repairs or servicing. Building in suitable terms to balance the incentives toward creating a durable solution is possible.

When a design team has a bonus based on time to market or a procurement team has a bonus based on cost reductions, the emphasis on reliability general suffers. Including a factor based on field reliability performance within the bonuses changes the focus to include the impact on reliability performance.

For state of the art military aircraft the functional performance is critical. Yet, if it will take 3 aircraft to insure mission success because two are in the shop for repairs, the functionality focus is out of balance with the aircraft’s mission.

Creating reliability systems is economically sound for your customers and your business. Identifying and eliminating (or at least balancing incentives) reliability conflicts of interest in service to the warfighter and your customers.

Next Steps to Resolve a Reliability Conflict of Interest

1. Identify reliability conflicts of interest
2. Create a plan to eliminate the conflict or at least balance the incentives by including reliability performance elements
3. Create reliable products
4. Help others to stop using MTBF (had to throw that in, even if not related.)

What has worked for you to expose and reduce reliability conflicts of interest? Use the comments section below and share your success stories so others can make progress as well.