US army : cost saving initiatives

THE EFFICIENCY CHALLENGE

Becoming more efficient is the third major challenge confronting America's Army. By becoming efficient, the Army intends to garner savings to help ensure it can maintain a force structure commensurate with operational commitments, to increase investment in essential modernization programs, and to increase spending in our vital quality of life programs.

By taking advantage of technological advances, streamlining our processes, and reorganizing our institutions the Army can gain significant savings and improve effectiveness and efficiency. In this era of constrained resources, the Army is emphasizing financial stewardship at every level. We must demonstrate that we are good stewards of the nation's resources and of the taxpayers' investment in us. The Army is aggressively seeking to maximize scarce resources by fundamentally changing our operating practices. Just as private businesses have become more efficient by modifying internal operations, the Army is reexamining every aspect of its operations and activities. We are exploring all reasonable avenues to provide commanders with opportunities to avoid costs and to generate savings. We are reviewing our business practices, revising our policies, and proposing legislative changes. Motivated by the National Performance Review, we are already implementing new policies designed to make government work better and cost less.

Governmental Initiatives

The National Performance Review

In the spring of 1995, the National Performance Review entered its third year by continuing toward its goal of a more efficient, effective, and productive government. This review - designed to make government work better and cost less - challenges the Army to shift from rules to results, to insist on customer satisfaction, to decentralize authority, and to focus on core missions. We continue to work directly with the Department of Defense and other Federal agencies to address specific cost-cutting initiatives, such as streamlining our work force, improving customer service, implementing acquisition reform, and reducing regulations. All major Army commands are working on reengineering and redesign initiatives that will institutionalize a high quality approach to managing organizational change. One provision of the National Performance Review charters reinvention laboratories. This process allows agencies to test new ways of doing business. Reinvention labs demonstrate the immediate benefits of freedom from red tape and provide incentives to operate more efficiently. In the last year, the Army intensified its efforts in this area by increasing the number of Reinvention Labs. Even more significant, the Army created the only two Reinvention Centers within the Defense Department (one each at Training and Doctrine Command and Forces Command). This designation provides broad powers to the commanders of those organizations to establish their own reinvention labs, to waive regulations in support of reinvention, and to coordinate directly with the Department of Defense regarding legislative changes necessary to support reinvention. Clearly, Reinvention Centers will expedite the reform process.

Waivers of existing regulations and instructions to support better business practices are another important tool in the Army's efforts to implement measures associated with the National Performance Review. In August 1994, the Army implemented a new policy to waive restrictive Army regulations that impede good business practices. In order to conserve and focus resources for America's 21st century Army, we must continue to generate, test and implement efficient business practices.

The Chief Financial Officers Act of 1990

The Chief Financial Officers Act of 1990 introduced a new era of financial management reform and represented a significant shift from appropriation-based management to private industry standards. A significant provision of this act requires audited annual financial statements for revolving funds, trust funds, and substantially commercial functions. The Army, as one of only ten federal agencies designated a pilot under this law has prepared audited annual financial statements covering all Army funds since fiscal year 1991. The Government Management Reform Act of 1994 expands the requirement for agency-wide financial statements to all agencies covered by the CFO Act, beginning in fiscal year 1996.

The Army set the standard for financial management reform within the Defense Department and continues to implement the Chief Financial Officers Act aggressively. Successful Army-led initiatives include revised policies on physical inventory, the valuation of assets, the incorporation of outcome-oriented performance measures, and restructuring of the management control process.

The Government Performance and Results Act of 1993

The Government Performance and Results Act is a major step in the inevitable transition to results-oriented program management and performance budgeting. This act builds on the legislative mandate to measure performance and to manage functional programs with accurate financial data that began with the Chief Financial Officers Act. The purpose of the Government Performance and Results Act is to improve program effectiveness and aid congressional decision making by systematically holding federal agencies accountable for program results. The law requires strategic plans and annual performance plans beginning in fiscal year 1997.

The Act also requires a series of pilot projects. The first, known as Performance Measurement, tests the costs and benefits of strategic planning, performance-based planning, and performance measurement. Of the approximately 70 pilot projects, three are in the Army: the U.S. Army Research Laboratory, U.S. Corps of Engineers Civil Works National Operation and Maintenance Program, and the U.S. Army Audit Agency.

Becoming More Efficient
The Army is developing an Army-wide efficiency strategy to generate revenues for reinvestment. We will use industry efforts as examples for the Army's business operations. We are reviewing all of our processes, programs, and organizations. We have established a senior level Efficiency Working Group, initiated several cost-saving initiatives, and have embedded within the organization a management philosophy known as Total Army Quality.

Redesigning the Institutional Army

The Army is also becoming more efficient by fundamentally redesigning and reengineering its institutional forces - the infrastructure that supports the Army's functions under Title 10 of the U.S. Code. This effort, which is part of the Force XXI process and is linked to the national military strategy and the Commission on Roles and Missions, will eliminate unnecessary layering of functions and headquarters. We are conducting top-to-bottom assessments of the institutional processes in all functional areas. We will reduce the number of major Army commands, divest the Army of those functions that are not absolutely essential, and reallocate resources to support our core capabilities.

At the same time, we are conducting comprehensive reviews of all our headquarters field operating and staff support agencies. Each will be rigorously scrutinized, and we will consider eliminating, consolidating or transferring out as many as possible. We expect to reduce significantly the number of headquarters agencies, and we will explore every opportunity to privatize or out-source a number of administrative support functions.

In support of the redesign effort, we have initiated some ancillary reviews to identify cost saving initiatives both across the Army and specifically in the acquisition and modernization processes. These initiatives will increase efficiency and effectiveness.

Efficiency Working Group

Another way in which the Army is developing ways to garner savings is through a recently established senior-level Efficiency Working Group. During the Program Objective Memorandum (POM) 97-01 update, it became evident that the Army could not sustain essential modernization, improve quality of life, and maintain an endstrength of 495,000 active duty personnel while conducting business as usual. Accordingly, the Army began earnestly reviewing policies and procedures to identify potential efficiencies. The Army's goal is to generate significant savings each year by driving down the cost of doing business, husbanding constrained resources, reengineering the Army throughout the breadth and depth of the organization, and continuing to adopt sound business practices.

The Army Chief of Staff charged the Deputy Chief of Staff for Operations and Plans with carrying out this efficiency review. He established a senior-level review group to identify specific, quantifiable areas from which to garner savings. The Army Audit Agency and the Cost and Economic Analysis Center are reviewing and validating proposals developed by the working group. After approval by senior leaders, the Army will implement worthy initiatives.

Total Army Quality

In 1992, the Army adopted a new management philosophy: Total Army Quality. This philosophy is now well established in all major Army commands. This fundamental cultural change will produce organizations capable of anticipating and leading change rather than simply responding to it. Our new quality-conscious culture will be characterized by the following:

Senior-level leadership and guidance - manifested in organizational visions, mission statements, and definitions of core competencies and processes.

Customer focus - all of our organizations will focus on their customers and fully understand the customers' requirements and needs.

Empowered employees - because no one can better improve the processes than those who work within them every day.

Continuous improvement - every unit must be capable of continuous improvement.

Recently, three Army organizations were recognized in the 1995 President's Quality Award Program. The Army dominated the awards by having three of the best five organizations in the Federal sector. All three are part of the Army Materiel Command: the Red River Army Depot and the Armament Research, Development and Engineering Center both won in the Quality Improvement Prototype category, and the Tank-Automotive Research, Development and Engineering Center won in the Presidential Category. In order to win, organizations must prove that they have made world-class improvements in efficiency and cost effectiveness.

We will not rest on our laurels. In an effort to accelerate implementation of quality management, the Army is implementing the Army Performance Improvement Criteria. These organizational assessment criteria are derived from the Malcolm Baldridge National Quality Award. They assess all aspects of an organization's operations, including leadership, human resource development, process management, operational results, and customer satisfaction.

Cost Saving Initiatives
While we continue to search for additional, innovative ways to generate savings, we are now benefiting from several programs and initiatives we instituted over the past several years. Initiatives such as Total Asset Visibility and acquisition reform are making the Army more efficient, productive, and cost-effective today, and they promise to generate increased savings in the years ahead.

Total Asset Visibility

Total Asset Visibility is a comprehensive Army program that improves the Army's ability to obtain and act on information about the location, quantity, condition, and movement of our assets. This effort enables the Army to track the flow of equipment and supplies continuously, whether they are in production, at a repair depot, in the inventory, or on the move between various locations. This capability allows the Army to get the right item to the right location at the right time, to redistribute assets to meet needs, to divert in-transit assets when required, and to avoid buying unnecessary items. To track assets, we use automated identification technologies, such as bar coding, laser optical cards, and radio frequency tags and readers. These tools provide rapid and accurate data capture, retrieval, and transmission.

With Total Asset Visibility, the Army has made significant gains in providing information to managers who can reduce new item procurement, improve the use of available assets through redistribution, and improve command and control decisions. Through this system, Army managers can track over 311,000 items representing 90 percent of the Army's supplies. In 1995, Government Executive magazine, which recognizes innovative technology-related programs within the federal community, selected TAV from more than 330 nominations as one of the winners of the Federal Technology Leadership Award.

Manpower and Personnel Integration

Through Manpower and Personnel Integration (MANPRINT), we are integrating systems with soldiers. This initiative ensures that systems are designed around the soldiers who will use them by assessing the impact of system design on individual operators and maintainers, the fighting unit, and the force as a whole. MANPRINT defines manpower and personnel requirements, minimizes the need for redesign, identifies and implements effective training technologies, and enhances soldier safety, health and survivability. The goal is to balance design factors which optimize life cycle costs, force structure requirements, and combat effectiveness.

MANPRINT is forward looking: it addresses the design of future systems today and accounts for projected changes in the structure and technology of tomorrow's Army. MANPRINT systematically identifies essential knowledge and skills, provides the necessary training, and ensures systems maximize the effectiveness of human resources.

The Comanche helicopter is an excellent example of MANPRINT's contributions to system design. Its cockpit is designed to support the full range of size and motion of both male and female pilots. By modularizing components, we have decreased maintenance requirements and we will reduce the risk of damage to surrounding components. By applying the MANPRINT process early, we have saved in excess of three billion dollars.

Integrated Sustainment Maintenance

Integrated Sustainment Maintenance (ISM) integrates, under a single management structure, all Active and Reserve Component General Support maintenance units, installation Directorate of Logistics facilities, maintenance depots, and defense contractors who perform maintenance on weapon systems. ISM streamlines maintenance and repair activities by centrally managing all Army sustainment maintenance workloads. This integration of maintenance levels ensures the best use of maintenance skills and reduces costs by eliminating redundant layers of management and maximizing the Army's sustaining base repair capability. ISM provides a focused logistics effort and permits greater workload distribution resulting in a more effective, efficient use of the Army's total maintenance capability.

A nine month test of the ISM program concluded in 1994 was so positive that the Army decided to commence an expanded demonstration in 1995. This ongoing demonstration is evaluating procedures for expanding ISM across major Army commands and establishing the roles and functions of national level sustainment management. Final details for implementing ISM throughout the Army are expected to be presented to senior Army leaders for approval in 1996.

Acquisition Reform

The Army is teaming with the Defense Department and industry to improve our acquisition process by promoting innovation, good business judgment, and by changing laws, regulations, and processes that impede smart practices. Army acquisition reform efforts are directly linked to initiatives in the National Performance Review. Each year, the Army places over $32 billion on contract. Everyone involved in determining requirements and acquiring equipment, supplies, and services for soldiers, their families, and our civilian employees must work together to improve our contracting practices. Implementing acquisition reform initiatives will provide the Army with excellent opportunities to stabilize requirements and programs, and provide savings for modernization, readiness, and quality of life initiatives.

In an effort to cut red tape, the Army provided resources directly to Program Executive Officers and Program Managers, eliminated unique government requirements for Army contracts, mandated compliance with the Army Technical Architecture, and reduced data and management reports in Army contracts. By specifying how a system should perform instead of specifying how it should be manufactured, the Army has saved precious funds on weapon systems, such as the COMANCHE helicopter, and routine maintenance contracts at Army installations. The Army also has established a preference for commercial items, which generally cost much less than items made to unique military specifications. Our dedication to real, lasting acquisition reform is reflected in our training program: we have trained over 5,000 personnel through our acquisition training seminars known as "Roadshows," and we are developing career path training programs for Army acquisition personnel.

We have fostered significant acquisition successes by streamlining and reengineering our acquisition programs. Working under the new Federal Acquisition Streamlining Act, we will be able to reduce documentation and oversight and remove many of the legal barriers that preclude much of the industrial base from selling to the Army. Our acquisition reform initiatives allow us to save money and, more importantly, to provide soldiers with new equipment more quickly.

We have developed many of the Army's reengineering successes through Cooperative Research and Development Agreements. These agreements are new mechanisms for the development and transfer of technology between the Army, academia, and private industry under which we provide purpose and overhead while academia and industry research technological advancements.

The Army Material Command, a major Army command responsible for equipping and sustaining the Army, also has instituted numerous programs and initiatives to improve the acquisition process. One, known as Direct Vendor Delivery, allows vendors to deliver directly to the ultimate user. In a two-year pilot program, the Tank-Automotive and Armaments Command has received 75 percent of its tires directly from vendors at a savings of more than $45 million. Another initiative, the purchasing of nondevelopmental items that are available commercially instead of developing, testing and evaluating new systems, has saved the Army over $400 million.

Other Commands have also instituted innovative reforms that are producing savings. Medical Command has used the Prime Vendor concept to improve their delivery of quality medical services at a reduced cost. This concept allows a single supplier to distribute a specified class of commercial supplies in a given geographical area. Orders are placed electronically and the Army is able to maintain minimal stocks as the prime vendor provides just-in-time delivery to meet requirements. Along with increased use of electronic commerce in contracting, the Army is the largest user of the credit card within the federal Government. Our credit card usage increased three-fold in FY95. The Army hopes to achieve a savings of over $76 million in FY96 by using credit cards in lieu of purchase orders.

These initiatives are among the many approaches the Army is taking to reform and improve the acquisition process. Acquisition reform enables us to leverage resources, thereby creating significant savings needed for developing our 21st century Army.

Other Examples

The Army has undertaken many other efforts to save money. Throughout the drawdown, we have been converting underutilized facilities to commercial use. The Army had been spending $3 million annually to maintain the Indiana Ammo Plant. By leasing the plant's facilities, equipment, and land to over 43 commercial companies, the Army avoids those costs. Our success at the Indiana Ammo Plant is a model for defense conversions.

By establishing Material Redistribution Centers, we have generated significant savings. These centers streamline the procedures for collecting and redistributing excess equipment from deactivated units. Thus far, we estimate that these centers have precluded expenditures of $74 million in operations and maintenance.

Army family housing is adopting the Business Occupancy Program to improve efficiency and generate savings. Under this program, family housing funding will no longer be based on the number of units in an installation's inventory. Instead, installations will be funded for housing based solely on occupancy. Housing managers can improve the condition of housing with stable funding and remove uneconomical units from the inventory by divestment or demolition. In addition to saving money, this program will enable soldiers to live in high quality on-post housing.

Conclusion
The Army is rapidly becoming more efficient in virtually all of its business practices. Readiness, essential modernization, and quality of life improvements for our deserving soldiers require money. The challenge is difficult, but by streamlining operations, adopting suitable commercial practices, and reorganizing our processes and programs, we have a significant "window of opportunity" to generate savings. Several programs and initiatives are already saving money, and those savings will increase exponentially as they continue to be implemented Army-wide.

Even with the many initiatives currently in effect and the promise of more to come, the Army requires the support of the President and Congress. We need continued legislative support in repealing statutes that inhibit efficiency, and we must be able to retain the savings we garner for investment in readiness, modernization, and quality of life.

Source : United States Army - 1997

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