Army Cost Management Enterprise

1
Cost Culture Update
2009 PDI Army27 May 2008
Stephen Bagby
2
Army Cost CultureUpdate

• Increased Leadership Commitment
• Establish Cost Management Process Provide
  Guidance
• Costing In GFEBS
• Training Career Development
• Designed Enterprise Cost Management Framework
• Cost Culture in Theater of Operations

X
3
Senior Leader Commitment
Redouble efforts of good stewardship of
resources
inculcate cost culture
shrink and share
GEN George W. Casey, Jr., HON Pete Geren, SA ALL
ARMY
GEN David Petraeus CENTCOM COMMANDERS
GEN Raymond Odierno COMMANDERS, MNF-I
4
Incorporating Cost Into DOTMLPF

• Business Case Analysis
• Forum/ Decision Point
• Independent Chair

5
Congressional / OSD Commitment Acquisition Reform
Act

• New OSD Director of Cost Assessment Program
  Evaluation

Director of Program Analysis Evaluation (PAE)
Director of Cost Assessment Program Evaluation
Cost Assessment
Program Evaluation

• Trade-Offs Among Cost, Schedule, Performance
  Objectives
• Authority to Challenge Acquisition / PPBES /
  Requirements
• Reports to Congress 10 Days After Budget

6
Army Cost CultureUpdate

• Increased Leadership Commitment
• Establish Cost Management Process Provide
  Guidance
• Costing In GFEBS
• Training Career Development
• Designed Enterprise Cost Management Framework
• Cost Culture in Theater of Operations

X
7
Cost Management Process
Cost Management - Managing Business Operations
Effectively Efficiently Through the Accurate
Measurement Thorough Understanding of the
Full Cost" of an Organization's Business
Processes, Products Services in Order to
Provide the Best Value to Customers.
Cost Measurement
Cost Management Process
Cost Planning
Cost Analysis
Cost Controlling
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Cost Management Handbook
Standard Rates
Full Cost
Depreciation
Overhead / Allocation
Master Data For Cost Model
Labor Tracking
Contract Cost Tracking
The Office of the Deputy Assistant Secretary of
the Army (Cost Economics) DASA-CE is the
Armys proponent for cost policy. Please refer
to the Cost Management Community of Practice for
the current version of the Army Cost Management
Handbook https//www.us.army.mil/suite/page/593
701
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Definition of Cost Management Success
ARMY COST MANAGEMENT


Integration with Quality/Productivity
MATURITY MODEL

Improvement


5.0
Version 10 4 June 2008


Knowledge Sharing / Best Practices
Enterprise Perspective


4.0

3.0


2.0
Leadership Commitment
Data Quality
1.0
0.0

Workforce Competencies
Process Integration

Acceptance Attitude
Accountability / Performance Mgmt
Actual
Target
The Office of the Deputy Assistant Secretary of
the Army (Cost Economics) DASA-CE Developed
the Army Cost Management Maturity Model Jun 2008
to Assess Level of Cost Management Activity
across Army Organizations .
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Army Cost CultureUpdate

• Increased Leadership Commitment
• Establish Cost Management Process Provide
  Guidance
• Costing In GFEBS
• Training Career Development
• Designed Enterprise Cost Management Framework
• Cost Culture in Theater of Operations

X
11
GFEBS Cost Structure Supports Supports
Operational Decision Making Analysis
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Capture Cost by Organization

• IMCOM Installations
• TRADOC Schools
• FORSCOM Brigades

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Capture Cost by Product/Service and Customer
Cost of Installation Services Provided to Tenants
BCT Cost by Resources Consumed
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Integrates Cost Measurement and Analytics
Cost Reporting by Multiple Views (Cost Objects)
Graphic Display
Exportable to Excel for Analysis
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Provides Multiple Analytical Cost Views
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Army Cost CultureUpdate

• Increased Leadership Commitment
• Establish Cost Management Process Provide
  Guidance
• Costing In GFEBS
• Training Career Development
• Designed Enterprise Cost Management Framework
• Cost Culture in Theater of Operations

X
17
Training Opportunities
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Cost Management 101

• Day 1 Cost Management Overview
• Understanding of why managing costs are
  important, Armys overall objectives, the process
  of Cost Management, how it differs from Budget,
  and key cost terms
• Day 2 Cost Object Definition
• Understanding of an ERP, how to build a Cost
  Model, and the various cost objects within a Cost
  Model (e.g. organization, products, job orders,
  etc.)
• Day 3 Assignment of Costs
• Understanding of cost allocations/assignments,
  how to chose which to utilize when, how to
  valuate the results of the assignments (Std. vs
  Actual), and rate creation
• Day 4 Analysis and Reporting
• Understanding of the results of the Cost Model
  and how various types of analysis and decisions
  are supported

Training Designed for Pre-GFEBS Deployment for
Resource and Operational Managers. Provides
Common Understanding of Definitions, Concepts,
Methodologies and Principles.
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Cost Competency Matrix
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Cost Competency Matrix
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Cost Competency Matrix
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Cost Competency Matrix
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Cost Competency Matrix
24
Army Cost CultureUpdate

• Increased Leadership Commitment
• Establish Cost Management Process Provide
  Guidance
• Costing In GFEBS
• Training Career Development
• Designed Enterprise Cost Management Framework
• Cost Culture in Theater of Operations

X
25
Enterprise Governance
Secretary of the Army
Chief of Staff of the Army
CE Core Enterprise
Army Enterprise Board
Process Teams
HQDA (Secretariat ARSTAF)
Trained and Ready Forces for the Combatant
Commanders
ARFORGEN
Readiness
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Enterprise Resource Management
Managing Funds to Ensure Strategic Objectives are
Effectively Resourced
Managing Resources to Effectively and Efficiently
Produce Outputs to Achieve Strategic Objectives
Human Capital
Services Infrastructure
Materiel
Readiness
Program / Budget Construct
Core Enterprises
OA / MDEP
Products/Services
Organizations (Cost Centers)
Resources (Labor, Equipment, Assets)
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Army Cost Management Framework
HBCT
IBCT
SBCT
ARFORGEN
Available / Deploy
Train / Ready
Reset

• Command Intelligence
• Operating Forces

• Train Units
• Operations Activities

Readiness

• Depot Maint / Repair of Mil Eqt
• Ordnance
• ST and RD
• Systems Acquisition, TE,
• Engineering, and Contracting

• Research
• Procure
• Sustain
• Distribute
• Dispose

Materiel
Cost Framework
Program Framework

• Civ Education / Training
• Civ Personnel Svcs
• Mil Education / Training
• Mil Personnel Svcs
• Prof. Development Educ.

• Acquire Train
• Manage (Pay) Distribute
• Develop Educate
• Force Development

Human Capital

• Community Family Svcs
• Environmental Security
• National Resource Svcs
• Health Svcs
• Installation / Facility Mgt

• Facility
• Installation
• Command Programs
• Centrally Managed Programs

Services Infrastructure
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Readiness Core Enterprise
Requirements /Risks

• RIGHT FORCE . . .
• RIGHT READINESS . . .
• RIGHT COST . . .
• RIGHT TIME . . .
• . . . TODAY, AND IN THE FUTURE

OUTPUT READINESS COST
Cost Benefit Analysis
Process Owner
Provides Products / Services

• Sample Types of Analysis Include
• Organizational Performance
• Analysis of Alternatives
• Variance Analysis
• Business Case Analysis
• Cost / Risk Assessments

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Readiness Core EnterpriseCascading Through
Processes
Requirements /Risks
OUTPUT READINESS COST
Organization Level 1
Cost Benefit Analysis
Process Owner
OUTPUT READINESS COST
Organization Level 2
IBCTs Ready
Cost Benefit Analysis
Process Owner
Organization Level 1
OUTPUT READINESS COST
IBCT Ready
Cost Benefit Analysis
Process Owner
30
Army Cost CultureUpdate

• Increased Leadership Commitment
• Establish Cost Management Process Provide
  Guidance
• Costing In GFEBS
• Training Career Development
• Designed Enterprise Cost Management Framework
• Cost Culture in Theater of Operations

X
31
USARCENT G8 Theater FM Strategy
MISSION USARCENT G8 Proactively Shapes Financial
Environment While Simultaneously Providing
Uninterrupted Support to the USCENTCOM AOR
TASK Lines of Effort
Objectives
Ends

OPERATIONAL OBJECTIVES
THEATER STRATEGIC OBJECTIVES
(1) Single RM entry into CENTCOM
AOR (2) Leverage Theater-wide FSO
capabilities (3) Unburden JTF Staffs (4) Achieve
FM unity of effort
Deploy 20 FM automated systems in use in CONUS
e-Commerce Integrate cost management, analysis,
planning into decision making process Measure
articulate full cost of ARCENTs business
processes Determine relationship among
readiness, capacity, cost requirements Implemen
t new FM doctrine throughout Theater
Shape, Build, and Promote Desired FM
Effects Trained Ready FM Community to Conduct
Full Spectrum Operations US Title 10 Support to
CJOA, AFORs Joint Enabled Logistics
Deploy / Maintain FM Battle CMD Sys
Establish a Cost Culture in CENTCOM AOR
Determine Cost of Readiness Effects
Develop Revise FM Doctrine
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Costers Who We Are

• Costers are chartered by the Deputy Assistant
  Secretary of the Army for Cost and Economics
  (DASA-CE) and ARCENT C8 to provide cost
  analysis support and promote Cost Culture
• Projects since October 2008
• Science Project - Modeling Requirements,
  Readiness, Capacity and Cost (R2C2)
• Cost of ARCENT and Cost of War
• Re-Balancing an Army at War
• Afghanistan Buildup
• FY 09-11 Budget Submission
• Contractors in Theater
• Afghanistan TPE and Forward Repair Activity
• ARCENT Retrograde of OIF Drawdown
• CARB Cost Validation
• Deployed OIF OEF Direct Staff Support

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Relating Requirements, Readiness, Capacity Cost
Start Point - Current
Step 1 - Adjust Capacity
Step 2 - Decrease Requirement
Description Initial conditions in theater had
readiness at 100 and excess capacity
Description The industrial capacity is reduced
with little to no effect on readiness. This
achieves balanced capacity with a cost avoidance.
Description Decreased requirement and a shift
of readiness from 100 to 90 provides additional
capacity that can be reduced for a cost
avoidance.

• Fixed - Operational Readiness
• Fixed - Operational Requirement
• Fixed - Industrial Capacity including excess

• Fixed - Operational Readiness
• Fixed - Operational Requirement
• Adjust - Industrial Capacity to be optimized

• Fixed - Operational Readiness
• Adjust - Operational Requirement
• Fixed - Industrial Capacity optimized

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Cost Analysis Resources

• GFEBS General Fund Enterprise Business System
• Automated Cost Estimating Integrated Tools
  (ACEIT)
• Operating Support Management Information System
  (OSMIS) https//www.osmisweb.army.mil
• FORCES (CONOPS) Cost Models
• Army Military-Civilian Cost System (AMCOS)
• Automated Cost Data Base (ACDB)
• Joint Integrated Analysis Tool (JIAT)
• Capabilities Knowledge Base (CKB)
• FMC Website
• AKO Cost Management COP https//www.us.army.mil/s
  uite/page/593701