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Stephen Bagby

Cost Culture Update. 2009 PDI – Army 27 May 2008. Stephen Bagby. Army Cost Culture Update. Increased Leadership Commitment Establish Cost Management Process & Provide Guidance Costing In GFEBS Training & Career Development Designed Enterprise Cost Management Framework

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Stephen Bagby

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  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 Organization Leadership Doctrine Personnel Facilities Materiel Training • 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 (PA&E) 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 Valueto Customers. Cost Measurement Cost Management Process Cost Planning Cost Analysis Cost Controlling

  8. 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 Army’s 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/593701

  9. 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 .

  10. 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 SupportsSupportsOperational Decision Making & Analysis Full Cost Organizations Full Cost Product/Services Full Cost Customers SSPs: Provide clothing, Issue OCIE, etc IMCOM: Director of Logistics • Tenants: • School • Brigade Courses: Mission technique classes, combative training TRADOC: Ranger School - Division / BCT - MOS - FMS - Ready Unit - Capability FORSCOM: 1st Brigade Combat Team Mission Commander

  12. Capture Cost by Organization • IMCOM Installations • TRADOC Schools • FORSCOM Brigades

  13. Capture Cost by Product/Service and Customer Cost of Installation Services Provided to Tenants BCT Cost by Resources Consumed

  14. Integrates Cost Measurement and Analytics Cost Reporting by Multiple Views (Cost Objects) Graphic Display Exportable to Excel for Analysis

  15. Provides Multiple Analytical Cost Views • - Cost Comparison • Benchmarking • - Forecasting • - Variance Analysis • Controlling • - Cost Planning • - Trend Analysis • Cash Flow • Operational • Cost Mgmt

  16. 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

  18. Cost Management 101 • Day 1: Cost Management Overview • Understanding of why managing costs are important, Army’s 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.

  19. Cost Competency Matrix

  20. Cost Competency Matrix

  21. Cost Competency Matrix

  22. Cost Competency Matrix

  23. 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. Services & Infrastructure Human Capital Materiel Objective: Efficient Delivery of Outputs Improve ARFORGEN: Effective and Efficient delivery of Trained and Ready Forces 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

  26. Cost Management Construct Enterprise Resource Management X Managing Funds to Ensure Strategic Objectives are Effectively Resourced Managing Resources to Effectively and Efficiently Produce Outputs to Achieve Strategic Objectives X X Heavy ARFORGEN Stryker Stryker Light Light Human Capital Services & Infrastructure Materiel Readiness Program / Budget Construct Core Enterprises OA / MDEP Products/Services Organizations (Cost Centers) Resources (Labor, Equipment, Assets)

  27. Army Cost Management Framework HBCT SBCT IBCT ARFORGEN Available / Deploy Train / Ready Reset • Command & Intelligence • Operating Forces • Train Units • Operations & Activities Readiness • Depot Maint / Repair of Mil Eqt • Ordnance • S&T and R&D • Systems Acquisition, T&E, • 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

  28. RIGHT FORCE . . . RIGHT READINESS . . . RIGHT COST . . . RIGHT TIME . . . . . . TODAY, AND IN THE FUTURE ARFORGEN Readiness Core Enterprise Requirements /Risks OUTPUT = READINESS COST Process Owner Cost Benefit Analysis Provides Products / Services • Sample Types of Analysis Include: • Organizational Performance • Analysis of Alternatives • Variance Analysis • Business Case Analysis • Cost / Risk Assessments

  29. ARFORGEN Readiness Core EnterpriseCascading Through Processes Requirements /Risks OUTPUT = READINESS COST Organization Level 1 Process Owner Cost Benefit Analysis OUTPUT = READINESS COST Organization Level 2 IBCTs Ready Process Owner Cost Benefit Analysis Organization Level 1 OUTPUT = READINESS COST IBCT Ready Process Owner Cost Benefit Analysis

  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 THEATER STRATEGIC OBJECTIVES OPERATIONAL 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 ARCENT’s business processes Determine relationship among readiness, capacity, cost & requirements Implement 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

  32. 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

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

  34. 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) • FM&C Website • AKO Cost Management COP https://www.us.army.mil/suite/page/593701

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