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Clinton Presidential Records
Digital Records Marker
This is not a presidential record. This is used as an administrative
marker by the William J. Clinton Presidential Library Staff.
This marker identifies the place of a tabbed divider. Given our
digitization capabilities, we are sometimes unable to adequately
scan such dividers. The title from the original document is
indicated below.
DEFENSE
Divider Title:
THE DEPARTMENT OF DEFENSE
AGENCY TEAM REPORT
NATIONAL PERFORMANCE REVIEW
INTERNAL WORKING DOCUMENT -- NOT FOR DISTRIBUTION
August 6. 1993
TABLE OF CONTENTS
Page
I. Introduction
1
П. Issue Papers and Recommendations
7
A. Shifting from Red Tape to Results
8
Issue 1: Rewrite Policy Directives to Include Better Guidance and
Fewer Procedures
9
Issue 2: Establish a Unified Budget for the Department of Defense
14
B. Introducing Market Dynamics
18
Issue 3: Purchase Best Value Common Supplies and Services
19
Issue 4: Outsource Non-core DoD Functions When It Makes
Economic and Operational Sense
22
Issue 5: Create Incentives to Find Revenues
31
Issue 6: Establish and Promote DoD's Productivity-Enhancing Capital
Investment Fund
43
C. Creating a Quality Management Culture
46
Issue 7: Create a Healthy and Safe Environment for DoD Activities
47
Issue 8: Establish of Defense Quality Workplace
53
D. Now Is the Time
58
Issue 9: Give DoD Installation Commanders More Authority and
Responsibility Over Installation Management
59
Issue 10: Reduce DoD Support of the Drug Interdiction Program
73
Issue 11: Reduce National Guard and Reserve Costs
81
Issue 12: Streamline and Reorganize the U.S. Army Corps
of Engineers
8
III. Agency Reinvention Activities
9
IV. Fiscal Impact Summary
9
Section I
Introduction
THE DEPARTMENT OF DEFENSE
Congress established the War Department in 1789 to provide for the common de-
fense. The Department of Defense (DoD) replaced the War Department in 1949. A cabi-
net-level organization, DoD is comprised of 16 Defense agencies and three military depart-
ments: the Army, Navy, and Air Force. Subordinate to these departments are the four
branches of the armed services: the Army, Navy, Air Force and Marine Corps. While the
military departments are responsible for recruitment, training, and logistics involving the
armed services, the Goldwater-Nichols Department of Defense Reorganization Act of 1986
placed operational control over the chain of command squarely upon the shoulders of the
unified and specified commanders-in-chief.
DoD is also this country's single largest employer with 1.9 million active duty
military personnel, 1.8 million in the National Guard and Reserves and 1.0 million civilian
employees.
DoD's fiscal 1993 budget was $259.1 billion and accounted for 18 percent of the
total national budget.
With the advent of the Gorbachev Era, the strategic and tactical missions of the De-
partment of Defense began to change. The collapse of the Warsaw Pact, the democ-
ratization-of Eastern Europe and the demise of the Communist-controlled Soviet Union
have led to a radical change in the way defense missions are being analyzed. The threat of
nuclear holocaust greatly diminished with the end of the Cold War. This change has
necessitated a new national defense policy for the 21st century.
As the risk of a High Intensity Conflict (e.g., a global or a nuclear war) has
diminished with the collapse of the Soviet Union, DoD is realigning its mission areas.
Current DoD doctrine recognizes that the threats of the future will more likely consist of
medium and low intensity regional conflicts (e.g., Somalia, the Balkans). In these
situations, the U.S. would be only one of the world's nations called upon by the United
Nations to provide military and humanitarian assistance.
The DoD budget has significantly declined in real terms since 1985. By 1997, the
Defense budget will decline by more than 40 percent. The Defense budget authority is
projected to decline from $259.1 billion in fiscal 1993 to $240.5 billion in fiscal 1998.
In fiscal 1992, DoD employed 1.8 million military personnel on active duty with
another 1.1 million in the Ready and Standby Reserves. With the current cutbacks in
military personnel, DoD is expected to eliminate 30 percent of its active duty personnel.
By 1994, the projected decrease will reduce DoD personnel to 1.6 million active military,
1.0 million reserve and national guard and 0.9 million civilians.
In fiscal 1992, DoD had more than 560 military installations and properties. About
470 of these are located in the United States, and approximately 91 are overseas in 20
countries and eight U.S. territories. Nearly one-third of all active duty personnel are
stationed outside the United States. The recommendations of the 1993 Defense Base
Closure and Realignment Commission (BRAC) included the closure of 31 major bases, the
realignment of 12 major bases and reductions to 122 smaller bases and activities for a
savings of $3.1 billion per year.
The current downsizing of the military emphasizes the need to develop innovative
business practices that will result in a more flexible and effective DoD. A greater reliance
on the private sector to perform many administrative and overhead duties would reduce the
number of employees at DoD. The National Performance Review (NPR) has identified
opportunities when greater use of the private sector is more cost effective or improves
customer service.
DoD has also initiated a significant internal program called the "Bottom-Up"
Review. This review is a comprehensive effort by DoD to identify specific military
programs where DoD can achieve significant cost savings without affecting the integrity of
current core mission requirements.
The Office of the Secretary of Defense is being completely restructured. More than
two dozen divisions that formerly operated autonomously were pared to five basic parts.
Under the new plan, four of the five Pentagon divisions--Acquisition and Technology,
Policy, Comptroller and Personnel and Readiness--will be headed by under secretaries. The
fifth will be headed by the Assistant Secretary of Defense for Command. Control.
Communications and Intelligence.
DoD is also pursuing acquisition reform to identify improvements in acquisition
practices. The DoD Acquisition Law Advisory Panel's Section 800 Report submitted to the
Senate and House Armed Forces Committees represents the first step in defining a
streamlined, sensible and coherent set of acquisition laws. The submission ensures
necessary levels of congressional oversight and control without significantly burdening the
process with unnecessary regulation. This action, if enacted, will have a major impact on
Defense's ability to follow smart business practices and outsource where it makes
operational and economic sense. A key facet of this reform will be the use of commercial
specifications versus military to the maximum extent possible. This should serve to lower
product/service cost and, in turn, make the market place more competitive.
In conjunction with NPR, DoD initiated its own Defense Performance Review
(DPR). Working in cooperation, the NPR and DPR have developed 12 initiatives which are
addressed in this report. These initiatives seek to improve DoD's ability to meet its mission
requirements in the most efficient and cost-effective means as possible. Along with the
Bottom-Up Review, the NPR/DPR initiatives represent a comprehensive effort by DoD to
manage itself in a more entrepreneurial manner.
Shifting from Red Tape to Results
The weight of more than 10,000 directives and 470,000 pages of intermingled policy
guidelines and highly detailed procedures has stifled innovation and efficiency within DoD.
The downsizing of DoD has reduced the ability of its employees to "get the job done" as
they are overburdened with a policy-guidance structure that has created an overcentralized
bureaucracy where policy makers try to cover all possible situations and managers futilely
attempt to prevent error by adding new levels of directives every time a mistake is found.
This massive inundation of paper severely limits inventiveness and creativity within DoD.
The principle of "steer better, row less" requires centralized policy-making and
decentralized policy execution as well as revision of policy directives include better
guidance and fewer procedures. An initiative has been developed to replace the old
paradigm of rigid bureaucracy which is resilient to change to a new paradigm of flexibility
and adaptability where employees are empowered rather than shackled.
To remedy this problem. the NPR/DPR are proposing innovative programs to clarify,
and where possible, reduce DoD policy directives. manuals and procedures. Through the
following initiatives, DoD is seeking to "steer better and row less":
Rewrite Policy Directives to Include Better Guidance and Fewer Procedures
Establish a Unified Budget for the Department of Defense
Introducing Market Dynamics
As its budget decreases, DoD must obtain the most value out of the funds it is
given. As a buyer of supplies and services, DoD will have to carefully analyze its
procurement processes in order to make them more competitive and cost effective. For
example, DoD should explore the use of outside providers if quality supplies or services
can be obtained faster and cheaper. Where possible, DoD will have to explore methods to
generate income or obtain reimbursement. In effect, DoD must manage its business
activities like a business.
The initiatives identified below provide opportunities for DoD to develop programs
based upon sound business practices:
Purchase Best Value Common Supplies and Services
Outsource Non-core DoD Functions When It Makes Economic and
Operational Sense
Create Incentives to Find Revenues
Establish and Promote DoD's Productivity-Enhancing Capital Investment
Fund
Creating a Quality Management Culture
The problem with government today is that we have a very hierarchial, bureaucratic
system that is based on the needs of an industrial age government. We are in the midst of a
revolution in information technology and innovative management concepts. This new
information age will shape the demands of government into the 21st century. In order for
DoD to respond to future challenges, it must develop a management system which serves
its employees' needs and meets their expectations. These changes will make government
efficient and effective in dealing with those needs. To effect those goals, DoD must
embrace the principles of Total Quality Management and reform its constrained budget
execution process.
To this end, two initiatives are aimed at adopting a Federal Quality Workplace
within DoD to streamline the budget process:
Create a Healthy and a Safe Environment for DoD Activities
Establish a Defense Quality Workplace
Now is the Time
In light of DoD's initiative to reduce its budget, one of the goals of the NPR/DPR is
to review and identify DoD programs where change can be made to promote efficiency and
economy without sacrificing the military mission. Based on that review, DoD can initiate
changes now to major defense programs such as installation management or DoD's support
of counter drug activities while still achieving maximum efficiency and effectiveness.
The following programs were identified:
Give DoD Installation Commanders More Authority and Responsibility Over
Installation Management
Reduce DoD Support of the Drug Interdiction Program
Reduce National Guard and Reserve Costs
Streamline and Reorganize the U.S. Army Corps of Engineers
Concluding Remarks
The NPR/DPR are recommending proposals which encourage innovative change in
an environment of rapidly changing mission priorities and budgetary constraints. Along
with the Bottom-Up Review, the 12 proposals emphasize a new focus on accountability,
enhanced budgetary and management techniques and a renewed commitment to providing a
safe, quality workplace for DoD personnel.
These recommendations are part of DoD's plan to maintain a viable and resilient
military force structure capable of meeting any exigency in the future.
Section II
Issue Papers and Recommendations
Shifting from Red Tape to Results
REWRITE POLICY DIRECTIVES TO INCLUDE BETTER GUIDANCE AND
FEWER PROCEDURES
Background
The United States has succeeded as the greatest military power in the world
despite the Department of Defense's (DOD) embedded bureaucracy because of
committed people and sufficient resources to resolve major problems. Times and
available resources, however, are changing. The DOD is downsizing and cannot "get the
job done" in the same way with half-a-million fewer people. The weight of more than
10,000 directives and 470,000 pages of intermingled policy and highly detailed
procedures has stifled innovation and efficiency. The Air Force's experience in
implementing its initiative proves these publications contain many unnecessary or
needlessly restrictive procedures that shackle workers throughout the DOD.
DOD's resources are decreasing rapidly while the diversity and scope of its
missions are increasing. As resources dwindle, DOD must focus its energy on
expending its remaining resources on the right things. Better management of policy
implementation will ensure that commanders can identify and concentrate on these 'right
things.' When commanders and others lose sight of policy because it has become buried
in procedures, they become more concerned with how something is done than with what
they are supposed to do. This tendency worsens when people or units are graded on
how well they dot the 'i' and cross the 't' rather than how well their end products
achieve or support their original goal. If only procedures are measured, people will do
the procedures very well, but they may completely miss the intent of the policy.
Over time, DOD policy-guidance has grown because its bureaucracy over-
centralized, headquarters tended to decide what was best for the field, policy makers
tried to cover all possible situations and managers futilely attempted to prevent error by
adding new procedures every time an inspection or audit uncovered a mistake. DOD has
buried policy in the many detailed procedures considered necessary to "get the job
done." This growth of detailed procedures severely limits inventiveness and creativity in
finding the best. least costly and most effective means to accomplish changing missions.
Accountability decreases as errors are blamed on "procedures" or time-consuming
requests for waivers. Most important, the blurring of policy has caused a loss of focus
on the end product or goal.
The renewed thrust within the federal government to encourage more business-like
practices provides DOD an opportunity to change and to delegate responsibility and
authority to its operating levels. The principle "steer better, row less" requires
centralized policymaking and decentralized policy execution. The Office of the
Secretary of Defense (OSD) and Component (those agencies internal to OSD excluding
the service branches--the Army, Navy, and Air Force--and the Joint Chiefs) headquarters
need to focus on providing policy guidance (what), while allowing people in the field
enough latitude to determine how to carry-out that policy. To achieve a renewed,
empowering environment, the DOD must clarify its written policy and strictly limit
directives to state what the organization most wants to accomplish. DOD must purge
these directives of unnecessary, encumbering and restrictive procedures that stifle
innovation and efficiency.
The following two success stories--one from the Air Force and one from the Defense
Logistics Agency (DLA)--demonstrate that progress in clarifying policy and procedures
is possible.
The Air Force saw the need for change and acted to streamline the organization and
reduce bureaucracy. It knew that the key to success was to empower people to be
creative, accept responsibility and use initiative to seek out new, more efficient methods.
It also recognized, however, that creative efforts must focus on getting the right things
done. Policy became one of the Air Force's most effective tools. Policy provided the
focus on the "right things" and served as the guide for accomplishing the mission. The
Air Force's Policy Review Initiative served to identify and clarify the most important
things the Air Force does; set clear, concise policy; fix accountability and responsibility
and measure the accomplishment of policy objectives.
The Air Force has identified its most important, "overarching" policies in Air
Force Policy Directives (AFPD). Written by Air Force Headquarters (HQ USAF). these
directives clearly and concisely state policies. outline responsibilities and authorities and
provide "CEO-level" metrics to measure performance. Senior leaders use management
information based on these metrics to make "fact-based" decisions. Policy Directives are
no more than three to five pages long.
The Air Force is rescinding all old regulations while retaining only those
procedures required to comply with law, health and safety issues. or to standardize Air
Force systems. Field operating agencies or designated major commands are writing
these mandatory procedures and HQ USAF is issuing them as Air Force Instructions.
The Air Force is replacing 1,510 regulations with 165 policy directives and 750
instructions containing essential procedural guidance. Some 55,000 pages of
intermingled policy and procedures will become approximately 18,000 pages which
clearly separate policy from procedures. And by mid-1994, CD-ROM disks will replace
printed documents.
Commanders of the Air Force's major commands have strongly approved of the
increased latitude this initiative provides and are quickly "mirror imaging" the concept
within their commands. In short, they also are orienting their headquarters staffs to
policy and leaving the "rowing" for local commanders.
The DLA's Defense Contract Management Command (DCMC) undertook an
effort consistent with the thrust of the Policy Review Initiative. It replaced 16 manuals
with The DCMC Manual, also known as the "One Book"--a single document organized
around DCMC services. DCMC wanted to increase efficiency and effectiveness by
eliminating restrictive and sometimes conflicting functional policies and procedures. The
One Book contributes to the success of this initiative because it focuses only on
headquarters policy and leaves procedures to field activities. It has fundamentally
changed the way DCMC writes policy. The One Book has empowered the field
commanders to best apply resources to achieve mission success.
As a related initiative, through the persistent efforts of the Director of the DLA
Office of Publications, DLA now uses ROM technology for many large logistical and
policy databases. The DLA Publishing System (DLAPS) produces and distributes all
policy, procedures and administrative-support documents on CD-ROM. DLA has
converted more than 800 DLA regulations. manuals and handbooks. containing 140,000
text and image pages, to CD-ROM. For a one-time capital investment of $900.000.
DLA identified an annual cost savings of $600.000 by eliminating conventional printing
of publications and reducing distribution and storage costs. Additionally, DLA avoided
$1,370,000 in annual costs by no longer having to insert change pages in DLA
publications. Users receive the most complete, up-to-date inventory of publications
every three months on the DLAPS CD-ROM. The success of this DLA initiative clearly
demonstrates the feasibility (and desirability) of using electronic media to distribute the
revised policies and procedures advocated here.
Recommendations
1. The DOD should clarify policy and decentralize procedures to empower people
to do their jobs better. The goal of the initiative is to provide clear, concise statements
of policy for what is to be done and then measure its accomplishment. Further, DOD
should delegate procedures (the how) and the accompanying responsibility and authority,
to the lowest possible level, so the field can work within local constraints. In pursuit of
this goal, DOD should establish procedures to ensure that existing policy guidelines are
reviewed and revised, future guidelines meet specific criteria, performance of the new
guidelines is tracked and all guidelines "steer more and row less."
2. Components must streamline their procedural guidance. Components should write
directives that include only essential procedures, e.g., those mandated procedures that
might be required by law or for reasons of safety, health or standardization. Writers
should link procedural publications to the overarching policy directive that require the
essential guidance. Components should group families of related procedural documents
into single publications. "County option" procedures should be left to field organizations.
3. Components should institutionalize in writing the process to revise policy and
procedural documents. They should annually certify that directive publications are
current and applicable and monitor the metrics that are part of the policy directives to
ensure that the institution implements policy. By evaluating progress and benefits,
Components can continuously improve the process.
4. DOD should follow the DLA model and make policy directives available on CD-
ROM.
Implications
Regulatory or legislative changes are not needed to carry out this initiative, but as
each Component works through this process it will identify barriers to efficient
operations. Each Component will address regulatory and legislative changes at that time.
A fundamental change in mindset is needed, however. A move is needed from
the old paradigm of a rigid bureaucracy, resilient to change, to a new paradigm of
flexibility and adaptability where personnel are empowered rather than shackled.
Headquarters personnel must make policy (or steer). They must not mix in the daily
operational issues of the field units who are rowing.
Reviewing and clarifying policy will not be easy. It requires headquarters
personnel to adopt a new way of thinking--steering, not rowing. However hard it may
be, we must empower DOD personnel. The DOD no longer has the level of resources it
once had. It must learn and employ new methods to "get the job done."
Clarifying policy directives and limiting procedures to those which are absolutely
necessary empowers people, reduces regulatory burdens and frees people to use their
creative energy and talent to improve performance and increase output. Institutionalizing
the process--separating policy and directing only the essential procedures--will enable
quality principles to mature and DOD to improve continuously.
Fiscal Impact
It is anticipated that once these recommendations are implemented there will be
fiscal savings to DOD.
ESTABLISH A UNIFIED BUDGET FOR THE DEPARTMENT OF DEFENSE (DOD)
Background
Congress provides funds to DoD through a series of appropriations covering specific
aspects of defense operations. Congress allows DoD to obligate these funds over one to five
fiscal years depending on the type of funds. Congress also allows cumulative transfers of
about $4 billion among appropriations. However, DoD does not give similar unilateral
flexibility to its headquarters and field commanders. Rather, it requires them to manage
their varied and complex installations under budgetary controls which provide less flexibility
than needed for the most efficient use of funds. Commanders must request approval from
higher authorities to shift funds among appropriations or categories.
When commanders request approval to shift funds, higher authorities often take part
or all of the excess funds for higher priority contingencies. As a result, former and current
commanders, who wish to remain anonymous, stated that they were hesitant to seek approval
to shift funds. Furthermore, they do not have incentives to hold funds in reserve to ensure
that the highest priority needs are met. To avoid losing the use of the funds, commanders
may use the funds for lower priority needs.
In recognition of this problem, DoD initiated a three-year unified budget test
beginning in fiscal 1987. Several installation commanders were given flexibility to transfer
funds among appropriations and cost categories. The test showed that more needs were met,
funds were used more efficiently, and readiness was enhanced. For example, funds were
transferred under the test between maintenance and furnishing accounts to purchase new
kitchen ranges rather than repair when it was cost effective.²
Despite the demonstrated effectiveness of the unified budget concept, DoD neither
adopted the concept nor continued the test. The primary reason given for abandoning the
unified budget concept was that greater central budgetary control was needed to handle major
unbudgeted activities such as medical cost overruns, the Persian Gulf War, and emergency
disaster assistance.³ Higher authorities also felt that the flexibility under the unified budget
concept made it more difficult to ensure compliance with reprogramming thresholds and
legislated transfer authority.
Nevertheless. the 1994 budget request to Congress for the Department of Defense
proposes consolidation of a number of categories within the operations and maintenance
accounts as an initial step toward a unified budget. This proposal, while moving in the right
direction, does not go far enough to provide flexibility for the commanders throughout DoD.
Activity commanders will still receive funds in four or more appropriations: Operations and
Maintenance, Other Procurement, Family Housing, and Military Construction.
The Department of the Navy has no problem meeting major unbudgeted needs. They
prorate the required funding among their major commands, request recommended off-sets be
identified, and centrally review the recommendation before transfer to fund the emergent
need.⁵ This process could be used by the entire Department of Defense to eliminate the
headquarter's concern over flexibility to meet emergent requirements.
The DoD budget execution process needs to shift from a centrally controlled, red tape
bound process to one that is results oriented. Central budget offices need to limit themselves
to steering while the budget executing commanders do the rowing. Delegation of authority
and responsibility will result in better utilization of the limited funds available. The focus of
the budget can then shift to outcomes rather than categories of expenditures.
Recommendations
1.
DoD should revise its budget process to fund major unbudgeted emergencies by a
process of assessing each organization an appropriate share of the shortfall. To
the extent possible and appropriate, commanders should have flexibility to determine
which budget accounts under their control will be used to fund the assessment. This
could be implemented in fiscal 1994.
2.
DoD should combine Operations and Maintenance, non-weapons systems (non-
centrally managed) Other Procurement, Family Housing Operations and
Maintenance, and Minor Construction into a single appropriation, available for
obligation for three years, for each Service and DoD agency. If approved by
Congress. this would further enhance the unified budget concept. Three years of
funding availability is necessary for cost effective procurement and is consistent with
the current availability of Other Procurement funds. This should be proposed for the
fiscal 1995 budget. If Congress does not approve this recommendation.
recommendations 3 and 4 are alternatives that DoD could implement unilaterally.
3.
DoD should allow field commanders flexibility to transfer funds among
appropriations and cost categories, as needed, to improve mission capability,
cope with unforeseen contingencies, and take advantage of opportunities that only
flexibility permits. This could be implemented immediately. Notification to central
budget offices of transfers of funds may be desirable to assure compliance with
reprogramming thresholds and legislated authority until such time as recommendation
2 is implemented. However, evidence from the test indicates that a very low
probability of noncompliance exists even if notification is not required. If
noncompliance levels are approached, the central budget offices should notify the field
organizations to delay further transfers into that area until transfers out have created
sufficient cushion to resume unrestricted flexibility.
4.
DoD should allow headquarters commanders flexibility to transfer headquarters'
administrative and housekeeping funds among appropriations and categories.
This could be implemented immediately. This will permit more appropriate allocation
among items such as travel, equipment, contractors, and civilian personnel.
Notification to the central budget offices of transfers of funds may be desirable to
assure compliance with reprogramming thresholds and legislated authority until such
time as recommendation 2 is implemented. However, evidence from the test indicates
that a very low probability of noncompliance exists even without notification. If
noncompliance levels are approached, the central budget offices should notify the
headquarters organizations to delay further transfers into that area until transfers out
have created sufficient cushion to resume unrestricted flexibility.
Implications
Based on the results of the Unified Budget Test, these recommendations will enhance
mission readiness by giving commanders greater flexibility to set priorities. to solve funding
problems sooner, to resolve unplanned and unprogrammed requirements, and to facilitate
solutions without higher headquarters assistance. In addition. DoD will have a more orderly
process for funding major unbudgeted activities.
Fiscal Impact
DoD will achieve more effective utilization of resources.
Endnotes
July 22, 1993 G:\ND-Budget
1. Interview with James E. DeWire, Deputy for Programs and Installation
Assistance, Office of the Assistant Secretary of the Army (I,L & E), June 11, 1993 and
Department of the Army Information Paper, "Unified Budget Execution," March 26, 1990.
2. Army Management Research and Design Activity, Briefing on Unified Budget
Test, Indianapolis, IN, May 2, 1989.
3. For example, during an interview with Don Gessaman, Program Assistant
Director, Office of Management and Budget, May 19, 1993, he stated that this was an
argument against turning over full control to local commanders. Others did not wish to be
quoted.
4. Interview with Robert Stone, Deputy Assistant Secretary (Installations),
Department of Defense, May 12, 1993.
5. Memorandum from RADM W. Earner, Director of Budget and Reports,
Department of the Navy, July 22, 1993.
Introducing Market Dynamics
PURCHASE BEST VALUE COMMON SUPPLIES AND SERVICES
Background
The Department of Defense (DoD) acquires common supplies and services under
guidance provided by the Federal Acquisition Regulation (FAR) and the Defense Federal
Acquisition Regulation Supplement (DFARS). The FAR and DFARS incorporate laws aimed
at spending appropriated dollars for many reasons other than just to acquire supplies and
services. Socioeconomic goals, protection of American markets, and tailored economic
legislation rather than best value have become the focus of the FAR and DFARS.
Additionally, each Military Service has added unique acquisition and supply regulations on
top of FAR and DFARS guidance. As problems have arisen, the Military services have
revised the regulations to prevent recurrence. As a result, service regulations are lengthy to
ensure that mismanagement results from a failure to follow, rather than provide guidance.
The resulting regulatory environment often confuses and frustrates the customer, supplier,
and procurement personnel alike. Furthermore, the bottom line is that the complexity of
excessive regulation adds to the cost of doing business.
It is this complexity that has frustrated the best attempts of a Vehicle Maintenance
Officer at an East Coast installation. He states that, on the average, ten percent of his
vehicles are down at any given time, awaiting parts from the DoD supply system. Many of
these parts are locally available, often for less than $100. If his downtime could be reduced
to five percent, he could eliminate the replacement requirement for 30 vehicles, worth over a
quarter million dollars. Neither he nor his local procurement office knew that local purchase
was authorized for of replacement parts for his vehicles. This is an example of how best
intentions run awry in this complex environment. As a result of the National Performance
Review, the military service has reissued guidance, provided training, and followed-up to
ensure that Vehicle Maintenance Officers can obtain vehicles parts in a timely manner.¹
In order to provide best value common supplies and services, we must streamline
existing acquisition guidelines and adopt commercial business practices like credit cards,
electronic commerce. competition, and electronic data interchange. Ultimately, expanded
numbers of employees must be and feel empowered to procure both urgently needed, critical
items and normal routine requirements. DoD has initiated many efforts in the past aimed at
procurement reform and streamline acquisition practices, but caution and fear of failure have
impeded rapid expansion of these practices.
Recommendations
1. DoD personnel should use the best value source of supply, as determined by the local
commander or manager. This will not eliminate the requirement to use specified items
where technical guidance exists. DoD will test this at specific reinvention labs for 15
months. The tests will commence no later than 4 months after approval by the Defense
Performance Review Committee. Several enabling actions will require waivers to existing
law; in those cases, the testing will commence after legislation is amended to permit the test.
As the reinvention labs verify the effectiveness of specific actions, the Defense Performance
Review staff will coordinate exportation and institutionalization of the action.
2. DoD should empower any properly delegated individual to buy common supplies and
non-professional services. Don't limit authorization to make small purchases to only
procurement personnel. Proper delegation will included sufficient training to be aware of
legal and ethical restrictions pertinent to their level of buying authority. Utilize credit cards,
establish higher procurement thresholds, develop a procurement customers' Bill of Rights,
and return to the basic FAR/DFARS guidance.
3. DoD should empower internal and external suppliers to focus on meeting customer
needs. Permit variable pricing, match price concept, tailored logistics support detachments,
just-in-time base supply, and competition between service providers.
Implications
These recommendations will create a competitive environment in which commanders
and managers scan select private, public. or non-profit sources for best value common
supplies and services, and suppliers similar to the private sector in which market dynamics
rather than socioeconomic goals determine the choice of supplier. These recommendations
empower employees and foster excellence rather than blind adherence to procedures.
Fiscal impact
More effective utilization of DoD resources is expected.
Endnotes
August 4, 1993\G: Common
1. Defense Performance Review, "Best Value Common Supplies and Services," July
1993, p.1. (draft paper.)
OUTSOURCE NON-CORE DEPARTMENT OF DEFENSE (DOD) FUNCTIONS
WHEN IT MAKES ECONOMIC AND OPERATIONAL SENSE
Background
The DoD budget is falling so rapidly (24 percent real decline since 1990) that DoD
can no longer afford to do business as usual, i.e., devote significant resources to performing
non-core functions when non-DoD providers are available to do them better, cheaper and
faster. The President's fiscal 1994 budget of $263 billion provides for total compensation
and benefits of $112 billion (civilian - $40 billion; military - $72 billion).
Outsourcing in DoD means the transfer of organizational functions, in whole or in
part, to non-DoD providers. Optimally, federal civilian employees of the function being
outsourced would be employed by the contractor so as to minimize mission impact and
adverse personnel actions. Key to deciding whether or not to outsource functions is how to
provide the best balance of cost and operational risk.
DoD core functions are those functions or competencies intimately related to the
organization's basic mission and crucial to its long run success.¹ In general, core functions
in the DoD include combat force, command of combat forces, deployable combat or combat
service support, and provision of the rotational base for these functions. Non-core does not
equal non-critical. The distinction between core and non-core is used only to remove from
consideration certain functions which clearly are not viable outsource candidates.
Outsourcing of non-core functions has been proven in both the private and public
sectors to be a sound business tool. In fact, the trend nationwide is toward more
outsourcing. In the private sector, the motivation to outsource is profit and hence survival
in the marketplace. In the public sector, the principal motivation to outsource stems from
the need to provide essential services in the face of declining budgets. Simply put, it is
purely a business decision.
The key to this sound business decision is that those functions which are non-core to
one organization/company are core functions to other organizations/companies. Therefore.
the critical consideration for outsourcing is defining the core business and thus, core
functions of the company. For example, administrative functions such as data processing,
billing and payroll. while important and necessary. often represent "no value-added" tasks
to their core business. Outsourcing these functions to specialized vendors allows
management to concentrate on the company's value-added core functions. Industry has
repeatedly demonstrated that this results in more efficient, cost effective operations.
Four of literally thousands of examples of successful outsourcing in the private
sector are: (1) General Dynamics awarded a $3 billion, 10-year contract to Computer
Services Corporation to provide all information technology functions including applications
development and maintenance, data center operations, and networking; (2) United
Technologies awarded a $100 million, 10-year contract to Integrated Systems Solutions
Corporation (ISSC) for operation of United Technologies data center in Newington,
Connecticut, providing data processing services, and assuming management responsibility
for all existing hardware leases and system software; (3) Continental Bank awarded a $700
million, 10-year contract to ISSC for data center and network management and operations.
assuming all leases on currently installed hardware and system software;² and (4) Cummins
Diesel outsourced piston design and manufacturing, concentrating instead on building
leadership in electronics, ceramics, and alternative fuels.³
In the public sector, there are also many examples of successful outsourcing. Across
the country, outsourcing of public services has experienced significant growth in recent
years. In the last 10 years, outsourcing for refuse collection has grown 43 percent, data
processing 3,664 percent, and landfill operations 129 percent. Additionally, local
governments reported the following outsource operations: vehicle towing (80 percent),
legal services (48 percent), street light operation (38 percent), solid waste disposal (26
percent), and street repair (26 percent).4
As a result of Proposition 13, Los Angeles County turned to outsourcing for
numerous county services such as security, housekeeping, fleet maintenance, data center
operations, fiscal services, printing, and workers' compensation administration. During the
period 1978 through 1990, the county estimates it saved a total of $246.6 million ($53
million in 1990 alone) through outsourcing. Additionally, the country realized increased
private sector employment and internal productivity.⁵ Outsourcing has been so successful it
is now Los Angeles county policy to do so when it is shown to be more cost effective.
Cultural. administrative. legislative and regulatory roadblocks are preventing DoD
from taking advantage of the opportunity to outsource various non-core functions. even
though it would make operational and economic sense to do so.
Cultural roadblocks exist because well-entrenched communities within DoD ranks
strongly object to letting go of "non-core competencies." Although these are functions DoD
has traditionally performed well, a rigorous review may show DoD does not need to
perform them in-house. Achieving this needed cultural change will take an institutional
commitment to begin outsourcing.
An administrative roadblock is that DoD senior leadership does not give
commanders/managers the latitude to design the mix of sources needed to accomplish their
mission. Further, DoD has not developed a simple approach for deciding which specific
functions are non-core and which non-core functions to outsource.
Section 312 of the fiscal 1993 DoD Authorization Act is the greatest roadblock to
the sourcing process. By prohibiting the funding of contracts in fiscal 1993 as a result of
OMB Circular A-76 reviews, Congress has prevented DoD from conducting business in the
most effective and efficient manner.
The Acquisition Law Advisory Panel was directed by Congress in the fiscal 1992
Authorization Act, to review all laws affecting DoD procurement actions. During their
review of laws regulating DoD contracting for commercial services under OMB Circular A-
76, the Panel found that the statutory provisions in Chapter 146 of Title 10 "present a
confusing and contradictory set of rules regarding the DoD's contracting out process." In
its report, the Panel proposed to consolidate and streamline the existing rules into two
sections which provide DoD managerial flexibility while at the same time preserving
meaningful congressional oversight and effective community input.
For example, the Panel identified the following sections for amendment or repeal:
Section 2462 which requires procurement of supplies necessary for DoD functions
from a private sector source if such a source can provide the supply or service at a real cost
lower than the comparable, in-house cost. The Panel recommended an amendment to
include a new requirement that the private sector source must be able to provide the supply
or service "adequate to meet defined performance standards."
Section 2465 prohibits contracting of fire fighting and security guard functions. The
Panel recommended repeal of this statute in its entirety. They noted numerous examples
where this had impeded management flexibility, increased costs, and in some cases
hampered meeting mission requirements.
Section 2466 prohibits DoD from contracting out more than 40 percent of its depot
level maintenance. The 60 percent in-house requirement was found to be somewhat
arbitrary. The Panel believed DoD should have the flexibility to determine core
requirements.
Agencies are also required by 10 USC 2851 to obtain construction and design
services from Corps of Engineers or Naval Facilities Engineering Command. These
organizations are not required to warrant (guarantee) their work. This legisiation limits the
commander's ability to outsource construction and design services.
Additionally, interviews with commanders/managers disclosed that enabling
legislation is needed to allow installation commanders and municipalities to achieve cost
savings by negotiating agreements to permit exchange of services. For instance,
municipalities could provide trash removal services if the installation provided snow
removal and grass cutting services on public roads adjoining the installation.
The final roadblock is regulatory. In the first place, the study goals and budget
reductions contained in Executive Order 12615 (Performance of Commercial Activities)
have served as disincentives rather than incentives to outsourcing.
The process contained in OMB Circular A-76 is complex and inflexible. However,
the basic, fundamental policy outlined in the circular, that government should rely on the
private sector for services when analysis determines it is more economical, is sound
business. Added flexibility in making this economic comparison would enhance the
government's ability to meet this policy goal.
While current federal, DoD, military service and DoD agency regulations may have
served a useful purpose. many restrictions placed on commanders/managers at all levels are
not warranted. For example, DoDI 4100.33 and OMB Circular A-76 require local
authorities to get Assistant Secretarial level waivers for deviations in severance pay and
contract administration factors. This requirement can substantially add to the time it takes
to complete the cost comparison process. one of the major complaints about the process.
Recommendations
DoD senior leadership should implement a comprehensive program for
outsourcing non-core functions when it makes economic and operational sense. Before
the program can be implemented, senior leadership must overcome roadblocks to
outsourcing, give commanders/managers incentives to outsource when appropriate, and test
the viability of outsourcing in DoD.
To overcome the cultural roadblocks, DoD senior leadership needs to emphasize the
need for a cultural change within the Department regarding outsourcing. Achieving this
needed cultural change will take an institutional commitment to implement the proposed
sourcing decision process. The advantages-are clear--the ability to concentrate DoD
resources on its primary mission, while reducing overhead and evolving into a more
flexible, leaner organization. By seizing the outsourcing opportunity, DoD can focus on its
core competence--protecting the country in wartime.
To overcome the cultural roadblocks, DoD senior leadership should give
commanders/managers the latitude to design the mix of sources needed to accomplish their
mission. The following five steps would be useful to commanders/managers for helping
them to decide which of their functions are non-core and when outsourcing makes
economic and operational sense: (1) clearly describe the function in objective terms of what
gets done and how it gets done, but not who does it; (2) categorize the function as either
core or non-core; (3) establish detailed, specific performance requirements for each function
based on the commander/manager's mission and customer requirements; (4) analyze
legality, sources available, and performance requirements for each function to determine the
source which best balances economic benefits with operational risk--the
commander/manager makes this call; and (5) produce a detailed performance agreement and
associated documents for function (e.g., performance work statement and request for
proposal if function is to be outsourced).
Each performance agreement is like a contract between the commander/manager and
the specified source. whether that source is an in-house workforce supervised by a
subordinate commander/manager, some other DoD or government source. or a commercial
source. Each includes the identification of required performance levels. in terms of relevant
performance metrics.
After the process has been defined, it must be managed. Metrics should be used to
monitor the state of the process and provide commanders/managers with appropriate
information and accountability to enable them to reduce costs while providing objective
measures of levels of performance. As a basic approach, efficiency and effectiveness
characteristics should be used to establish a plan, assess performance and establish and
award incentives.
Section 312 of the fiscal 1993 DoD Authorization Act is the greatest roadblock to
overcome. By prohibiting the funding of contracts in fiscal 1993 as a result of OMB
Circular A-76 reviews, Congress has prevented DoD from conducting business in the most
effective and efficient manner. This provision should not be extended or codified as a
permanent restriction.
Action should be taken to implement the recommendations made by the Acquisition
Law Advisory Panel's Section 800 Report. During the Panel's review of laws regulating
DoD contracting for commercial services under OMB Circular A-76, they found that the
statutory provisions in Chapter 146 of Title 10 "present a confusing and contradictory set of
rules regarding the DoD's contracting out process." In its report, the Panel proposed to
consolidate and streamline the existing rules into two sections which provide DoD
managerial flexibility while at the same time preserving meaningful congressional oversight
and effective community input. For example, sections 2462, 2465, 2466 were identified for
amendment or repeal.
Agencies are also required by 10 USC 2851 to obtain construction and design
services from Corps of Engineers or Naval Facilities Engineering Command. These
organizations are not required to warrant (guarantee) their work. This legislation limits the
commander's ability to outsource construction and design services.
Additionally, interviews with commanders/managers disclosed that enabling
legislation is needed to allow installation commanders and municipalities to achieve cost
savings by negotiating agreements to permit exchange of services.
To overcome the regulatory roadblocks. Executive Order 12615 (Performance of
Commercial Activities) should be rescinded and a new Executive Order issued. The new
order should highlight the government's policy of acquiring goods and services in the most
economical and efficient manner without directing study goals or identifying projected
savings. The study goals and budget reductions have served as disincentives rather than
incentives to outsourcing.
In the very near term, OMB Circular A-76 should be reviewed for potential change
to simplify the process and increase its flexibility by allowing varying levels of detail based
on the size and scope of the study. Added flexibility in how economic comparisons are
made will enhance the government's ability to meet this policy goal. For the long term, the
federal government needs to evolve beyond the limited scope of OMB Circular A-76 to
ensure the sourcing decision for all government functions is based on a logical, systematic,
and accepted process.
Current federal, DoD, military service and DoD agency regulations must be
reviewed to ensure unnecessary hindrances to the outsourcing decision are removed. While
many of these regulations may have served a useful purpose, the federal government must
ensure the regulatory restrictions placed on commanders/managers at all levels are
warranted.
In the absence of a profit motive, DoD must provide tangible incentives for
commanders/managers to seek new and better ways of doing business. Outsourcing has
win potential for both DoD and the private sector. It's a win for DoD in terms of overhead
savings -- manpower and dollars. It's a win for corporate America for profit and market
share. But one thing is for sure: incentives must be there for both.
From a macro perspective, DoD's incentive clearly comes from reducing overhead
and the ability and flexibility to shift its limited and ever decreasing resources from non-
core to core functions. Additionally, and just as importantly, commanders/managers who
initiate outsourcing must be permitted to retain a portion of the resulting savings. This is
the only way to provide a positive, real incentive to outsource. The President's Council on
Management Improvement study of OMB Circular A-76 found that "the absence of retained
savings is seen as a disincentive and a major reason why agencies do not aggressively use
A-76." DoD and Agency/Service regulations should be changed. where necessary, to
clearly provide for retained savings at the installation/local level.
Further, and with regard to incentivizing industry, government (DoD in this case)
must move more toward the practice of specifying from contractors "what is wanted, rather
than how it is to be done." That, of course, is an over-simplification, but the underlying
benefit is reduced cost. DoD should give contractors flexibility to use standard commercial
business practices and material specifications, rather than demanding more costly and often
unnecessary military/government specifications.
Moreover, DoD should test the viability of outsourcing non-core functions. DoD
has identified 50 broad area candidates for outsourcing such as base operations support,
housing, health services, maintenance and repair, training, labs, security and transportation.
Further, the military services and DoD agencies have identified nine specific functions for
immediate outsourcing consideration. The specific outsourcing candidates are Navy-
Defense Printing Service-formally Navy Publishing and Printing Service; Defense Nuclear
Agency-Technical Library Division; Air Force-304 conference Switch & Associated
Command Display System consoles and maintenance; Defense Finance and Accounting
System-DoD travel reimbursements; Defense Logistics Agency-Defense Reutilization and
Marketing Service; Defense Mapping Agency-security guard functions; AETC Training
Base-Base operating support functions;
Defense Information System Network-switched services; and Army-morale, welfare,
recreation business programs.
Implications
By outsourcing non-core functions when it makes economic and operational sense,
DoD will be better able to focus on its core functions and to absorb current and future
budget cuts. Many roadblocks both inside and outside DoD must be overcome before DoD
commanders/managers are routinely allowed to make sound business decisions on whether
to outsource non-core functions or continue to perform them with federal employees.
Fiscal Impact
Outsourcing, when it makes economic and operational sense. will produce significant
savings for DoD. After selected tests. DoD will be able to estimate future savings.
Endnotes
August 5, 1993, B:\outsourcing
1. Venkatesan, Ravi. "Strategic Sourcing - To Make or Not to Make." Harvard
Business review. November-December 1992.
2. Presentation by Howard Anderson, Managing Director of the Yankee Group,
February 4-5, 1992, at New York Hilton and towers, New York, NY.
3. Venkatesan, Ravi, "Strategic Sourcing - To Make or Not to Make." Harvard
Business Review. November-December 1992.
4. Garsombke, Diane J., "Privatization - - New Challenges for Strategic Planning",
Business, January-March 1990, pp 3-12.
5. Thompson, Stephanie, "Privatization - Possibly Positive Politics", American City
& County, January 1992, pp 45-47.
6. Dixon, Richard B., "Contracting Out: LA County Makes Consultants Worth the
Cost", Business Forum, Fall 1988/Winter 1989, P 32.
CREATE INCENTIVES FOR THE DEPARTMENT OF DEFENSE (DOD)
TO GENERATE REVENUES
Background
By giving commanders/managers incentives to take advantage of opportunities to
generate revenue, DoD can increase funds available for mission-related activities, help
improve the environment, improve customer service, and/or provide more complete cost
information for decisionmakers. Appropriate incentives would include allowing them to
retain a portion of the new revenue for mission-related use. DoD has opportunities to
generate new revenue by eliminating or reducing subsidies, obtaining reimbursements from
other government agencies for services performed, and increasing sales of recyclable
materials.
Eliminating or reducing subsidies. DoD does not consistently charge customers
either the incremental or full costs of services. In effect, DoD is providing a subsidy to
some customers. When subsidies are included, neither the provider nor the recipient of
services has an incentive to seek the most cost-effective way of doing business from the
taxpayers' perspective.
DoD subsidizes commercial customers about $12 million annually because fees are
insufficient to recover costs incurred by the Corps of Engineers for processing applications
for discharges of dredged or fill materials into the waters of the United States (see
recommendation 1).¹ Increasing commercial fees could generate revenue which could be
used to improve customer service by decreasing the delays in processing applications. DoD
subsidizes other federal agencies about $150 million annually because the reimbursement
for the incremental cost of their use of DoD airlift (transportation of materials or passengers
in military aircraft) is waived in many cases (see recommendation 2).² The airlift may be
requested by the non-DoD agencies and non-government users or may be White House-
directed. Airlift directed by the White House includes airlift for humanitarian reasons and
airlift utilizing the 89th Airlift Wing at Andrews Air Force Base. Maryland.
Obtaining reimbursements from government agencies. DoD has opportunities to be
reimbursed for the costs of services provided to other government agencies. When goods
and services are provided from one agency to another without full cost reimbursement, the
receiving agency lacks the incentive to search for the most cost-effective source from the
taxpayers' perspective. Rather, without a full buyer/seller relationship, the receiving agency
has an incentive to select the source that minimizes the use of their funds. In addition, both
DoD and the receiving agencies are unable to report actual costs of their operations, thus
denying decisionmakers full information.
DoD provides airlift annually costing about $150 million free to other agencies (see
recommendation 2).⁵ DoD provides medical services free to Medicare-eligible retirees and
dependents, but is prohibited by law from recovering an estimated $868 million annually
from Health Care Financing Agency (HCFA) (see recommendation 3)⁶. Further, although
allowed to by current law, DoD does not charge the retirees and dependents a co-payment
to discourage unnecessary use of medical facilities and to recover a portion of the costs of
treating them. Recommendations regarding the co-payment issue will not be presented in
this report as the issue is within the scope of the Health Care Task Force.
The Economy Act (31 U.S.C. 1535 and 1536) allows one Federal agency to provide
another goods and services under certain conditions. Certain other laws prohibit the
receiving agency from fully reimbursing the providing agency for some services.
Increasing sales of recyclable materials.⁷ Proceeds from sales of recyclables grossed
$37 million in fiscal 1992. DoD's waste disposal costs can be as high $200 a ton, and total
costs may exceed $500 million a year. More and more communities are prohibiting the
disposal of certain materials (such as yard wastes, newspapers, mattresses and tires) in their
landfills which forces DoD to look to recycling or alternate uses of these materials. These
could increase disposal costs if they are not effectively addressed.
DoD estimates that solid waste reduction goals of 50 percent are achievable over the
next five years.⁸ This can equate to significant reductions in solid waste disposal costs,
even if DoD must pay companies to take the recyclables. (See recommendation 4.)
Recommendations
1. The Corps of Engineers should request Congress to amend the Energy and Water
Development Appropriation Act of 1993 to increase the Corps' commercial regulatory
fees to more closely approximate the costs of evaluating applications and allow the
Corps to retain, in a special regulatory account, all revenues generated through the
collection of fees. These funds would then be used by Corps districts solely to increase the
efficiency of the regulatory program by reducing delays associated with permit evaluations
and wetlands delineations.⁹ This fund would be independent from the Corps' normal
regulatory operating budget and should be available without appropriation. DoD must
provide accountability over the use of the new revenue.¹⁰
Since 1890, the Corps of Engineers has been involved in regulating certain activities
in the Nation's waters. 11 More recently, Section_404 of the Clean Water Act authorizes the
Corps to issue permits for discharges of dredged or fill materials into the waters of the
United States providing that such discharges are in compliance with environmental
regulations.
In 1993, the taxpayers funded this effort at $86 million to evaluate about 15,000
individual applications, 20,000 activities under the Corps' regional permit program, and
over 60,000 activities through the Corps' nationwide permit program.¹² For many years, the
Corps of Engineers has been charging token permit fees of $10 for noncommercial projects
and $100 for commercial projects which resulted in revenues of less than $400,000 per
year. 13 Funds received for permits historically have been conveyed to the U.S. Treasury
rather than used as a reduction of costs.¹⁴
Following a study and recommendation from the DoD Inspector General, a Corps
Task Force developed a more elaborate fee schedule based on the costs to the Government
for work done on the regulatory program. 15 In October 1990, the Corps formally proposed
significantly higher permit fees designed to recover about $17 million annually. 16 The
proposal would have increased application fees to $2,000 for commercial projects and to
$500 for noncommercial projects. 17 The proposed increase in fees was very controversial
and in the 1992 and 1993 Energy and Water Development Appropriations Acts, Congress
expressly prohibited the Corps from expending any funds to finalize its proposed fee
regulations. 18 As a result no action has been taken on the proposed fee increases. 19
DoD is still interested in recovering at least some of the costs of the regulatory
program. Specifically, the program could be improved by using the fees collected to reduce
regulatory delays.²⁰
2. The Office of Management and Budget should draft an Executive Order
reemphasizing that DoD airlift provided to non-DoD agencies is reimbursable and
waiver of the reimbursement is appropriate only in the most extraordinary
circumstances and only with DoD approval in advance. DoD must provide
accountability over the use of these funds. Federal agencies should record the airlift costs
as travel or transportation in order to provide accurate information to decisionmakers.
DoD military airlift is often treated as a free good by non-DoD federal government
agencies and non-government users. 21 The airlift may be requested by the non-DoD
agencies and non-government users or may be White House directed. 22 Airlift directed by
the White House includes airlift for humanitarian reasons and airlift utilizing the 89th
Airlift Wing at Andrews Air Force Base, Maryland.23
Various laws restrict the use of DoD aircraft to official purposes. 24 The Economy
Act (31 U.S.C. 1535 and 1536) allows one Federal agency to provide another goods and
services under certain conditions. While other laws provide guidance for the use of DoD
airlift for humanitarian assistance (the McCollum Amendment and the Denton Amendment
are the primary ones), the Economy Act is most frequently used.
For various reasons, reimbursement is waived for many non-DoD Agencies who use
DoD cargo and passenger aircraft, thereby making DoD airlift a free good. Users are
required to justify the use of DoD airlift. Even when they reimburse DoD for these
services, federal agencies do not record the costs as travel or transportation, thereby
avoiding travel budget limitations.
DoD is reimbursed by non-DoD agencies for about $10-12 million annually. 25 In
fiscal 1992, because of the extent that the reimbursement requirement was waived, DoD
lost about $150 million because airlift was provided without reimbursement to other federal
agencies, such as the State Department, which impacted readiness training.²⁶
3. Health Affairs should draft legislation to amend 42 U.S.C. 1395 to require
Medicare to reimburse DoD at HCFA's predetermined rates for medical services
provided to Medicare eligible individuals. These funds would be used to offset DOD's
cost of providing the medical services. The total expenditures of DoD for Medicare-eligible
patients should not exceed the HCFA reimbursement and the HCFA authorized co-payment
amount. DoD must also provide accountability for these funds.
Regardless of whether or not DoD is allowed in the future to receive
reimbursements from HCFA, we believe that DoD should use the HCFA rates as well as
treatment costs at private treatment facilities as benchmarks to determine if costs of
treatment at military facilities are reasonable.
About 200 thousand Medicare-eligible military retirees and dependents receive free
medical services at military treatment facilities. DoD provides the medical treatment at an
estimated annual cost of $1.2 billion.² 42 U.S.C. 1395 prohibits DoD from obtaining
reimbursement from HCFA for Medicare recipients who are treated at military treatment
facilities. Therefore, an estimated $868 million of Medicare costs annually are included,
but not identified, in the DoD budget. 28
DoD has authority under 10 U.S.C. 1078(b) to charge retirees and dependents a co-
payment for medical services which would result in the recovery of a portion of the costs
of treatment and would help discourage unnecessary use of the treatment facilities.
However, DoD has chosen not to charge co-payments. Recommendations concerning co-
payments are not addressed in this report as the issue is within the scope of the National
Health Care Task Force.
About 1 million military retirees and dependents are Medicare-eligible, but about
800 thousand receive their primary medical services from private treatment facilities. 29 A
private treatment facility receives from HCFA partial reimbursement of the costs of treating
these persons and additional reimbursement from the patients as co-payment.
If DoD were reimbursed by HCFA at HCFA's predetermined rates for treatment of
Medicare-eligible retirees and dependents, they would receive an estimated 70 percent
(about $868 million) of the costs incurred. 30 The remaining 30 percent includes the
amounts normally charged by private treatment facilities to individuals as a co-payment and
the amount by which DoD's costs exceed HCFA rates.³¹
The reasons why DoD's incurred costs appear to exceed HCFA's reimbursement
rates have not been covered by this review due to time constraints. However, according to
the General Accounting Office there is no evidence that civilian and military medical care
costs are different. 32 Differences are generally the result of different methods used to
account for costs.
4. The Deputy Under Secretary of Defense (Environmental Security) should draft
legislation to amend PL 97-214 to allow managers/commanders mission-related use of
all net revenue from sales of recyclable materials. DoD should continue the same level
of funding from sales of recyclables for pollution abatement, energy conservation,
occupational safety and health activities, and morale and welfare activities. However,
commanders/managers should be allowed to use end-of-year unobligated funds in excess of
$2 million rather than convey them to the U.S. Treasury. In addition,
commanders/managers should be allowed to use for mission-related purposes any savings
from reducing waste disposal costs.
Public Law 97-214 restricts the use of revenue from sales of recyclable materials as
follows: Funds shall cover the costs of operations, maintenance, and overhead for
processing recyclable materials at the installation (including the cost of any equipment
purchased for recycling purposes). Up to 50 percent of the remaining funds can be used for
pollution abatement, energy conservation, and occupational safety and health activities. All
remaining funds may be used for morale and welfare activities. However, at the end of
each fiscal year, unobligated funds in excess of $2 million must be conveyed to the U.S.
Treasury. -
In fiscal 1992, DoD's proceeds from sales of recyclable materials grossed $37
million, down from a high of $50 million in a previous year.³³ Proceeds from sales of
recyclables are declining even though the quantity of materials is increasing. 34 This is due
in part to declining markets for recyclables because more materials are being recycled and
demand for products containing these materials has not sufficiently increased. 35 Additional
efforts to increase purchases of products containing recycled materials and development of
"close-loop" recycling ventures where DoD-provided recycled materials are manufactured
into products it gets back will further help save funds for DoD. 36
More and more communities are prohibiting the disposal of certain materials (such
as yard wastes. newspapers. mattresses and tires) in their landfills which forces DoD to
look to recycling or alternate uses of these materials. 37 These could increase disposal costs
if they are not effectively addressed.³⁸
DoD is in the process of determining the total costs of its solid waste disposal.³
The disposal costs may exceed $500 million a year.⁴⁰ By establishing aggressive goals,
these costs can be reduced thus saving operation and maintenance account funds for
mission support. 41 Therefore, in some cases, it may be advantageous for DoD to pay for the
recycling of materials. Since disposal costs can be as high as $200 a ton, paying
companies to take the recyclable material will still save DoD funds if the payments are less
than its normal disposal costs.⁴³
The additional incentives proposed in this recommendation are necessary to
encourage the managers/commanders to recycle waste materials. DoD must provide
accountability over the use of the new revenue and savings from decreased disposal costs.
Implications
Recommendation 1: If accepted by Congress, 404 permit fees would be increased
for certain projects that require extensive, detailed review. In addition, fees could be
charged for jurisdiction determinations, public hearings and environmental impact studies.
The costs of evaluating applications would be defrayed partially by the fees. Since only a
small portion of the taxpayers benefit directly from permits, it should be more equitable for
the direct users to bear the costs of the permits. However, it is recognized that many users
would be against the increased fees because they own the land and all taxpayers benefit
from the protection of the environment through the regulatory process. Most objections
would probably diminish if the increased fees were for large projects only (e.g., not "Mom
and Pop" projects) and if the fees were used to further reduce regulatory delays which
would improve customer service. 44
Recommendation 2: Accounting for reimbursement by the benefiting organization as
travel or transportation would ensure that decisionmakers can consider the total costs to the
taxpayer. If all users of the DoD airlift system were required to reimburse DoD. there
would be a clear incentive to use government air only when cost effective or absolutely
necessary. The DoD airlift system is sized to satisfy requirements during mobilization. not
non-DoD user traffic. 45 Lack of reimbursement from non-DoD users detracts from wartime
readiness.⁴
Recommendation 3: The costs of treatment of Medicare-eligible persons would be
charged to the correct appropriation and provide more complete information for
decisionmakers.
Recommendation 4: If commanders/managers had more funding flexibility, they
would have more incentive to expand their recycling programs as revenue-producing
activities and reduce their disposal costs. By establishing aggressive goals,
commanders/managers can reduce disposal costs, thus saving operation and maintenance
account funds for mission support.⁴⁷ Important, but lower priority, mission-related activities
would be funded. Increased recycling will reduce pollution, conserve limited disposal
space, and conserve natural resources by using recycled materials in the manufacture of
products.⁴
Fiscal Impact
Recommendation 1: Revenues of more than $12 million annually would likely be
realized beginning upon Congressional approval.⁴⁹ Estimated annual costs of implementing
the recommendations would be minimal.⁵⁰
Recommendation 2: Based on fiscal 1992 estimated usage of military airlift,
reimbursements of more than $150 million would be received annually beginning in 1994 51
The funds should be used to offset operations costs of airlift provided to the user. The
reimbursements themselves would generate no new revenue to the federal government;
however, having to pay for services received would make the using agencies more cost
conscious and could result in more efficient use of non-DoD government funding for
transportation and travel. Reduction of the Federal deficit will occur to the extent that
demand for higher cost DoD airlift declines. The estimated annual costs of generating the
revenue is considered insignificant.52
Recommendation 3: DoD states that imprecise estimates adjusted for inflation for
recoverable amounts from HCFA are $868 million in fiscal 1994. $894 million in fiscal
1995 and $920 million in fiscal 1996: however, there would be no direct impact on the
taxpayer.⁵ The reimbursements would be used to cover medical treatment facilities costs.
Assuming central interdepartmental reimbursement, the cost of implementing the
recommendation is not expected to be significant. 54
Recommendation 4: Proceeds from sales of recyclables grossed $37 million in fiscal
1992. DoD's waste disposal costs can be as high $200 a ton, and total costs may exceed
$500 million a year.⁵ DoD estimates that solid waste reduction goals of 50 percent are
achievable over the next five years. This can equate to significant reductions in solid
disposal costs, even if DoD must pay companies to take the recyclables.
Preferably, DoD will be able to sell recyclable waste materials for a profit; however,
DoD could afford to pay up to $200 a ton (or its normal disposal costs) to companies to
recycle waste materials. As an example, if DoD paid an average of $100 a ton for one-
half of the solid waste, DoD would annually save about $125 million in waste disposal
costs. However, if DoD did not have to pay companies to take the recyclable materials,
the annual savings would increase to about $250 million.
1994
1995
1996
1997
1998
1999
Budget Authority
$125
$125
$125
$125
$125
$125
Outlays
$125
$125
$125
$125
$125
$125
Revenue
$ 12
$ 12
$ 12
$ 12
$ 12
Change in FTEs
0
0
0
0
0
0
Endnotes
August 5, 1993 b:\incentives
1. Memorandum from Michael L. Davis, Assistant for Regulatory affairs. Office of the
Assistant Secretary, Department of the Army to Gerald Kauvar, Deputy Director. Defense
Performance Review, July 6. 1993.
2. Memorandum from Robert H. Moore, Assistant Deputy Under Secretary of Defense,
Transportation Policy to Deputy Director Defense Performance Review, July 23, 1993.
3. Telephone interview with Colonel Richard W. Bonnell, Sr., Assistant for Air
Transportation, Office of the Secretary of Defense, August 4, 1993.
4. Ibid.
5. Memorandum from Robert H. Moore, Assistant Deputy Under Secretary of Defense,
Transportation Policy to Deputy Director Defense Performance Review, July 23, 1993.
6. Memorandum from John L. Maddy, Acting Deputy Assistant Secretary of Defense
(Health Budgets and Programs) to Major Al Giambone, Health Affairs, July 27, 1993.
7. Telephone interview with Blake T. Velde, Office of the Deputy Under Secretary of
Defense (Environmental Security), July 28, 1993.
8.
Ibid.
9. Memorandum from Michael L. Davis, Assistant for Regulatory Affairs, Office of
the Assistant Secretary, Department of the Army to Gerald Kauvar, Deputy Director, Defense
Performance Review, July 6, 1993.
10. Ibid.
11. Ibid.
12. Ibid.
-
13. Ibid.
14. Ibid.
15. Ibid.
16. Ibid.
17. Ibid.
18. Ibid.
19. Ibid.
20. Ibid.
21. Memorandum from Robert H. Moore, Assistant Deputy Under Secretary of
Defense, Transportation Policy to Deputy Director Defense Performance Review, July 23,
1993.
22. Telephone interview with Colonel Richard W. Bonnell, Sr., Assistant for Air
Transportation, Office of the Secretary of Defense, August 4, 1993.
23. Ibid.
24. Memorandum from Robert H. Moore, Assistant Deputy Under Secretary of
Defense, Transportation Policy to Deputy Director Defense Performance Review, July 23,
1993.
25. Telephone interview with John McClelland, Office of Management and Budget,
August 2, 1993.
26. Telephone interview with Colonel Richard W. Bonnell, Sr., Assistant for Air
Transportation, Office of the Secretary of Defense, August 4, 1993.
27. Memorandum from Alfred V. Giambone, Military Assistant to the Assistant
Secretary of Defense (Health Affairs), July 9, 1993.
28. Ibid
29. Ibid
30. Telephone interview with Alfred V. Giambone, Military Assistant, Office of the
Assistant Secretary of Defense (Health Affairs), July 22, 1993.
31. Ibid.
32. General Accounting Office, Analysis of Grace Commission Report, p.366
33. Telephone interview with Blake T. Velde, Office of the Deputy Under Secretary
of Defense (Environmental Security), July 28, 1993.
34. Ibid.
35. Ibid.
36. Ibid.
37. Ibid.
38. Ibid.
39. Ibid.
40. Ibid.
41. Ibid.
42. Ibid.
43. Ibid.
44. Memorandum from Michael L. Davis, Assistant for Regulatory Affairs, Office of
the Assistant Secretary, Department of the Army to Gerald Kauvar, Deputy Director, Defense
Performance Review, July 6, 1993.
45. Memorandum from Robert H. Moore, Assistant Deputy Under Secretary of
Defense, Transportation Policy to Deputy Director Defense Performance review, July 23, 1993.
46. Ibid.
47. Telephone interview with Blake T. Velde, Office of the Deputy Under Secretary
of Defense (Environmental Security), July 28, 1993.
48. Ibid.
49. Memorandum from Michael L. Davis, Assistant for Regulatory Affairs, Office of
the Assistant Secretary, Department of the Army to Gerald Kauvar, Deputy Director, Defense
Performance Review, July 6, 1993.
50. Ibid.
51. Memorandum from Robert H. Moore, Assistant Deputy Under Secretary of
Defense, Transportation Policy to Deputy Director Defense Performance Review, July 23,
1993.
52. Ibid.
53. Memorandum from John L. Maddy, Acting Deputy Assistant Secretary of Defense
(Health budgets and Programs) to Major Al Giambone, Health Affairs, July 27, 1993.
54. Ibid.
55. Telephone interview with Blake T. Velde, Office of the Deputy Under Secretary
of Defense (Environmental Security), July 28. 1993.
56. Ibid.
ESTABLISH AND PROMOTE A PRODUCTIVITY ENHANCING
CAPITAL INVESTMENT FUND
Background
Currently, DoD receives approximately $12 million annually for investing in
equipment that will, over a period of years of increased productivity, save more money than
the investment.¹ Presently more opportunities exist than can be funded. For example,
forklifts and shrink wrap machines have been requested in the past because they save
significant labor costs. 2 In order to increase long-term savings, more investments need to be
made.
A central organization for each Military Department controls the allocation of funds
for investing in equipment that will increase productivity. Users of the funds are required to
submit proposals demonstrating that enhanced productivity would result in recovery of the
cost in three years. While users benefit from the enhanced productivity, they are not
required to track or report on these savings.
Previously, more funds were allocated to productivity enhancing investments;
however, as the DoD budget declined, these funds were cut by approximately 70 percent.³
This cut was disproportionate to the total Defense budget reduction. It appears that the
central organizations lacked the incentive to oppose the disproportionate reductions because
they did not benefit from the savings or the increased productivity. In addition, some DoD
leaders believed that the funds were given to the organizations that could write the best
justifications rather than the organizations with the most productive investments.
Market mechanisms could be used to increase the available resources for productivity
enhancing equipment as well as to regulate the allocation of the scarce investment funds.
From the perspective of the operating organization, funding the purchase of productivity
enhancing equipment could be similar to a business decision to borrow funds from a bank
and repay the loan with the resulting savings.
Recommendation
To increase the available resources for worthy investments. DoD should obtain
Congressional approval to establish a fund that would loan money to DoD organizations
for productivity-enhancing capital investments. The organizations would be required to
repay the loan in equal installments over three years, pay an annual fee to cover
administrative costs, and pay a fee of 25 percent of the estimated annual savings during the
first three years. If more loans are requested than can be funded, a bidding system should
be established by the organization controlling the investment funds (Industrial Engineering
and Quality, Office of the Assistant Secretary of Defense, Production and Logistics4 or the
Military Department counterparts). The bidding system could include the pay-back period,
the amount of the loan, and the highest projected savings. This would provide a self-
regulating method of ensuring that the most productivity-enhancing investments were funded.
After the loan fund is sufficient to meet the need for capital, profits could be used to
reduce the deficit. Based on informal agreements with Congress, budget approval is
required; however, this fund can be established under the current revolving fund
authorization. The organization controlling the investment funds will evaluate project
proposals, ensure that loans are repaid and fees are paid, and in effect, becoming the banker.
Implications
The pay-back provision would make DoD more business-like and discourage or
prevent requests for loans which are not likely to achieve savings. Borrowers will make
trade-offs similar to private companies. Only if the Office of Management and Budget
waived payment would a borrower be able to avoid repayment of the loan. After several
years, the fund will grow to the point of being adequate, self-sustaining and return a profit to
the Treasury. In fiscal 1995 the borrowers will return $5 million to the bank thereby
increasing the funds available to loan from the $12 million appropriation to $17 million. By
1998, the first year without an appropriation, $31 million will be available for loans⁵.
Equipment needed to enhance productivity will be purchased that. without this program,
might not be purchased.
Fiscal Impact
An annual appropriation will continue to be necessary only for the first four years.
After fiscal 1997, the $12 million annual appropriation will be discontinued. Total savings
through 1999 will be approximately $110 million based on a baseline of $12 million
currently budgeted for productivity equipment. 1994-1997 appropriations would be used to
provide initial capital for the Fund. Initial borrowers will begin repaying loans in 1995.
Administrative costs will be covered by a separate fee. Savings computation assumes that
funds will be loaned only for projects that return $2 for each $1 invested i.e. that will return
the $1 invested and an additional $1 in savings. Savings computation assumes that savings
occur at the same time as repayment; however, the timing of actual savings can be either
faster or slower.
Savings
In Millions of Dollars
1994
1995
1996
1997
1998
1999
Budget Authority
0
$4
$9.7
$17.7
$37.1
$41.8
Outlay
0
$4
$9.7
$17.7
$37.1
$41.8
Change in FTEs
0
0
0
0
0
0
Endnotes
G:\ND-BANK-August 2, 1993
1. Interview with Don Gessaman, Program Assistant Director, Office of Management
and Budget, May 19, 1993.
2. Interview with Gerald Kauvar, Deputy Director, Installations and Logistics,
Department of Defense May 18, 1993.
3. Interview with Ronald A. Davidson, Assistant Deputy Comptroller
(Program/Budget), Office of the Secretary of Defense, June 8, 1993.
4. Telephone interview with John Binford, Industrial Engineering and Quality Office,
Office of the Assistant Secretary of Defense, Production and Logistics, July 16, 1993.
5. By 1998, the loan fund would grow to $37 million. At that time it would be
appropriate for DoD to return additional profits to the Treasury.
Creating a Quality Management Culture
CREATE A HEALTHY AND A SAFE ENVIRONMENT FOR
DEPARTMENT OF DEFENSE ACTIVITIES
Background
The Department of Defense (DoD) has a clear mandate from the people of the
United States and Congress to improve its environmental stewardship. This means that
DoD has a responsibility to clean up its facilities and Formerly Used Defense Sites
(FUDS), comply with existing environmental regulations, conserve natural resources and
prevent pollution. In this respect, DoD senior leadership has made a strong commitment to
fulfill its responsibility by redirecting both budget and personnel resources. The DoD
environmental program covers over 5,500 properties containing approximately 27 million
acres and more than 400,000 buildings. In fiscal 1992, the program cost the American
taxpayer $4.2 billion. Good progress has been made (e.g., "The Paperwork Reduction Act"
and the phasing out of ozone depleting chemicals). DoD must now speed up the process,
demonstrate significant near term progress and lay the foundation for long term
improvements.
The challenges inherent in the clean-up of DoD facilities and FUDS often result in
adversarial relationships among stakeholders (i.e., groups with an interest in the project such
as installation commanders, government regulators, the surrounding community, contractors
and public interest groups). For example, state and federal officials have been in litigation
since 1988 to determine who will be in charge of clean-up at Rocky Mountain Arsenal.
This lengthy battle has led to mistrust, increased clean-up expenses and unnecessary delay.
Where stakeholders have worked together to mutually solve their problems, the results have
been quite different. The US Air Force has developed a highly successful program at
McClellan Air Force Base through innovative management, education, communication and
partnering with the Environmental Protection Agency (EPA) and the State of California to
obtain consensus on clean-up strategy from all parties.
DoD's environmental vision is to create a responsive DoD Environmental Program
which balances the needs of the individual services. is fully integrated into all DoD
business processes and provides the tools and authority to installation commanders so that
they can create a healthy and safe environment for DoD activities.
To achieve this goal, five issues are recommended for action: partnering, clean-up,
environmental technology, pollution prevention and environmental regional offices. These
five areas offer the opportunity to fundamentally change the DoD environmental program to
accomplish significant improvement.
Partnering, the first issue, involves commitment between stakeholders to work
together to ensure that all concerns are addressed. Where employed, it has significantly
reduced project time, cost and litigation. Although the potential value of partnering is
appreciated in some DoD locations, it is not widely practiced throughout DoD, nor is it
universally understood and accepted as a business practice. This can be improved by
educating and training managers in how to commit to and maintain partnering relationships
and by adapting partnering concepts more closely to DoD business practices. This practice
of partnering should be expanded throughout DoD to foster cooperative relationships with
stakeholders.
The adversarial nature of the relationships of employees at many DoD facilities with
their regulators are serious impediments to successful compliance and clean-up programs.
Partnering replaces adversarial relationships with teamwork. Of approximately 150 Army
Corps of Engineers construction projects that use partnering, none have resulted in
litigation. Clearly, cooperation through partnering promotes positive results.
The second targeted area, clean-up, has much room for improvement. In many
cases, the excessively lengthy and costly study process causes "paralysis by analysis." With
experience, many of DoD's clean-up activities are becoming almost routine. Clean-up can
be expedited by using successful remedies developed elsewhere. However, the field does
not often have sufficient access to information about clean-up technologies and their
successful application.
Moreover, project officers need better data on which to base decisions regarding the
use of competing technologies. For example, on a project concerning disposal of hazardous
waste (e.g., oil or paint), an officer may need more information to determine which disposal
method would most efficiently minimize environmental harm. This could be solved by
maintaining cost and performance data on various methods and technologies and making
the data widely available.
Furthermore, a disproportionate amount of money allocated for clean-up is expended
for analysis rather than for the clean-up itself. Presumptive solutions, based on experience.
will help. Regulators often require unrealistic future land use projections to determine
health risk and clean-up levels, which increases restoration costs.
DoD must better involve the community in clean-up initiatives. Even though the
community is a significant stakeholder in clean-up programs, DoD frequently excludes
community representation in clean-up planning or activities.
Environmental technology, the third issue, can assist in both clean-up of existing
contaminated sites and prevention of pollution during future Department operations. A
DoD environmental technology program is needed to solve the most pressing environmental
problems as rapidly as possible at minimum cost. This can be achieved through
cooperative actions in program planning, budgeting, execution and by leveraging each
service's funding, expertise and facilities.
Currently, no systematic method exists by which user (i.e., the installation
commanders) needs are identified, quantified, validated, prioritized and integrated. Also,
the time from the identification of an environmental problem to the fielding of a solution
(an average of six to seven years) is too long. This delay increases costs for environmental
compliance. Additionally, no process integrates all DoD environmental technology
demonstration programs nor is there an effective method to prioritize technology based on a
potential return on investment.
Pollution prevention. the fourth area, can also be improved. While DoD strives to
meet certain environmental requirements which mandate that ozone depleting chemicals be
phased out, few resources are left to meet other needs. Another hinderance is that
commanders lack the budgetary resources to make the business decisions necessary for
successful. cost effective pollution prevention. Federal and DoD procurement policies also
impede cost effective pollution prevention by limiting flexibility and inhibiting
decisionmaking ability. Also. current procurement regulations require the assignment of
short shelf-lives on many products for which the actual life is many times greater.
Environmental regulations often require this material to be classified as hazardous waste
once the shelf-life has expired. which greatly increases disposal costs. In short. DoD
investment strategies discourage pollution prevention.
The final issue, environmental regional offices, involves the development of a
unified program for dealing with the regulatory community. Currently each installation.
including local reserve components, deals directly with the various regulatory agencies.
Commanders need support from DoD for their interests with state and local
regulators, particularly during the rule-making process. Installations and reserve centers
need regional offices to help them interpret and understand the large number of local
environmental laws and regulations; to provide early notice of emerging legislation; and to
assist in environmental compliance and clean-up. DoD and service staffs can accomplish
this function at the national level, working primarily with the EPA, but the corresponding
function with each of the states needs to be improved.
The DoD Environmental program is in its infancy. Some progress has been made.
ut DoD needs to do more, faster, now. The five recommendations are designed to impact
significantly on the execution of the environmental mission.
Recommendations
1.
DoD should develop partnering relationships with environmental stakeholders.
This involves the development of a DoD partnering training program that includes all
stakeholders; reaching consensus of all stakeholders in the technical direction, magnitude
and process of clean-up projects from "cradle to grave"; the creation of a formal partners
between the customers and technology developers to ensure that technology development
and the strategy used to transfer technology from development to production to users are
designed to solve DoD's most pressing environmental problems in a timely, cost effectiv
manner; the encouragement of EPA and the States to partner oversight; and an increased
emphasis on the development of project specific partnering on environmental projects.
2.
DoD should streamline the clean-up process to clean up sites quickly withou
prolonged periods of study. This involves partnering with regulators: encouragement
generic clean-up approaches: provisions that grant installation commanders authority to
contract for clean-up of contaminated sites: and development of a "risk management"
approach which requires the categorization of sites. puts highest priority on risk to hur:
health and the environment, mandates funding allocations based upon these priorities and
monitors progress in reducing overall risk.
3.
DoD should establish an environmental technology policy that is based on
service users' environmental requirements and embodies the DoD environmental
strategy. To do this, it is necessary to ensure active participation by users in the
technology development process and adequate resource allocation. Moreover, DoD should
identify those areas within environmental technology where a joint development approach is
most desirable and encourage early identification of emerging technologies in other federal
agencies and the private sector. DoD should also establish a method to determine the
potential return on investment for DoD environmental technology. DoD's goal is to field
new technology that meets users' requirements in a timely manner.
4.
DoD should develop a more effective DoD pollution prevention program. This
can be accomplished with the creation of incentives to use pollution prevention as a
primary means to achieve compliance; a review of military specifications to eliminate the
use of hazardous materials; adequate funding of the services' pollution prevention program;
and development of a model pollution prevention program to serve as a prototype.
5.
DoD should establish regional offices to work directly with EPA regions and
local state environmental organizations to develop joint policy. These offices can assist
installations and reserve centers in environmental compliance and clean-up and support
commanders' interests with state and local regulators.
Implications
The American public has shown great interest in DoD's management of
environmental security issues. Adequate funding must be appropriated for training, clean-
up of existing sites and pollution prevention during current and future military operations.
DoD must apprise Congress of fiscal 1995 funding required to implement significant long-
term recommendations. The environmental regional offices should open during fiscal 199
They will significantly help installation commanders in fulfilling their environmental
security mission and facilitate improved relations with government regulators. Many of the
initiatives are long range in nature and will require changes in regulations and policies. For
some of these proposals, the Services will have to staff and coordinate with the Office of
the Secretary of Defense.
Fiscal Impact
It is anticipated that once these initiatives are implemented there will be cost savings
to the department. The amounts saved will vary from installation to installation.
ESTABLISH A DEFENSE QUALITY WORKPLACE
Background
The environment in which the Department of Defense (DoD) must conduct its
mission has fundamentally changed. The factor characterizing this new environment--
perceived long term decrease in national threat, and therefore, substantially reduced
budgets--requires that DoD change the way it conducts its business. The military services
and several DoD components have adopted the Total Quality (TQ) philosophy as the means
to accomplish their missions in spite of the constraints imposed by the changed
environment. Many have achieved success, and several DoD activities are nationally
recognized quality award winners. In addition, private sector companies such as Xerox,
Federal Express, Harley-Davidson and Motorola, when faced with similarly changed
environments that threatened their existence, have risen to their former world class
preeminence through adoption of a customer driven focus and total quality philosophy of
management. The key factor underpinning each success is top leadership commitment and
strategic quality management of the quality improvement effort. The same type of
commitment and strategic quality management of DoD's most senior leadership is required
if DoD is to maintain an effective national defense in this new environment.
Corporations who recognized that their survival was at stake had to transform
themselves to be successful. They adopted the philosophy known as "Total Quality
Management" (TQM) as their framework for improvement. Guiding principles, strategic
planning, focus, empowerment and continual process improvement are characteristic of
TQM and victorious armies.
Many units and entire components in DoD have followed the principles of quality.
They have achieved many breakthroughs, saving resources and at times preventing potential
life threatening situations. Unfortunately, since these efforts have not been ingrained across
the entire department, the successes have been limited and innovations have not been shared
among organizations.
The quality revolution that has profoundly changed management practice rests on an
industrial engineering foundation. but its leverage comes from the leadership principles of
Dr. W. Edwards Deming. When the US was experiencing a severe recession in 1980. an
NBC TV White Paper entitled "If Japan Can Why Can't We?" awakened American
industry to the power of Deming's principles. Individual industrial and government leaders
reexamined their management practices and concluded that these practices, not their
employees, were the problem. A managerial breakthrough was required to reverse the
country's economic fortunes. Those who saw the possibilities of a total quality approach to
management initiated the changes and ultimately created world class companies.
The most important characteristic of a total quality organization is committed
leadership. Its central task is to create an environment in which the knowledge and
expertise of every person can be expressed and is welcomed. A shared vision based on
core principles must be deployed so that all- members will have a compass for their
direction. Employees must be empowered to surface problems and fix those for which they
have the resources. Responsible initiative is required throughout DoD where resources are
limited, but success in the nation's defense is not negotiable. Any impediment that inhibits
the Department's components from solving problems they confront must be eliminated.
Mutual trust between the organization and its employees must be fostered so that everyone
is committed to the organization's mission.
The hierarchical structure of the DoD organization might be satisfactory when resources
are plentiful, but industry has proven that this type of architecture and narrow span of
control becomes a millstone when budgets shrink and market demand changes dramatically.
Hierarchical type structures foster centralized decision making, powerful staffs who tamper.
turf battles and avoidance of risk. These behaviors prevent any long term organization
efficiencies and constrain the ability to alter direction when required.
The best of the commercial industry has eliminated many layers of management and
flattened their organizations in order to be competitive and agile. It is not uncommon for
20 to 50 employees to report to one person. This structure demands that everyone
contribute and add value to the process. The supervisor becomes a coach, a mentor, and is
not expected to know instantly every detail in the organization. The employee is
accountable for specific assignments and responsible for his or her own contribution to the
team. To be successful. this type of organization demands mutual trust.
The ultimate goal is that TQM ceases to have its own identity as continuous
improvement principles and practices become the normal way DoD accomplishes its
mission. To achieve this goal, everyone in the department must understand and employ TQ
principles.
Recommendations
1.
DoD should establish a top leadership and management structure that furthers
TQ principles. This structure provides DoD with a senior level corporate forum to define
the future direction of the Department and is established by instituting the following:
A DoD Executive Steering Board (ESB), composed of the Department's senior
leaders, that guides implementation of TQ within DoD.
A DoD Quality Advisor to provide an independent source of advice to the SECDEF
and the DoD ESB on matters of quality management.
2.
DoD should implement a strategic planning process that encompasses TQ
principles and establishes direction. A strategic planning process and implementation
plan is necessary to communicate direction and guide work efforts across DoD towards the
Department's vision. The plan provides a vehicle for corporate alignment and integration
of actions, programs and process improvement endeavors across all organizational
components. The actions required to implement this are the following:
Determine customer needs and assess the external and internal environment to
identify the critical issues upon which to base the strategic plan.
Develop the Department's strategic quality plan to include the following:
- mission statement
- vision (corporate direction)
- major focus areas (MFAs) to guide process improvement efforts
- critical objectives within each MFA
- an action plan with milestones and measurements
Identify DoD core processes and designate process owners.
Develop methodology for alignment and coordination of all DoD processes among
major DoD components.
3.
DoD should ensure that the entire department has a comprehensive knowledge
of TQ principles and practices to bring about and sustain the TQ transformation. The
following actions are necessary to accomplish this:
Establish a TQ education and training plan for OSD personnel.
Issue policy that requires incorporation of TQ principles in the curricula of all DoD
professional and service schools.
Establish measures to determine the impact of TQ education and training on mission
outcomes.
4.
DoD should create an environment that promotes TQ principles and practices
to foster continuous process improvement, encourage creativity and innovation and
nurture the professional and personal growth of all employees. The Department's most
critical resource is its people. Leadership sets the tone and creates this environment by
doing the following:
Creating career enhancing incentives for DoD executives and managers to employ
TQ principles and methods.
Redesigning DoD's reward and recognition programs and performance appraisal
systems so that they are consistent with TQ principles and value total quality
practitioners.
Designing and implementing an unencumbered, responsive employee suggestion
program that encourages people to volunteer their improvement ideas.
Reinventing the DoD IG so that its main purpose is to assist DoD components in
achieving their mission vice controlling their actions. Its statutory control role
would be minimized.
Enacting a DoD policy that accentuates involvement of elected union representatives
as active participants and partners in the TQ process.
5.
DoD should rewrite directives, instructions and policies to support TQ
principles and methodologies. This can be achieved by doing the following:
Providing departmental guidance for the implementation of "Government
Performance and Results Act of 1993." which is consistent with TQ principles.
Ensuring that recommendations resulting from ongoing reviews of personnel and
acquisition regulations are consistent with TQ principles.
6.
DoD should use performance metrics to assess progress towards attaining its
vision. A measurement system ensures leadership decisions are based on objective
information from outcomes by establishing a performance measurement capability to assess
progress towards the DoD vision.
Implications
Total Quality Management principles have been an unqualified success in the private
sector. Introduction of Total Quality concepts into DoD greatly enhances the ability of
each service branch, component, command and individual to accomplish their specific
missions. For this to happen DoD's cultural environment must change so that a
comprehensive knowledge of TQ principles and practices are part of the everyday practices
at all levels in DoD. Many of the initiatives are long range in nature and require changes
in regulations and policies. The end result will be a true quality defense establishment.
Fiscal Impact
It is anticipated that once these initiatives are implemented there will be cost savings
within DoD based upon enhanced productivity and reduction of errors, bad management
practices and obsolete regulations.
Now Is The Time
GIVE DEPARTMENT OF DEFENSE INSTALLATION COMMANDERS
MORE AUTHORITY AND RESPONSIBILITY OVER INSTALLATION
MANAGEMENT
Background
Installation management is big business in the Defense Department, with over
5,500 properties containing approximately 27 million acres and more than 400,000
buildings. The current replacement value of these properties is greater than $566
billion. Facilities and services are provided for approximately 1.8 million military
personnel, almost one million civilian employees, 2.5 million dependents and 1.7
million military retirees. The annual funding support provided to military
installations totaled over $16 billion per year during the early 1990s.
All installations share a common mission. This mission is to provide quality
facilities and services to tenant organizations, activities and individuals to allow
them to most effectively and efficiently accomplish their assigned tasks. Among the
varied types of services provided are housing, messing (food services), utilities,
waste disposal, health and child care, schools, hospitals, recreation, facilities repair,
grounds and building maintenance, vehicle maintenance and administrative and
technical support. Managing a defense installation is comparable to managing a city
of equal size.
Despite the similarity in the services provided, each installation is uniquely
defined by a combination of factors including the mission and requirements of
tenants, funding sources, geography, population served, Service or agency identity
and history.
Installation commanders have a demanding job that is hampered by an
abundance of rules and regulations that inhibit, rather than encourage, decisions to
be made on behalf of mission success. Many decisions that impact installations are
made by people who have no knowledge of a situation's particulars nor any
responsibility for the consequences of their actions. For example, authority to repair
National Performance Review - DRAFT NOT FOR DISTRIBUTION
August 6, 1993
1
leaking roofs in Albuquerque, New Mexico, could only be given by the Deputy
Assistant Secretary of the Air Force even though he was 2,500 miles away and did
not know whether the roofs leaked. The installation engineer, who could see that
the roofs were leaking, could only write a report to Washington, D.C. seeking
permission to fix them, rather than take the initiative to fix them on his own.
The ideal vision for the Department of Defense's (DoD) installation in the year
2000 is to empower installation commanders with the responsibility, authority, and
flexibility to make the requisite decisions based on what is best for the client tenants
and their respective missions. This report identifies the legislative, regulatory, and
policy impediments that form barriers to the effective and efficient management of
military installations.
To provide focus to this effort and to define an implementation plan for this
vision of installations in the year 2000, four general functional areas have been
identified: financial management and funding flexibility, installation engineering
support, installation contracting and supply and service support. These represent
areas in which installation commanders are restricted in their authority to manage in
a more business-like manner.
The first area which will be discussed involves financial management and
funding flexibility.
The finance and accounting systems that support installations are generally
designed to control and track appropriation obligations. Currently, these systems fail
to provide adequate cost accounting information to the installation commander and
severely limit the capability of commanders to make cost-based, best value support,
supply or service decisions.
Financial management constraints include appropriation structure, restrictive
fiscal policies, inflexible program levels, fiscal year boundaries and obligation limits.
Though some would argue that these constraints are necessary to control and
monitor spending, unreasonable restrictions often overwhelm the proactive
installation commander who is attempting to apply limited resources to an unending
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list of operational, support and quality of life requirements.
To improve financial management and funding flexibility, the installation
commander must be empowered to manage his or her installation from a
comprehensive view. The commander must have the authority, ability and
responsibility to develop a comprehensive management plan that addresses all of the
installations' tasks and functions. This plan must establish the overall priorities,
distribute the full set of resources and balance requirements with available resources.
Finally, the installation commander must be held accountable for his or her
decisions.
The proposed actions would enable installation commanders to tailor their
resources to the unique requirements of their installation, flexibly respond to
changing circumstances, encourage and reward good management by subordinates
and subsequently improve the overall value and effectiveness of DoD Installations.
The second area addressed is installation engineering support. Mission
effectiveness and productivity are significantly affected by the quality of installation
engineering services. Engineering services include the maintenance and disposal of
real property, facilities and physical plant systems (e.g., heating) and the
procurement of services, supplies and equipment in support of these systems.
Engineering support requirements from authorities above installation level have
often been reasonably unattainable and needlessly prescriptive, directing "how"
commanders are to meet these requirements. Engineering projects often require
line-item reviews and approval by authorities above the installation commander's
level. These restrictions unnecessarily delay the completion of these projects.
Inflexible workforce authorization and personnel hiring and discharge procedures
impede the commander's ability to adequately staff a particular project to
accommodate changing workloads and resources. Personnel restrictions sometimes
prevent commanders from retaining the most qualified and productive personnel.
Similarly, limitations on budget accounts prevent commanders from expeditiously
funding necessary engineering requirements as mission needs and circumstances
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dictate.
DoD is currently in the process of reducing its inventory of properties and is
retaining only those installations which are necessary to adequately support the
current and planned missions and activities of the Department. Where possible,
DoD has relied on private sector and other public sector agencies to provide real
property and installation support (e.g., use of local fire departments). However,
coordination between private and public sectors has not been fully explored. And
the use of private sector financed projects has not always been considered as an
option. Installation commanders are also hampered by inflexible requirements which
prevent them from acquiring a provider who can give the best value for services,
supplies or equipment in the most cost-effective manner.
In the area of inventory management, decisions on the cost of installation
facilities and engineering services are often based on annual obligation authorities or
outlay considerations rather than on total life cycle costs. Also, DoD lacks a
comprehensive, long range management program to manage its capital assets. This
has led to DoD's inability to properly maintain and dispose of real property facilities
and systems.
Another problem which challenges installation commanders is an ever
increasing number of environmental, safety and occupational health laws/regulations
imposed by both state and federal authorities. Installation commanders sometimes
do not have adequate facilities and engineering services to operate in compliance
with these regulations. Inadequate engineering service support also impedes the
commander's ability to minimize and prevent adverse impacts on the environment.
The third area of concern which affects installation commanders involves
contracting support.
Contracting support at the installation level is hampered by excessive controls
imposed on contracting activities. For example, smaller contracts ranging from
$25,000 to $100,000 cannot be processed in an expeditious manner due to complex
and restrictive acquisition procedures. Current procurement statutes and regulations
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require extensive documentation and lead-time to advertise and prepare bids on
contracts with values that are comparable to the price of a used car. Unnecessary
inter- and intra-agency reviews also impede the efficient and effective processing of
contracts.
One of the biggest problems that DoD must address concerns the resolution of
disputes between service contractors and the Department. "Partnering" agreements
between service providers and service users which could prevent misunderstandings
between parties are rarely used. As a result, procurement disputes between service
providers and service users delay the prompt delivery of goods and services, create a
confrontational atmosphere and raise the costs to both the provider and the
Government.
Because of these problems and restrictions, installation commanders are
discouraged from taking prudent risks or trying creative contracting approaches.
The final major area addressed is in the area of supplies and services support.
Installation managers lack flexibility and freedom to purchase, procure, obligate,
negotiate, source or price for best value supplies and services directly from a
provider.
Restrictive regulations and directives drive up costs by inhibiting the commander
from "shopping smart." For example, to purchase a commercial motor vehicle or to
lease space, an installation manager must provide an extensive analysis to the DoD
Comptroller and the General Services Administration. The preparation of the
analysis and the subsequent review and approval processes often cause unnecessary
delay and expense to the Department. It would be faster and more economical to
permit the manager to purchase the vehicle directly from a private commercial
dealer. To do this, restrictive Government procurement regulations will have to be
changed to permit commanders to purchase certain types of items from large
businesses. Commanders must also be given authority to buy high demand items "in
bulk" to minimize costs.
Current procurement practices create unusable excess as well as pose significant
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disposal problems for hazardous waste at installation sites. For example, if a project
only requires one gallon of paint, a commander may be forced to purchase a 55
gallon container because this is the minimum amount that can be obtained.
Obviously, procuring, storing and ultimately disposing of the excess paint is an
expense which should be avoided.
Currently, the costs of procuring, warehousing, packing, crating and handling are
not permitted to be included as customers' surcharges. These additional costs should
not be absorbed by the Government.
Finally, because DoD instructions concerning interagency support agreements
(ISA) are inadequate, the responsibilities and functions of users and suppliers are
often not clearly defined. Ambiguous and incomplete provisions in an ISA
ultimately lead to confusion and costly delays.
Recommendations
FINANCIAL MANAGEMENT AND FUNDING FLEXIBILITY
1.
The Defense Finance and Accounting Service should develop and
institute a Defense-wide cost accounting system for installation
management.
2.
The Defense Comptroller, in conjunction with Service and Agency
Comptrollers, should review all financial constraints and limitations
imposed on installations. All limitations would be challenged and removed
wherever possible. For example, the Defense Comptroller should seek
legislative authority to allow, on a limited basis, Operations and Maintenance
appropriations beyond the traditional single fiscal year. For those limitations
required by law or good business practice, the dollar amounts would be
raised to the maximum achievable levels.
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3.
The Defense Comptroller should develop and institute procedures that
allow installation commanders to retain a designated portion of
budgetary savings generated by specified cost saving measures, such as
energy conservation. This would be an incentive program designed to
encourage installation commanders to manage their programs as efficiently
and economically as possible.
4.
The Services should institute procedures that require a financial impact
assessment of major policy issues on resource decisions. These
assessments can be factored into resource initiatives before these proposals
reach the installation level. Installation commanders can then act with the
assurance that these financial impacts have already been considered by the
Services.
5.
The Office of the Secretary of Defense (OSD) should issue guidance that
encourages the Services to limit non-specific, broad based cuts of
installation resources. By limiting the imposition of non-programmatic
reductions of resources, the Services would spare installations the problem of
maintaining unnecessary functions or undesired levels of service in the face
of decreasing funding levels. Reductions should be tied to a specific
deletion or reduction of a required function or level of service.
INSTALLATION ENGINEERING SUPPORT
6.
The Office of the Under Secretary of Defense (OUSD) for Environmental
Security, in conjunction with the Services, should review existing
installation engineering policies, procedures and other regulatory
requirements. The review should ensure that clear, measurable and realistic
(attainable) goals and standards have been established for each primary
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process and activity. It should eliminate all unnecessary prescriptive
direction on how the goal/standard is to be achieved.
7.
OSD, theComptroller and the Office of the Deputy Under Secretary of
Defense for Environmental Security, in conjunction with the Services and
other Agencies, the Office of Management and Budget (OMB) and
Congress, should develop a comprehensive, long-range approach to
managing DoD capital assets, similar to capital asset management
systems common in the private sector. Such an approach would require the
development of a system for tracking total life cycle costs for acquiring,
operating, maintaining, and disposing of real property facilities and systems.
DoD, with the assistance of OMB and Congress would also have to annually
program and budget the capital and operating/expense resources necessary to
minimize the total life cycle costs of the required physical plant.
8.
The Office of the Under Secretary of Defense for Environmental
Security, in conjunction with the OSD Comptroller, the Services, other
DoD Agencies, OMB and Congress, should implement policies and
practices which will enhance the installation commander's ability to
obtain engineering support in a timely and efficient manner. For
example, the number and types of projects requiring line-item review and
approval by authorities above the installation commander level, especially by
Congress should be greatly reduced. Work classification policies and
guidance should be simplified. Commanders should be allowed to adopt a
"unified budget" that would equip the installation commander with a single
account which could be used with any or all installation engineering
requirements, e.g., for installation or family housing facilities; for operations,
maintenance, repair or available resources to their highest priority
requirements, as changing mission needs and circumstances dictate. The
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extraordinary costs now incurred unnecessarily due to excessive oversight in
budget development, review, authorization, and appropriation would be
greatly reduced.
9.
The OSD Force Management and Personnel, in conjunction with the
Services, Agencies, the Office of Personnel Management (OPM), unions
and Congress, should modify staffing authorization and personnel hiring
and discharge procedures to permit installation commanders the
flexibility they need to efficiently adjust their staffs to changing
workloads and resources and to retain the most qualified and productive
personnel.
10.
The Office of the Under Secretary for Defense for Acquisition, in
conjunction with the Services, Agencies and Congress, should identify
and modify those statutes, policies and procedures which preclude or
otherwise limit the installation commander from acquiring from a
provider who offers the best value for services, supplies, equipment and
other resources required to accomplish installation engineering activities
in the most cost-effective manner.
11. The OSD Comptroller and the Office of the Deputy Under Secretary of
Defense for Environmental Security, in conjunction with the Services,
Agencies, OMB and Congress, should modify current statutes and/or
budget scoring rules to encourage private sector financed alternatives to
Military Construction (MILCON) for acquiring, operating and
maintaining required facilities at the lowest total life cycle cost.
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12.
The OSD Comptroller and the Office of the Under Secretary of Defense
for Environmental Security, in conjunction with the Services, Agencies,
OMB and Congress, should implement cost savings incentives that would
authorize installation commanders to retain savings (or cost avoidance)
which result from process improvements and productivity enhancements.
Commanders should be allowed to apply these savings towards discretionary
spending and/or other installation engineering requirements.
CONTRACTING SUPPORT
13. The Deputy Under Secretary of Defense for Acquisition Reform should
allow the use of simplified acquisition procedures for contracts between
$25,000 and $100,000. Along with this proposal, DoD should consider
reducing the synopsis and solicitation lead-time for contracts between
$25,000 and $100,000 and increase the threshold established by the Service
Contract Act and the Davis-Bacon Act consistent with the recommended
change to the simplified acquisition threshold.
14. The OSD should encourage the use of "partnering" agreements between
service providers and service users, and encourage widespread
application wherever possible and appropriate, in contracts as well as in
agreements between government organizations. Successful partnering can
be enhanced by formally stating values and goals in solicitations, ensuring
top-level commitment to establish "champions" at all levels in the
government and with contractors, sponsoring joint team building workshops
and by reaching consensus on operating principles and conflict management
(e.g., Alternate Disputes Process). Follow-up meetings and/or workshops
will also maintain open communications and encourage continued cooperation
after the contract is underway.
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15. All Defense Services and Agencies should increase the use of "best value"
contracts where applicable and encourage installation commanders to
take prudent risks in procurement activities. Current requirements do not
match the best type of contract to be used in specific situations. This
contributes to longer lead times, customer dissatisfaction and less than full
value for Government expenditures. All personnel involved in the
contracting process should be better trained in the "best value" philosophy.
The training should emphasize the benefits of using best value contracting
approaches; clearly state the roles, responsibilities and authorities of all
personnel involved in the contracting process; and instill quality management
principles. DoD needs to encourage installation commanders to take
prudent risks and to accept occasional failures. In that regard, auditors
should recognize that risk taking is a necessary component of the culture and
that criticism should be avoided. Contracting support can also be improved
by authorizing installation contracting officers to approve Value Engineering
proposals at the local level.
16. The Deputy Under Secretary of Defense for Acquisition Reform should
revise protest procedures, including limiting the time in which a protest
is considered, to facilitate the rejection of unreasonable protests
submitted by contractors whose primary intent appears to be to delay
the contract awards.
SUPPLIES AND SERVICES SUPPORT
17. OSD should identify impediments to a "shop smart" capability and
implement a standardized reimbursement accounting system. DoD needs
to revise and/or eliminate restrictive regulations that prevent installation
contracting officers from buying in the most cost efficient manner. DoD
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needs to develop standard interservice support agreements (ISAs) to fully
integrate with a standard financial accounting system. DoD should also
provide information to installation commanders comparing commercial
options to available federal sources.
18. The Defense Logistics Agency and the OSD should change the
Federal Acquisition Regulations (FAR) to permit purchasing from large
businesses based on cost and quality of items required. Amending the
FAR would, in many cases, save the costs associated with the small business
"middle man." DoD should also establish a single DoD retail activity or
retail supply activity for each military service/agency so that duplicative
functions can be eliminated. GSA and the local procurement organization
should ensure that the best products are obtained at the lowest prices in a
timely manner. To provide for a single retail inventory management system,
DoD should establish the Base Operating System. Once established, this
System would become the accounting, financial, contracting and supply
choice for DoD.
19. - OSD should delete or revise those statutory and regulatory requirements
which unreasonably impede an installation commander's ability to
contract for supplies and services. In the area of real estate leasing and
purchasing, Section 2682 of Title 10, United States Code should be amended
to eliminate some fixed lease costs and overhead expenses. Similarly, DoD
should be allowed to delete the requirement to submit Analysis of
Requirements for Commercial Vehicles and other similar requirements where
the procedures are unnecessary, cumbersome and difficult to understand.
The Joint Travel Regulations should also be reviewed and amended.
These regulations are often confusing and contradictory. For example, the
restriction on use of foreign flag carriers (Fly American Act) prohibit the use
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of several U.S. Carriers (U.S. Air, Continental) because of their alignment
with non-U.S. Carriers even though they can often can provide the least
costly means of transportation.
20.
OMB/OSD should implement full funding reimbursement on an
accelerated schedule. In this area, DoD should add improved automated
support and provide more definitive policy/procedure guidance. This should
include flexible pricing, process/function costs and total asset visibility.
21.
The DoD Comptroller should issue unit cost guidance. It is critical that
DoD establish a standard financial accounting system and uniform guidance
for computing unit costs. This will promote uniformity and assist
installation commanders in assessing their procurement programs in a more
efficient and effective manner.
22.
The DoD Comptroller should change applicable DoD regulations to allow
stock fund managers to include in their customers' surcharges the costs
for procuring, warehousing, packing, crating and handling.
23.
OSD should provide detailed guidance identifying the requirements,
negotiations and preparation of interservice support agreements (ISAs).
DoD needs to revise its guidance to include DoD inter-Service support
policy; organization, functions and specific responsibilities of suppliers and
receivers in the ISA process; procedures for negotiation and preparation of
ISAs; and categories of support which spell out in detail the types of support
required.
Implications
Many of these initiatives are long range in nature and will require changes in
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statutes, regulations and policies. For some of these proposals, the Services will
have to staff and coordinate with the Office of the Secretary of Defense. Several
recommendations in the four functional areas will require Congressional assistance.
Reforming engineering support functions will require outside assistance from outside
resources such as state and local communities and other federal agencies. Modern
management tools and innovative technological applications in the areas of energy
use, automated data processing and the environment will have to be provided in
order to assist the installation commander in moving toward entrepreneurial
management. There will be some upfront administrative costs to develop the various
fiscal management systems.
It is not anticipated that there will be any increase of staffing levels necessary to
implement these recommendations.
Fiscal Impact
It is anticipated that once these initiatives are implemented there will be a cost
savings to the department. The amounts saved will vary from installation to
installation.
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REDUCE DOD SUPPORT OF THE DRUG INTERDICTION PROGRAM
Background
Sections 371-380 of Title 10, United States Code and various non-codified authorities
contained in the National Defense Authorization Acts for fiscal 1991 to 1993 provide for
maximum cooperation between the Department of Defense (DoD) and federal, state and
local law enforcement agencies (LEA) in counternarcotics operations to stem the flow of
illegal drugs into the U.S.¹
The bulk of this mission has been undertaken by the National Guard (NG). Generally,
in the U.S., the NG operates under state authority, following implementation plans prepared
by state Governors, approved by the Secretary of Defense and funded by DoD under
Section 112 of Title 32, United States Code. The major tasks assigned the NG have been
supporting LEAs in specific areas. These are: interdiction activities (including
reconnaissance, surveillance, cargo inspection and engineering support); eradication efforts;
research and development of surveillance equipment; transportation support and drug
demand reduction (e.g., urinalysis and inner city education programs).² It is estimated that
for fiscal 1993, the number of NG work days related to counter drug actitivies will exceed
one million days.³
Section 124 of Title 10, United States Code, establishes DoD to be the lead federal
agency to detect and monitor aerial and maritime transit of illegal drugs into the U.S.4
Additionally, the Secretary of Defense is responsible for integrating communications and
technical intelligence assets dedicated to drug interdiction and to approve and fund state
Governor's Plans for use of their NG in state status for counter drug activities.⁵
Section 1004 of the fiscal 1991 Defense Authorization Act, as amended, also specifies
that DoD may provide monetary support without reimbursement during fiscal 1991 to 93
for counter drug activities for federal, state, local and foreign LEAs. This support includes
the purchasing of equipment and the provision of services (e.g., training, linguists.
transportation. maintenance/repair/upgradeof government provided equipment). Section
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1004 funds are also used to support activities which do not have a direct military benefit.
These include procurement of C3I (i.e., command, control and communications and
intelligence) services, formal training of LEA personnel in military schools and the
upgrading of non-Government provided equipment.⁷
The total fiscal 1992 budget for these and other DoD counter drug programs was
$1.226 billion. 8 Within the DoD budget, the fiscal 1993 NG counter drug budget was $236
million.⁹ Of that total, approximately 85 percent was spent in support of the interdiction
and eradication mission while 1.5 percent was spent on drug demand reduction programs. 10
In addition to its role in the domestic program, the NG supports the CINCs' (commander in
chiefs) counter drug operations overseas.
One unique activity performed by the NG in support of LEAs, and not an authorized
activity for active duty military, is a program to assist U.S. Customs Service inspections of
cargo entering the country. 11 Under state (Section 112 of Title 32, United States Code)
authority, and in accordance with plans submitted by state Governors and approved by the
Secretary of Defense, NG personnel are sent on temporary active duty pursuant to ADSW
(active duty special work day) orders to ports of entry where they inspect cargo containers
under the supervision of the Customs Service. NG personnel (including commissioned and
non-commissioned officers) assisting this effort are transported to the inspection site. They
earn full military pay, credit toward retirement and if the location of the inspection facility
is over 50 miles away, travel payments while performing these duties. 12 The program costs
roughly $28 million a year. 13 In all likelihood, the Customs Service could hire wage grade
civilians or contractors to provide this type of support at a lower cost.¹⁴
Whether the involvement of DoD in support of LEA counter drug activities has been
effective in reducing the flow of illegal drugs into the U.S. is debatable. 15 But, despite
increased seizures, the availability of drugs in this country has not decreased. 16 Further, the
GAO has viewed some of the drug interdiction activities (e.g., cargo inspection and use of
radar balloons) as inefficient and costly. 17
Congress has also asked DoD to develop communications networks for state and local
LEAs. This effort was designed to fund and assist in the development of an overall.
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coordinated, comprehensive telecommunications system to assist in drug interdiction efforts.
The program has the potential to expand to all states. But beyond the development of
these systems, DoD is also being asked to maintain them in the future. 18
DoD is providing approximately 250 "temporary" staff personnel for counter drug
activities at LEAs. These "temporary" details of military and civilian staff to LEAs
sometimes last for periods as long as four years. Often, these details are costly and
unnecessarily prolonged by the LEAs. In effect, DoD has been subsidizing the staffs of
these LEAs without reimbursement. As an example, DoD is not only developing and
maintaining the National Drug Intelligence Center at Johnstown, PA, but it pays the
salaries of the Department of Justice employees who are assigned to this facility.¹⁹
Pursuant to Public Law 102-396, Congress made $25.5 million available for the sole
purpose of operating and maintaining five sea-based aerostat (radar balloon) systems.
These systems are used for detecting and monitoring in support of U.S. Coast Guard
antinarcotics operations.²⁰ However, there are indications that the sea-based aerostats are
unreliable and inefficient monitoring and detecting devices.²¹ Often, these aerostats cannot
be operated due to inclement weather or because of maintenance problems.²²
Recommendations:
1.
The DoD should eliminate certain National Guard interdiction operations such
as supporting the Customs Service's manual cargo inspection program,
substituting, as necessary, less costly civilian inspectors funded by the Customs
Service. Congress should continue to fund non-intrusive cargo inspection research
programs to develop technology such as bio-sensors and full container x-rays which
will obviate the need for such labor intensive methods.
2.
The DoD should eliminate Section 1004 funded support of other agencies when
such support does not have a direct military benefit. The DoD should be
allowed to continue to provide counter drug support on a reimbursable basis where it
is cost effective (e.g., establishing communication and ADP systems, training,
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equipment maintenance and foreign language translators). Through appropriate
legislation, Congress should make fiscal 1994 funds programmed for Section 1004
support available to other agencies as designated by the ONDCP Director.
3.
The DoD should require LEAs to provide their own funding for LEA counter
drug administrative staff instead of relying on DoD to provide more costly
civilian or military staff. When LEAs request DoD to provide personnel assistance
under the DoD 274 Detail Program, DoD will carefully determine if the LEAs have
the capability to obtain these type of services from other sources. When a detail is
granted, DoD should insure that the LEAs use DoD personnel in a manner
consistent with the request (i.e., military intelligence analyist is used for intelligence
activities), and that LEAs take appropriate action to train others to replace these
personnel when the detail is over. DoD will continue to provide personnel on a
nonreimbursable basis only for key billets such as those related to intelligence and
planning where it is clear that LEAs do not have the capability to obtain these
assets.
4.
The DoD should discontinue the use of sea-based aerostats for counter drug
detection and monitoring activities because they are costly and inefficient.
Aerostats are relatively high cost assets for limited coverage and are not valued by
DoD commanders in the field. Though they are primarily used in support of the
Coast Guard activities, land based radar, tracker aircraft, E2 and P3 aircraft and
Coast Guard cutters are sufficient assets to perform the mission of detection and
monitoring. Elimination of this program would most directly affect the Coast
Guard.
Implications
The Clinton Administration is expected to announce its counternarcotics policy
sometime in the fall of 1993 23 Any changes in DoD's counternarcotics program should be
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implemented in such a way that they are consistent with this policy.
If DoD military assistance is reduced in such areas as aerial surveillance and
interdiction, $270 million in OPTEMPO training funds now dedicated to the counter drug
program would continue to be spent in non-counter drug endeavors to assure minimum
military readiness qualifications.²⁴
Despite criticism from the Congressional Budget Office and Congress, NG and DoD
drug enforcement officials believe that they have fulfilled the mission given them by
Congress -- namely, to provide support to LEAs. In particular, the NG believes that
because they are an integral part of their local community, it is part of their state mission to
assist in the drug interdiction effort. The NG contends that it provides LEAs with
irreplaceable resources such as aerial surveillance, reconnaissance, intelligence, linguists.
translators and technical expertise for sophisticated surveillance equipment.²⁵ LEAs should
be able to accomplish their mission more economically in such areas as cargo inspection if
the LEAs were funded directly for this mission. However, DoD may have to continue
support until LEA forces are hired and trained. Legislation may be necessary to assure that
the hand-off is accomplished in a timely manner.²⁷ As a result of these recommendations,
Congress may have to readjust budget ceilings of affected federal LEAs to properly fund
the national counter drug policies established by this Administration.²⁸ It is also
anticipated that NG reservists will receive less secondary income if ADSW funding is
reduced for counter drug inspections.²⁹
Fiscal Impact
Each of the recommendations listed above can result in cost savings to DoD. In the
area of NG cargo inspections, approximately $28 to 29 million per year for the next five
years is budgeted in support of this program. These funds could be better spent on
contracting for less expensive contractors or in the development of non-intrusive cargo
inspection technology to achieve the same results. Currently, $8 million a year in Section
1004 support to LEAs is expected to be spent by DoD for non-military assistance.
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Elimination of this support will result in over $35 million savings to DoD over the next
five years. Similarly, funding for DoD personnel assistance under the DoD 275 Detail
program, currently budgeted at $10.5 million for the next five years, could be saved if DoD
is allowed to curtail unnecessary administrative details in the future. Finally, over $25
million per year could be saved if DoD is permitted to discontinue the costly and
ineffective sea based aerostat program.
In Millions of Dollars
1994
1995
1996
1997
1998
1999
Budget Authority
71.5
72.3
73.1
74.0
74.0
Outlays
55.8
68.2
70.0
70.7
70.7
Change in FTEs
(74)
(74)
(74)
(74)
(74)
Endnotes
1. Lieutenant Commander John Rolph, Military Assistance to Law Enforcement,
(June,1992) p. 7-9
2. Interview with Francis J. Bray, Director, Counterdrug Task Force,
National Guard Bureau, Department of Defense, the Pentagon, Arlington, Virginia, June 3,
1993.
3. Department of Defense, Annual Report to the President and the Congress,
Part III, Defense Components Counterdrug Program, Richard Cheney, (Washington, D.C.,
January 1993) p. 110.
4. Rolph, p. 3.
5. Telephone interview with James Fish, Budget Examiner, Office of
Management and Budget. Washington. D.C., June 8, 1993.
6. Interview with Colonel Robert Newberry, Principal Director for Drug
Enforcement Policy & Support. Department of Defense, the Pentagon, Alexandria, Virginia.
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June 1, 1993.
7. Memorandum provided by Brian E. Sheridan, Deputy Assistant Secretary
for Drug Enforcement Policy and Support, July 16, 1993, p. 8.
8. Telephone interview with James Fish.
9. Interview with Francis J. Bray.
10. Ibid.
11. Telephone interview with James Fish.
12. Interview with James Fish.
13. Ibid.
14. Ibid.
15. U.S. Congress, Senate Judiciary Committee, Hearing on America's Drug
Strategy, Comments by Senator Joseph Biden, Jr., April 29, 1993.
16. Congressional Budget Office, Reducing the Deficit: Spending and
Revenue Options, A report to the Senate and House Committees on the Budget as required
by PL 93-344, (Washington, D.C., February 1993) pp. 216-17.
17. "Military anti-drug effort $3-billion flop, report says," Milwaukee
Journal, (June 21, 1993) p. 1.
18. Comments received from Colonel Robert Newberry, June 21, 1993, p. 3.
19. Ibid.
20. Memorandum from R.C. Macke, Vice Admiral, USN, Director, Joint
Staff, (Washington, D.C. June 15, 1993) p. 1.
21. Interview with Captain Stewart Barnett (Navy), Branch Chief, Host
Nations Operations Branch, Counternarcotics Operations Division (CNOD), Lieutenant
Colonel Gordon W. Howard, Branch Chief, Research Management Branch, CNOD, and
Captain John D. Roberts (Navy), Action Officer, Detection and Monitoring Branch, CNOD,
Joint Chiefs of Staff (J3), the Pentagon, Alexandria, Virginia, June 14. 1993.
22. Ibid.
National Performance Review --- DRAFT Not for Distribution
August 6, 1993
23. Interview with Richard Canas, Director of Counterterrorism &
Counternarcotics, National Security Council, June 21, 1993.
24. Comments received from Colonel Newberry, June 21, 1993, p. 3.
25. Interview with Frank Bray.
26. Interview with James Fish.
27. Comments received from Colonel Newberry, June 21, 1993, p. 3.
28. Comments received from Lee P. Brown, Director, Office of National Drug
Control Policy, Office of the President, Washington, D.C., August 6, 1993.
29. Interview with James Fish.
National Performance Review --- DRAFT Not for Distribution
August 6, 1993
REDUCE NATIONAL GUARD AND RESERVE COSTS
Background
In 1993, the U.S. military reserves exceeded 1.1 million personnel, compared with 1.8
million on active duty.¹ The seven reserve components are in the Army, Navy, Air Force,
Marine Corps and Coast Guard and the Army and Air National Guard. Two-thirds of the
reserve force are in the Army Reserve and National Guard.
A selected reservist performs duty one weekend a month plus serves on active duty for
a period of time (usually 12 to14 days) during a calendar year. During the monthly drill
period, the selected reservist trains in his or her military occupational specialty for a
wartime mission. Some selected reservists occupy positions in "individual mobilization
augmentee" (IMA) slots. An IMA reservist can either be in a drilling or a non-drilling
position. Depending on the service (e.g., Army, Air Force, Navy), a drilling IMA reservist
performs duty either one or two days a month and is paid. A non-drilling IMA reservist
does not perform duties during the month. However, like all selected reservists, an IMA
reservist must serve on active duty for up to 12 to14 days during the calendar year.² In
fiscal 1992, there were 18,735 officers and 11,070 enlisted personnel in IMA slots. At the
end of fiscal 1991, the Army had the largest number of selected reservists (755,802) (65
percent of overall reserve strength). In comparison, the Navy and Marine Corps had a
force of only 196,443 in the selected reserves (17 percent), the Air Force had 202,325 (17
percent) and the Coast Guard had 11,857 (one percent).⁴
Because of the draw down of military forces after the end of the Cold War, the Bush
Administration proposed reducing the National Guard and Reserve personnel by over
250,000 by the end of fiscal 1995. There has also been a large reduction of active duty
personnel which has greatly increased the number of former military who wish to join the
reserves. At the same time, there are many reservists who have lost their positions due to
the draw down and are actively seeking to stay in the selected reserves. The draw down
of active and reserve military forces coupled with the effects of the recession have, in some
cases. created a surplus of individuals seeking to join or stay in the reserve program.
Two specific issues with National Guard and Reserve implications were identified
which showed inequities in the program. The first of these deals with payments to
reservists who are federal employees.
In fiscal 1992, there were 136,700 reservists who were Federal civilian employees.⁶
Selected reservists who are also federal employees receive their full civilian pay and full
reserve pay during their two weeks of annual military training. This is an exception to the
Dual Compensation Act which generally prohibits a federal employee from drawing two
salaries from the federal government for the same period of time. These members are
authorized to receive military leave for training by federal statute with no loss of pay or
annual leave.⁷ In contrast, a 1986 Hay-Higgens Benefits Survey of Clients showed that 81
percent of reservists employed by private employers with over 500 employees only received
the difference between their civilian and reserve pay or received no additional pay at all.⁸
In 1989 Yee/Minard and Associates, Inc. prepared another study for Ross Roy, Inc. which
showed 66 percent of small private companies and 51 percent of large private companies
only paid the difference in reserve and civilian salary, paid no salary at all or required the
reservist to take annual or sick leave.⁹
In 1978, the Reserve Compensation System Study (RCSS) and a 1990 Congressional
Budget Office report proposed eliminating dual compensation.¹⁰ The RCSS was, however,
not released as an approved study outside DoD. The RCSS found that over half of the
reservists who were federal employees were civilian technicians (i.e., full-time federal
employees of Guard and Reserve units) whose civilian employment was contingent upon
membership in the unit.¹¹ In fiscal 1992, out of 101,000 federal employees employed at
DoD, 58,000 were military technicians. 12
Reservists with dependents who are placed on active duty for short training periods also
receive housing allowances. Reservists generally serve on two weeks of active duty each
year for annual training. Reservists also may serve for short periods of additional active
duty for schooling or special training. While training for periods of 14 days or less,
reservists with dependents receive basic allowance for quarters (BAQ), even when
government quarters are provided to the reservist. Reservists without dependents do not
receive BAQ.
This issue was originally raised by a congressional inquiry following a constituent's
complaint that two single members without dependents of the same Service and same grade
received different compensation when performing identical missions in a temporary duty
status. 13 One of the members was in the reserves and the other was on active duty. The
second issue concerning BAQ arose when service members complained in a 1986 Reserve
Component Survey that reservists without dependents did not receive BAQ during short
tours of active duty while members with dependents did. 14 As a results of these
complaints, the Sixth Quadrennial Review of Military Compensation recommended that
BAQ be extended to all reservists on active duty with the exception of members without
dependents who are performing initial active duty for training.
The disparity in treatment with respect to compensation results from Section 401(d) of
Executive Order No. 11457, "Regulations Relating to Incentive Pay, Special Pay and
Allowances." This Section defines the permanent duty station of members of the reserve
components on active duty for training as the place where the training is being performed. 15
Entitlement to BAQ is based on the availability and use of Government quarters at the
"permanent duty station".
A reservist who is sent to a location on temporary active duty is deemed to be at his
or her "permanent duty station." Since quarters are generally provided to reservists during
short periods of active duty, the Government does not provide BAQ for reserve members
without dependents. In contrast, reservists who have dependents receive BAQ even though
they are provided quarters during active duty for training. As an example, a member in pay
grade E-4 who has no dependents will receive $125 less during a 14 day annual training
period than will an E-4 with dependents.¹⁶
Active duty members, with or without dependents, are provided BAQ even though they
may be on temporary duty at another location. The justification for this differentiation is
that the government has an obligation to provide housing benefits (i.e., BAQ) for active
duty dependents even when an active duty service member is on TDY. In contrast, the
government should not be obliged to provide housing benefits for dependents of a reservist
and should not have to pay BAQ benefits when a reservist, on short periods of AT, is
provided government quarters.¹⁷ The existing policy primarily benefits officers and senior
enlisted personnel who have dependents.¹⁸ Since single reservists do not receive BAQ,
elimination of BAQ benefits for all reserve personnel when government quarters are
provided would remedy a perceived inequity.
Recommendations:
1. Congress should amend Section 6323 of Title 5, United States Code to authorize a
reservist on annual military training leave who is a federal employee to be paid
only the greater of civilian or reserve compensation or to allow the reservist to take
annual leave. Corresponding changes to DoD and Office of Personnel Management
regulations and policies would also have to be made to implement this statutory
amendment.
2. Congress should amend Section 403 of Title 37, United States Code to
eliminate BAQ for all selected reserve personnel occupying government quarters
during short periods of active duty training (15 days or less). To implement this
statutory change, relevent Executive Orders, regulations and policies would also have to
be amended.
Implications
The issue of eliminating dual compensation and BAQ benefits have been raised in the
past by the Congressional Budget Office and Office of Management and Budget. Though
there have been arguments that this change in policy would be detrimental to the
recruitment and retention of qualified individuals in the reserves, our review indicates that
this change would only minimumly affect overall reserve compensation and would not
adversely affect the viability of the program. Enactment of these proposals would end
perceived inequities in the system and provide significant cost savings for the Government.
Fiscal Impact
By eliminating dual compensation for reservists who are federal employees. the
potential cost savings to the Government would average approximately $80 million a year.
Ending BAQ for reservists with dependents who are provided quarters during short periods
of active duty would save the Government approximately $100 million per year. The
reduction in yearly income of reservists with dependents would be only about five percent.
In Millions of Dollars
FY 94
FY 95
FY 96
FY 97
FY 98
FY 99
Budget
180
180
180
180
180
Authority
Outlays
180
180
180
180
180
Change in
0
0
0
0
0
FTEs
Endnotes
1. Congressional Budget Office (CBO), Reducing the Deficit, Spending and
Revenue Options, A report to the Senate and House Committees on the Budget as required
by PL 93-344, (Washington, D.C. , February 1993), p. 90.
2. CBO, Reducing the Deficit, p. 94.
- 3. Memorandum received from Frank Rush, Principal Director, Office of the
Deputy Secretary of Defense for Reserve Affairs (Manpower and Personnel), the Pentagon,
Alexandria, Virginia, July 20, Recommendation #1, p. 3.
4. Memorandum received from Frank Rush, July 20, 1993, Recommendation
#1. p. 2.
5. Committee on Armed Forces, United States Senate, National Defense
Authorization Act for Fiscal Year 1993, Subtitle E - Guard and Reserve Transition
Initiatives, p. 203
6. Memorandum received from Frank Rush, July 20, 1993, Recommendation #1,
p. 3.
7. Federal Personnel Manual 630, Subchapter 9, Absence and Leave, p. 21-22.
8. Memorandum received from Frank Rush. July 20, 1993. Recommendation #1,
p. 4.
9. Ibid.
10. Interview with Gene Divine, Budget Analyst, Office of Management and
Budget, May 10, 1993.
11. Ibid.
12. Memorandum received from Frank Rush, July 20, 1993, Recommendation
#1, p. 3.
13. Department of Defense, Sixth Quadrennial Review of Military
Compensation, Volume 1, National Guard and Reserve Compensation, (August, 1988), p.6-
2-6-9.
14. Ibid.
15. Ibid.
16. Ibid.
17. Interview with Wendel Waites, Budget Analyst, Office of Management and
Budget, June 11, 1993.
18. Interview with Gene Divine.
STREAMLINE AND REORGANIZE THE
US ARMY CORPS OF ENGINEERS
Background
The US Army Corps of Engineers (Corps), which has both a military mission and a
Civil Works mission, is part of the Department of Defense (DoD). The Corps does all of
the military construction for the Army and 80 percent of the Air Force's construction.¹ In
addition, the Corps performs some of the DoD's environmental work. Out of a $10.6
billion fiscal 1993 program including reimbursable work, $5.5 billion is for military
construction programs and $5.1 billion is for civil works programs.² The Corps presently
does approximately $1.5 billion of reimbursable work for programs of DoD and other
federal agencies, such as the Environmental Protection Agency's (EPA) Superfund,
environmental restoration and other engineering services for the Department of Energy
(DOE), and emergency activities for the Federal Emergency Management Agency
(FEMA).³ These agencies use the Corps' expertise in project planning, cost estimating,
engineering design, and contract management.
The Corps' workforce includes 27,402 civil works full time equivalent employees
(FTEs) and 13,400 military program FTEs.⁴ This proposal deals primarily with the 15,600
civil works FTEs and the approximately 4,900 military program FTEs that are located in
and have responsibility for performing work in assigned geographic areas within the
continental United States (CONUS). It excludes the Corps Research and Development
Laboratories and two specialized division offices.
The Corps has long recognized the need to reorganize to maintain its status as a
world class engineering organization. The Corps has not undergone a major reorganization
since 1942, yet it is doing less of its traditional engineering and construction activities in its
civil works programs. Recent history indicates that there will be fewer large civil works
projects approved by Congress and traditional military construction is expected to decline.
Although the Corps' workload and workforce are generally balanced nationwide (The
present CONUS-geographic organizational structure of the Corps includes 1 headquarters,
11 division. and 38 district offices. some districts have severe workload peaks and valleys
(varying as much as 50 percent from year to year), that are difficult to staff efficiently. The
Corps' technical capabilities are limited by a lack of personnel in specialized fields at some
of the Corps' smaller offices. High overhead is also a problem for both civil works and
military programs. For example, when division offices and headquarters are included,
Corps-wide overhead and management costs are calculated at 25 percent; however, small
district offices may have overhead rates that are as much as 20 percent higher than
comparable rates at many large district offices.⁷
Congress has expressed its concern about the Corps' organizational structure.
Committee reports accompanying the Energy and Water Development Appropriations Acts
for fiscal 1990 and 1991 directed the Corps to prepare conceptual alternatives and criteria
for reorganization. As a result, the Corps furnished its "Bayley" Phase I Report to
Congress on January 4, 1991.
Congress passed the Defense Base Closure and Realignment Act of 1990 (BRAC),
which appeared, according to DoD, to be an appropriate vehicle for developing and
implementing an agency-wide reorganization. The Corps' reorganization plan under BRAC
projected significant savings and a two- to three-year payback. However, due to
congressional committee jurisdiction considerations and opposition by some members, Con-
gress asserted that the Corps' civil works program should not be considered under BRAC
and passed legislation in the fall of 1991 which took the Corps out of the BRAC process.⁹
In early 1992, the Corps renewed its restructuring effort by focusing on its roles,
missions, workload, workforce, funding, and cost efficiency. This review confirmed the
Corps' need to reorganize for several compelling reasons which are summarized in its 1992
publications, Why Reorganize and Reorganization Plan.
During 1992, the Army coordinated with the Congress regarding its reorganization
plans and provided testimony before the House and Senate authorization and appropriation
committees on the need for a comprehensive reorganization of the Corps. The fiscal 1993
appropriations bill includes $5 million and transfer authority for another $7 million to
reorganize the Corps' divisions and headquarters. However, a provision of the fiscal 1993
Energy and Water Development Appropriations Act prohibits closing any district office.¹⁰
While individual Congressmen are opposed to closing division offices in their states or even
removing functions from district offices. many have affirmed the need for Corps'
reorganization.
In addition to changing the organizational structure, the Corps' proposed reorga-
nization plan includes consolidation of some functions, elimination of review, and other
process streamlining. Management efficiencies plus substantial dollar and time savings
would be realized by these changes. Moreover, more than 37 actions were identified to re-
move redundancy, improve efficiency, and reduce headquarters costs. Some of these
headquarters actions can be implemented independent of Corps-wide reorganization.¹¹
The plan recommended by the Corps would do the following:¹
1. Reduce the number of division offices from 11 to six.
2. Retain all district offices to guarantee continued, strong customer/partner
interface.
3. Enhance the Corps' competency and cost effectiveness primarily through
appropriate consolidations of technical and support functions - rather
than primarily through office closures.
4. Consolidate some technical functions by creating 15 civil works technical
centers within existing districts to provide greater concentrations of
planning, design, real estate, and review experts.
5. Consolidate some administrative functions by creating five administrative
centers in the continental United States.
6. Consolidate financial and accounting (F&A) functions by creating one
national F&A center.
7. Collocate military project construction management and design with ten
of the 15 civil works technical centers for maximum efficiency.
Since fiscal 1991, the Corps has prepared two reorganization plans. Implementation
of the first plan was denied by Congressional action in 1991, and the second plan has been
on hold pending review by the new administration. Congress has also made clear its
opposition to changes in district structure in the fiscal 1994 Energy and Water Development
Appropriations Act as passed by the House. Continued uncertainty regarding reorganization
is having a severe adverse impact on the Corps' employees. As a result. the Corps is losing
some of its best employees. and customer service is being affected adversely. 13 In this
regard. reorganization needs to proceed as quickly as possible or be terminated.
Recommendations
1.
The President, Congress, and the Corps should work cooperatively to
implement the Corp's Reorganization Plan of November, 1992. The Corps, using
previously appropriated funds for reorganization, should proceed immediately to implement
the division-level portions of the Reorganization Plan. This initiative would consist of such
actions as establishment of a central review center which would consolidate the
headquarters and division policy review; transfer of technical review functions from
divisions to districts; and initiation of the closure of five division offices. The President
should request fiscal 1994 supplemental funding to allow the Corps to reduce the number of
division offices from 11 to six.
2.
Congress should enact legislation to establish a commission and mechanism
similar to that of the Defense Base Closure and Realignment Act of 1990 to allow
federal agencies, including the Corps, to close or relocate offices and resources based
on mission, programs, workload, and resource needs. Under the auspices of this
commission, the Corps should recommend a plan for its district-level structure. The
commission's evaluation of the Corps' plan should include public and congressional input
on the Corps' mission, programs, workload, resource needs, and other planning criteria.
3.
The Assistant Secretary of the Army (Civil Works) and Chief of the US Army
Corps of Engineers should work with other federal agencies and the Office of
Management and Budget (OMB) to make maximum use of Corps' planning,
engineering, and contract management capabilities in support of other federal agency
programs.
Implications
Although most members of Congress recognize the Corps' need for general
reorganization and streamlining, the Corps' plan is politically controversial in several
congressional committees because of potential impacts on individual districts. This
controversy consequently hinders the Corps' ability to close or relocate offices--a situation
that has occurred with many federal agencies.
Under the Corps' Reorganization Plan, presented in November, 1992, there will be a
reduction of 2,600 FTEs from the workforce base in place at the end of fiscal 1991. 14
Positions transferred will affect approximately 5,000 FTEs.¹ 15 Not only will the plan
improve customer service, but it will also save money and time by reducing the number of
levels of review. Other proposals may increase or decrease the proposed FTE reductions
and budget impacts.
President Clinton has put forth a number of initiatives to improve the way
government works and to reduce the cost of government. Three of these initiatives--
reducing the government workforce, reducing the administrative costs of government, and
reducing the number of high grade employees--will be met and exceeded by reorganizing
the Corps. Reorganization would allow the Corps to apply a managed approach to achieving
necessary reductions.
Fiscal Impact
The cost to implement all of the changes outlined and reported in the Corps'
Reorganization Plan was estimated to be $215 million. After full implementation, annual
savings are estimated to be $92 million from reduced FTEs (savings stated in the November
plan were adjusted to reflect current Corps staffing and savings do not reflect the
President's initiatives to reduce the government workforce and administrative reductions).
Implementation of only select portions of the plan could be accomplished at lower costs,
but this would be accompanied by reduced savings. While these figures were derived from
this specific plan, alternative proposals may increase or reduce savings.
FISCAL IMPACT TABLE (Recommendations 1 and 2)¹⁶
In Millions of Dollars
Fiscal Year
1994¹⁷
1995'⁸
1996
1997
1998
1999
Budget
($26.0)
($46.0)
($20.0)
$6.0
$92.0
$92.0
Authority
Budget
($33.0)²⁰
($46.0)
($20.0)
$6.0
$92.0
$92.0
Outlay¹⁹
Change in
-250
-850
-1450
-2100
-2100
-2100
FTEs
Endnotes
1. Interview with Kevin Cook, Assistant for Interagency and International Activities.
Office of Assistant Secretary of the Army (Civil Works) (OASACW); Mike Davis, Assistant
for Regulatory Affairs, OASACW; Jim Waddell, Chief, Office of Strategic Initiatives, Corps;
Jill Davis, Reorganization Program Director, Corps; COL John Brown, Executive Director.
Directorate of Civil Works (DCW), Corps; Don Kisicki, Chief, Office of Interagency &
International Activities (DCW), Corps; John Studt, Chief, Regulatory Branch, Operations.
Construction, and Readiness Division, Corps; Bill Klesch, Chief, Office of Environmental
Policy, Policy and Planning Division, Corps; Al Carton, Deputy Director, Directorate of
Military Programs, Corps; and Bob Oswald, Director, Directorate of Research and
Development, Corps, Corps Headquarters, Washington, DC, May 21, 1993.
2. Memorandum from Claudia Tornblom, OASACW, to Kathleen Dillon, OASA
(M&RA) at the Pentagon, June 29, 1993.
3. Interview with Corps staff, May 21, 1993.
4. Memorandum to Kathleen Dillon, June 29, 1993.
5. US Army Corps of Engineers Reorganization ,Washington, DC, November,
1992), p. i.
6. Ibid., p. 10.
7. Ibid., p. A-1.
8. Ibid., p. 1.
9. Ibid., p. 1.
10. Ibid., p. i.
11. Ibid., p. i.
12. Ibid.. p. 6.
13. Telephone interview with General Arthur E. Williams. Chief. Corps, Washington.
DC. June 25. 1993.
14. Corps Reorganization Plan, p. iv.
15. Ibid., p. iv.
16. This follows the same cost and FTE estimating procedures as used in the Corps
November 1992 Reorganization Plan. Dollar entries are incremental, not cumulative. The civil
works FTE base has been adjusted downward by 500 FTE since the end of fiscal 1991. Thus.
net reductions would equal 2100 FTEs versus 2600 FTEs, and annual dollar savings $92
million per year versus $115 million per year. Implementation costs of $215 million are
assumed unchanged. This assumes that the reorganization plan developed through the BRAC-
type process will, at a minimum, achieve the savings contained in the Corps' Reorganization
Plan of November, 1992 as adjusted.
17. Costs and FTEs reductions for full implementation of division-level only portion of
the plan during fiscal 1994.
18. Entries for fiscal 1995 through 1999 include incremental costs and savings, and
cumulative FTE reductions for implementing a district-level plan of a magnitude similar to the
Corps' November, 1992 Reorganization Plan. This also includes incremental cost savings
from prior implementation of division-level portion of plan.
19. All costs and savings are assumed to be in "administrative" category, i.e., salaries
and expenses, not "program" changes.
20. Includes the fiscal 1993 appropriated reorganization funds.
Section III
Agency Reinvention Activities
Defense Performance Review
The Department of Defense (DoD), like other large bureaucracies, is resistant to change.
However, in the post Cold War world environment, declining budgets and the rapid pace of
advancement in communications and information transfer necessitate change. DoD has
recognized this need to restructure and has already begun to incorporate the principles of
quality and excellence into its operations.
DoD created its own team--the Defense Performance Review (DPR)--to identify and build
on recent successful innovations and to review primary management functions. DPR's
objective is to devise innovative ways to encourage more business-like practices and market
driven efficiencies. In addition to the DPR, Defense has implemented major ongoing
departmental initiatives including the Bottom-up Review, Acquisition Reform and the
Restructure of the Office of the Secretary of Defense.
The first reinvention effort, the Bottom-up Review, is a comprehensive analysis of all
DoD programs. It includes a review of the base force structure, weapons systems, research
and development programs and the support (e.g., number of installations, equipment) needed
in light of a rapidly declining budget. The purpose of the review is to insure that each
program is necessary and consistent with the current national security strategy.
The second initiative involves the complete restructuring of the Office of the Secretary of
Defense. More than two dozen divisions that formerly operated autonomously were pared to
five basic parts. Under the new plan, four of the five Pentagon divisions--Acquisition and
Technology, Policy, Comptroller and Personnel and Readiness--will be headed by under
secretaries. The fifth will be headed by the Assistant Secretary of Defense for Command,
Control, Communications and Intelligence.
Through the acquisition reform program, the third reinvention effort, the Secretary of
Defense is identifying improvements in DoD's acquisition practices. The DoD Acquisition
Law Advisory Panel's Section 800 Report submitted to the Senate and House Armed Services
Committees represents the first step in defining a streamlined. sensible and coherent set of
acquisition laws. The report ensures necessary levels of congressional oversight and control
without significantly burdening the process with unnecessary regulation. This action, if
enacted. will have a major impact on DoD's ability to follow smart business practices and
outsource where it makes operational and economic sense. DoD will also maximize the use
of commercial rather than military specifications where appropriate. This should lower
product/service cost and, in turn, make the market place more competitive.
The Reinvention Team established within Defense has taken advantage of these programs
and built on recent efforts in other areas that are consistent with National Performance
Review (NPR) objectives. DoD established six task forces to take a comprehensive look at
specific areas in which it could use the NPR philosophy to implement change. These include
Give DoD Installation Commanders More Authority and Responsibility Over Installation
Management; Rewrite Policy Directives to Include Better Guidance and Fewer Procedures;
Establish a Defense Quality Workplace; Outsource Non-Core Functions When It Makes
Economic and Operational Sense; Purchase Best Value Common Supplies and Services: and
Create a Healthy and a Safe Environment for DoD Activities.
DoD's active participation in formulating programs that incorporate NPR principles
clearly indicates that it not only supports the reinvention concept but is also totally committed
to change.
Section IV
Fiscal Impact Summary
DEPARTMENT OF DEFENSE
FISCAL IMPLICATIONS SUMMARY
CHANGE IN BUDGET AUTHORITY
Numbers in Millions
Ch.
Fiscal Year
Ref.
Recommendation
1994
1995
1996
1997
1998
1999
6-YRS
1 Rewrite Policy Directives to Include Better Guidance a
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
2 Establish a Unified Budget for the Department of Defe
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
3 Obtain Best Value Common Supplies and Services
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
4 Outsource Non-core DoD Functions When It Makes E
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
5 Create Incentives to Find Revenues
$125.0
$125.0
$125.0
$125.0
$125.0
$125.0
$750.0
6 Establish and Promote DoD's Productivity-Enhancing
$0.0
$4.0
$9.7
$17.7
$37.1
$41.8
$110.3
7 Create a Healthy and a Safe Environment for Departme
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
8 Establish Defense Quality Workplace
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
9 Give DoD Installation Commanders More Authority an
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
10 Reduce DoD Support of the Drug Interdiction Program
$0.0
$71.5
$72.3
$73.1
$74.0
$74.0
$364.9
11 Reduce National Guard and Reserve Costs
$0.0
$180.0
$180.0
$180.0
$180.0
$180.0
$900.0
12 Streamline and Reorganize the U.S. Army Corps of En
($26.0)
($46.0)-
($20.0)
$6.0
$92.0
$92.0
$98.0
Total, Department of Defense
$99.0
$334.5
$367.0
$401.8
$508.1
$512.8
$2,223.2
CHANGE IN OUTLAYS
Numbers in Millions
Ch.
Fiscal Year
Ref.
Recommendation
1994
1995
1996
1997
1998
1999
6-YRS
1 Rewrite Policy Directives to Include Better Guidance a
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
2
Establish a Unified Budget for the Department of Defe
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
3
Obtain Best Value Common Supplies and Services
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
4
Outsource Non-core DoD Functions When It Makes E
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
5 Create Incentives to Find Revenues
$125.0
$125.0
$125.0
$125.0
$125.0
$125.0
$750.0
6 Establish and Promote DoD's Productivity-Enhancing
$0.0
$4.0
$9.7
$17.7
$37.1
$41.8
$110.3
7 Create a Healthy and a Safe Environment for Departme
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
8 Establish Defense Quality Workplace
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
9 Give DoD Installation Commanders More Authority an
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
10 Reduce DoD Support of the Drug Interdiction Program
$0.0
$55.8
$68.2
$70.0
$70.7
$70.7
$335.4
11 Reduce National Guard and Reserve Costs
$0.0
$180.0
$180.0
$180.0
$180.0
$180.0
$900.0
12 Streamline and Reorganize the U.S. Army Corps of En
($33.0)
($46.0)
($20.0)
$6.0
$92.0
$92.0
$91.0
Total, Department of Defense
$92.0
$318.8
$362.9
$398.7
$504.8
$509.5
$2,186.7
CHANGE IN REVENUES
Numbers in Millions
Ch.
Fiscal Year
Ref.
Recommendation
1994
1995
1996
1997
1998
1999
6-YRS
I Rewrite Policy Directives to Include Better Guidance a
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
2 Establish a Unified Budget for the Department of Defe
$0.0
$0.0
$0.0
$0.0
S0.0
$0.0
S0.0
3 Obtain Best Value Common Supplies and Services
$0.0
$0.0
$0.0
$0.0
S0.0
S0.0
S0.0
4 Outsource Non-core DoD Functions When It Makes E
$0.0
$0.0
S0.0
S0.0
$0.0
$0.0
$0.0
5 Create Incentives to Find Revenues
$0.0
$12.0
$12.0
$12.0
$12.0
$12.0
$60.0
" Establish and Promote DoD's Productivity-Enhancing
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
- Create a Healthy and a Safe Environment for Departme
$0.0
$0.0
S0.0
$0.0
S0.0
$0.0
$0.0
8 Establish Defense Quality Workplace
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
9 Give DoD Installation Commanders More Authority an
$0.0
$0.0
S0.0
S0.0
$0.0
$0.0
50.0
10 Reduce DoD Support of the Drug Interdiction Program
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
S0.0
11 Reduce National Guard and Reserve Costs
$0.0
50.0
$0.0
$0.0
$0.0
$0.0
S0.0
12 Streamline and Reorganize the U.S. Army Corps of En
$0.0
S0.0
S0.0
50.0
S0.0
50.0
$0.0
Total. Department of Defense
$0.0
$12.0
$12.0
$12.0
$12.0
$12.0
$60.0
DRAFT--INTERNAL WORKING DOCUMENT
NATIONAL PERFORMANCE REVIEW
AGENCY TEAMS
Team: Department of Defense
ISSUE DECISION PACKAGE
Date:
6-Year
Issue
Impact
NPR Team
Agency
Action from
No.
Issue Title
(Million $)
Position
Position
Tollgate 4 Meeting
1
Rewrite Policy Directives to Include
$0.00
Rec 1: DoD should clarify policy and
DoD concurs with the recommendations.
Better Guidance and Fewer Procedures
decentralize procedures to empower
people to do their jobs better.
Rec 2: Components must streamline their
procedural guidance.
Rec 3: Components should institutionalize
in writing the process to revise policy and
procedural documents.
Rec 4: DoD should follow the DLA model and
make policy directives available on
CD-ROM.
2
Establish a Unified Budget Plan for
$0.00
Rec 1: DoD should revise its budget
DoD concurs with the recommendations.
DoD
process to fund major unbudgeted
emergencies by a process of assessing
each organization an appropriate share of
the shortfall.
Rec 2: DoD should combine Operations and
Maintenance, non-weapons (non-centrally
managed), Other Procurement, Family
Housing Operations and Maintenance, and
Minor Construction into a single appropria-
tion, available for obligation for 3 years,
for each Service and DoD agency.
Rec 3: DoD should allow field commanders
flexibility to transfer funds among appropri-
DRAFT--INTERNAL WORKING DOCUMENT
NATIONAL PERFORMANCE REVIEW
AGENCY TEAMS
Team: Department of Defense
ISSUE DECISION PACKAGE
Date:
6-Year
Issue
Impact
NPR Team
Agency
Action from
No.
Issue Title
(Million $)
Position
Position
Tollgate 4 Meeting
ations and cost categories, as needed, to
improve mission capability, cope with
unforseen contingencies, and take
advantage of opportunities that only
flexibility permits.
Rec 4: DoD should allow headquarters
commanders flexibility to transfer HQ's
administrative and housekeeping funds
among appropriations and categories.
3
Best Value Common Supplies and
$0.00
Rec 1: DoD personnel should use the
DoD concurs with the recommendations.
Services
best value source of supply, as determined
by the local commander or manager.
Rec 2: DoD should empower any properly
delegated individual to buy common supplies
and non-professional services.
Rec 3: DoD should empower internal and
external suppliers to focus on meeting
customer needs.
4
Outsource Non-core DoD
$0.00
Rec 1: DoD senior leadership should
DoD concurs with the recommendations.
Functions When It Makes Economic
implement a comprehensive program for
and Operational Sense
outsourcing non-core functions when it
makes economic and operational sense.
5
Create Incentives to Find Revenues
$810.00
Rec 1: The Corps of Engineers should
DoD concurs with the recommendations.
request that Congress amend the Energy and
Water Development Appropriation Act of
1993 to increase the Corps' commercial
regulatory fees to more closely approximate
the costs of evaluating applications and allow
DRAFT--INTERNAL WORKING DOCUMENT
NATIONAL PERFORMANCE REVIEW
AGENCY TEAMS
Team: Department of Defense
ISSUE DECISION PACKAGE
Date:
6-Year
Issue
Impact
NPR Team
Agency
Action from
No.
Issue Title
(Million $)
Position
Position
Tollgate 4 Meeting
the Corps to retain, in a special regulatory
account, all revenues generated through
the collection of fees.
Rec 2: The Office of Management and
Budget should draft an Executive Order
reemphasizing that DoD airlift provided to
non-DoD agencies is reimbursable and
waiver of the reimbursement is appropriate
only in the most extraordinary circumstances
and with DoD approval in advance.
Rec 3: Health Affairs should draft
DoD does not concur. This is a transfer
legislation to amend 42 USC 1395 to
payment with no budget effect. It will entail
require that Medicare reimburse DoD at
additional costs, and should not be
HCFA's predetermined rates for medical
undertaken unless the accounting system
services provided to Medicare eligible
for all health care is rationalized.
individuals.
Rec 4: The Deputy Under Secretary of
DoD does not concur. No change to the law
Defense (Environmental Security) should
is required because DoD will not accumu-
draft legislation to amend PL 97-214 to
late over $2 million in unexpended receipts.
allow managers/commanders mission-
Commanders and managers can use the
related use of all net revenue from sales
receipts from recycling for appropriate
of recycable materials.
purposes with no changes to existing
statutory authority.
6
Establish and Promote a Productivity
$110.30
Rec 1: To increase the available
DoD concurs with the recommendation.
Enhancing Capital Investment Fund
resources for worthy investments, DoD
should obtain Congressional approval to
establish a fund that would loan money to
DoD organizations for productivity-
enhancing capital investments.
DRAFT--INTERNAL WORKING DOCUMENT
NATIONAL PERFORMANCE REVIEW
AGENCY TEAMS
Team: Department of Defense
ISSUE DECISION PACKAGE
Date:
6-Year
Issue
Impact
NPR Team
Agency
Action from
No.
Issue Title
(Million $)
Position
Position
Tollgate 4 Meeting
7
Create a Healthy and a Safe Eniron-
$0.00
Rec 1: Develop partnering both within DoD
DoD concurs with the recommendations.
ment for DoD Activities
and between DoD and stakeholders.
Rec 2: Streamline the clean-up process to
clean-up sites quickly without prolonged
periods of study.
Rec 3: Establish an environmental
technology that is based on service users'
environmental requirements and embodies the
DoD environmental strategy.
Rec 4: Develop a more effective DoD
pollution prevention program.
Rec 5: Establish regional offices to
provide necessary interface for all joint
policy with EPA regions and local
state environmental organizations.
8
Establish a Defense Quality
$0.00
Rec 1: DoD should establish a top
DoD concurs with the recommendations.
Workplace
leadership and management structure that
furthers total quality principles.
Rec 2: DoD should implement a strategic
planning process that encompasses total
quality principles and establishes direction.
Rec 3: DoD should ensure that the entire
department has a comprehensive
knowledge of total quality principles and
practices to bring about and sustain the
total quality transformation.
DRAFT--INTERNAL WORKING DOCUMENT
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AGENCY TEAMS
Team: Department of Defense
ISSUE DECISION PACKAGE
Date:
6-Year
Issue
Impact
NPR Team
Agency
Action from
No.
Issue Title
(Million $)
Position
Position
Tollgate 4 Meeting
Rec 4: DoD should create an environment
that promotes total quality principles
and practices to foster continuous process
improvement, encourage creatitivty
and nurture the professional and personal
growth of all employees.
Rec 5: DoD should rewrite directives,
instructions and policies to support total
quality principles and methodologies.
Rec 6: DoD should use performance
metrics to assess progress towards
attaining its vision.
9
Give DoD Installation Commanders
$0.00
Rec 1: The Defense Finance and Accounting
DoD concurs with the recommendations.
More Authority and Responsibility Over
should institute a Defense-wide cost
Installation Management
accounting system for installation manage-
ment.
Rec 2: The Defense Comptroller, in
conjunction with Service and Agency
Comptrollers should be tasked to perform
a review of all financial constraints and
limitations imposed on installations.
Rec 3: The Defense Comptroller should
develop and institute procedures that
allow installation commanders to retain
a designated portion of budgetary
savings generated by specified cost
savings measures, such as energy
conservation.
DRAFT--INTERNAL WORKING DOCUMENT
NATIONAL PERFORMANCE REVIEW
AGENCY TEAMS
Team: Department of Defense
ISSUE DECISION PACKAGE
Date:
6-Year
Issue
Impact
NPR Team
Agency
Action from
No.
Issue Title
(Million $)
Position
Position
Tollgate 4 Meeting
Rec 4: The Services should institute
procedures that require a financial impact
assessment of major policy issues on
resource decisions.
Rec 5: DoD should issue guidance that
encourages the Services to limit
non-specific, broad based cuts of
installation resources.
Rec 6: The Office of the Under Secretary of
Defense for Environmental Security, in
conjunction with the Services, should review
existing installation engineering policies,
procedures and other regulatory requirements.
Rec 7: OSD, the Comptroller and Office of
the Deputy Under Secretary of Defense for
Environmental Security, in conjunction with
the Services and other agencies, OMB and
Congress should develop a comprehensive
long-range approach to managing DoD
capital assets, similar to capital asset
management systems common in the
private sector.
Rec 8: The Office of the Undersecretary of
Defense for Environmental Security, in
conjunction with the OSD Comptroller, the
Services, other DoD agencies, OMB, and
Congress should implement policies and
practices which will enhance the installation
commander's ability to obtain engineering
support in a timely and efficient manner.
DRAFT--INTERNAL WORKING DOCUMENT
NATIONAL PERFORMANCE REVIEW
AGENCY TEAMS
Team: Department of Defense
ISSUE DECISION PACKAGE
Date:
6-Year
Issue
Impact
NPR Team
Agency
Action from
No.
Issue Title
(Million $)
Position
Position
Tollgate 4 Meeting
Rec 9: OSD Force Management and
Personnel, in conjunction with the Services,
OPM, unions and Congress should modify
staffing authorization and personnel
hiring and discharge procedures to permit
installation commanders the flexibility
they need to efficiently adjust their staffs
to changing workloads and resources and to
retain the most qualified and productive
personnel.
Rec 10: The Office of the Under
Secretary of Defense for Acquisition, in
conjunction with Services, agencies and
Congress, should identify and modify those
statutes, policies and procedures which
preclude or otherwise limit the installation
commander from acquiring from a
provider who offers the best value for
services, supplies, equipment and other
resources required to accomplish
installation engineering activities in the
most cost-effective manner.
Rec 11: The OSD Comptroller and the
Office of the Undersecretary of Defense for
Environmental Security, in conjunction with
the Services, agencies, OMB and Congress,
should modify current statutes and/or
budget scoring rules to encourage private
sector financed alternatives to Military
Construction for acquiring, operating and
maintaining required facilities at the lowest
DRAFT--INTERNAL WORKING DOCUMENT
NATIONAL PERFORMANCE REVIEW
AGENCY TEAMS
Team: Department of Defense
ISSUE DECISION PACKAGE
Date:
6-Year
Issue
Impact
NPR Team
Agency
Action from
No.
Issue Title
(Million $)
Position
Position
Tollgate 4 Meeting
total life cycle cost.
Rec 12: The OSD Comptroller and the Office
of the Undersecretary of Defense for
Environmental Security, in conjunction with
the Services, agencies, OMB and Congress,
should implement cost savings incentives
that would authorize installation commanders
to retain savings (or cost avoidance)
which resulted from process improvements
and productivity enhancements, and apply
towards discretionary spending and/or
other installation engineering requirements.
Rec 13: The Deputy Under Secretary of
Defense for Acquisition Reform should
allow the use of simplified acquisition
procedures for contracts between $25,000
and $100,000.
Rec 14: OSD should encourage the use
of "partnering" agreements between
service providers and service users, and
encourage widespread application
wherever possible and appropriate, in
contracts as well as agreements between
government organizations.
Rec 15: All Defense Services and agencies
should increase the use of "best value"
contracts where applicable and encourage
installation commanders to take prudent
risks in procurement activities.
DRAFT--INTERNAL WORKING DOCUMENT
NATIONAL PERFORMANCE REVIEW
AGENCY TEAMS
Team: Department of Defense
ISSUE DECISION PACKAGE
Date:
6-Year
Issue
Impact
NPR Team
Agency
Action from
No.
Issue Title
(Million $)
Position
Position
Tollgate 4 Meeting
Rec 16 The Deputy Under Secretary of
Defense for Acquisition Reform should
revise protest procedures, including
limiting the time in which a protest is
considered, to facilitate the rejection of
of unreasonable protests submitted by
contractors whose primary intent appears to
be to delay the contract awards.
Rec 17" OSD should identify impediments to
a "shop smart" capability and implement a
standardized reimbursement accounting
system.
Rec 18: Defense Logistics Agency and OSD
should change the Federal Acquisition
Regulations to permit purchasing from
large businesses based on cost and quality
of items required.
Rec 19: OSD should delete or revise those
statutory and regulatory requirements which
unreasonably impede an installation
commander's ability to contract for supplies
and services.
Rec 20: OMB/OSD should implement full
funding reimbursement on an accelerated
schedule.
Rec 21: DoD Comptroller should issue unit
cost guidance.
Rec 22: DoD Comptroller should change
DRAFT--INTERNAL WORKING DOCUMENT
NATIONAL PERFORMANCE REVIEW
AGENCY TEAMS
Team: Department of Defense
ISSUE DECISION PACKAGE
Date:
6-Year
Issue
Impact
NPR Team
Agency
Action from
No.
Issue Title
(Million $)
Position
Position
Tollgate 4 Meeting
applicable DoD regulations to allow
stock fund managers to include costs for
procuring, warehousing, packing, crating and
handling in their customer's surcharges.
Rec 23: OSD should provide detailed
guidance identifying the requirements,
negotiations and preparation of interservice
support agreements.
10
Reduce DoD Support of the Drug
$364.90
Rec 1: DoD should eliminate certain
DoD does not concur with the four
Interdiciton Program
National Guard interdiction operations
recommendations.
such as supporting the Customs Service's
manual cargo inspection program,
As a result of the Bottom-Up Review, the
substituting, as necessary, less costly
role of the Guard and Reserve forces will
civilian inspectors funded by the Customs
be enlarged in the future consistent with
Service.
the National PErformance Review's
mandate to create a government that works
Rec 2: DoD should eliminate Sec. 1004
better and costs less. DoD's assistance to
funded support of other agencies when
local law enforcement agencies and the
such support does not have a direct
Customs Service is consistent with our
military benefit.
efforts to assist in solving America's
internal problems--everything from
Rec 3: DoD should require LEAs to
disaster relief to drug interdiction. This role
provide their own funding for LEA counter
is central to the Department and supported
drug administrative staff instead of relying
by Congressional leadership.
on DoD to provide more costly civilian
or military staff.
Rec 4: DoD should discontinue the use of
sea-based aerostats for counter drug
detection and monitoring activities because
they are costly and inefficient.
DRAFT--INTERNAL WORKING DOCUMENT
NATIONAL PERFORMANCE REVIEW
AGENCY TEAMS
Team: Department of Defense
ISSUE DECISION PACKAGE
Date:
6-Year
Issue
Impact
NPR Team
Agency
Action from
No.
Issue Title
(Million $)
Position
Position
Tollgate 4 Meeting
11
Reduce National Guard and
$900
Rec 1: Congress should amend Sec. 6323,
DoD does not concur with the two
Reserve Costs
5 USC to authorize a reservist on annual
recommendations.
military training leave who is a federal
employee to be paid only the greater of
As a result of the Bottom-Up Review, the
civilian or reserve compensation or to
role of Guard and Reserve forces will be
allow the reservist to take annual leave.
enlarged in the future--an example of the
National Performance Review 's mandate to
Rec 2: Congress should amend Sec. 403,
promote a government that performs
37 USC to eliminate Basic Allowance for
better and costs less. The minor savings
Quarters for all selected reserve personnel
that may be available are not worth the
occupying government quarters during
irritation to members or Congressional
short periods of active duty training
supporters. Moreover, the recommendations
(15 days or less).
appear to undercut President Clinton's
campaign speech to the Guard and
Reserve in St. Louis.
12
Streamline and Reorgainze the Corps
$98.00
Rec 1: The President, Congress, and the
DoD concurs with the recommendations.
of Engineers
Corps should work cooperatively to
The issue is whether to propose the
implement the Corps' Reorganization
reorganization under the umbrella of the
Plan of November 1992.
National Performance Review as part of
an effort to reduce field organizations
Rec 2: Congress should enact legislation to
throughout government or to try to gain
establish a commission and mechanism
Congressional support independent of
similar to that of the Defense Base
the NPR.
Closure and Realignment Act of 1990 to allow
federal agencies, including the Corps, to
close or relocate offices and resources
based on missions, programs, workload,
and resource needs.
Rec 3: The Assistant Secretary of the Army
(Civil Works) and Chief of the US Army Corps
of Engineers should work with other federal
agencies and OMB to make maximum use
DRAFT--INTERNAL WORKING DOCUMENT
NATIONAL PERFORMANCE REVIEW
AGENCY TEAMS
Team: Department of Defense
ISSUE DECISION PACKAGE
Date:
6-Year
Issue
Impact
NPR Team
Agency
Action from
No.
Issue Title
(Million $)
Position
Position
Tollgate 4 Meeting
of the Corps' planning, engineering, and
contract capabilities in support of other
federal agency programs.