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As the Department of Defense enters an era of shrinking budgets and reconsiders its priorities, accountability and efficiency will be key. In a video message to DoD employees last August, Secretary of Defense Chuck Hagel said the department “must do things more efficiently and effectively, beginning with having the most accurate financial information available.” He emphasized that being able to audit DoD is a high priority and that the department “is committed to having audit-ready financial statements by September [of 2014].”1

Reaching this milestone and achieving overall audit readiness by 2017 is complicated by the fact that the Pentagon has imperfect information on its “mission critical assets,” a category that includes facilities, supplies, ammunition, vehicles, weapons, and equipment. In fact, increasing awareness of these assets is one of DoD’s top Financial Improvement and Audit Readiness (FIAR) goals. Asset visibility is not only important for audit readiness, however; it is critical to improving enterprise efficiency, and thereby enhancing national security.

Areas for improvement

In particular, energy use, asset maintenance, and reverse logistics stand out as issue areas where DoD can reap significant benefits from enhanced awareness. The department has recognized the need to tackle these challenges, but does not have

       

APPROACHING DOD AUDIT READINESS THROUGH ASSET VISIBILITY

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the information needed to do so in the most efficient way.

Energy use

Sustainability has become an important priority for the Pentagon in recent years, but it does not have the data it needs to develop the most efficient energy plans. DoD is responsible for a majority of the federal government’s energy use, consuming 4.3 billion gallons of petroleum and $20 billion worth of fuel in 2012 alone.2 In an effort to cut consumption, the Pentagon has prioritized reducing facility energy use and improving installation energy security, two areas that the Office of Management and Budget (OMB) flagged in its most recent DoD sustainability scorecard. OMB reported that the department failed to reach its energy intensity reduction and overall building sustainability goals for FY 2012.3 Much of the challenge comes down to not knowing which facilities and installations to prioritize for energy reduction efforts. The Pentagon’s Sustainability Performance Report for FY 2013 recognizes this weakness, highlighting its goal of using advanced

TO HELP ACHIEVE ITS AMBITIOUS AUDIT GOALS, THE PENTAGON CAN ENHANCE AWARENESS OF MISSION CRITICAL ASSETS THROUGH M2M

The logistical difficulties involved in U.S. operations overseas necessitate enhanced asset awareness across air- and ground-based platforms.

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metering to measure 60% of electricity consumed by DoD facilities by 2020.4

Energy efficiency for the military is not just about compliance and cost-savings. According to Vice Admiral William Burke, Deputy Chief of Naval Operations for Warfare Systems, energy efficiency plans are not just about being green: “It’s because we believe that’s how you can be more effective when you fight.”5 Finding ways to use energy more efficiently directly affects troops on the ground. Forward operating bases in theater rely on a continuous supply of energy, which can be difficult, and often dangerous, to ensure. Recent military figures show that one Marine is killed or wounded for every 50 supply convoys in Afghanistan.6

Asset maintenance

The absence of real-time data has also contributed to waste and excess inventories. Recent reports have highlighted the extent of excess and unaccountability due to doctored inventory ledgers and sheer unawareness.7 Vice Admiral Mark Harnitchek, Director of the Defense Logistics Agency, has said that the DLA has “about $14 billion of inventory for lots of reasons, and probably half of that is excess to what we need.”8 Even programs designed to cut back on inventory excess do not go the distance. Despite the successes of the Army Logistics Modernization Program, the Government Accountability Office has reported that the system still lacks data on the maintenance status of equipment.9 Part of the problem is that the military currently conducts maintenance spot checks rather than addressing real-time conditions.

   

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The U.S. Army Research Laboratory’s (ARL) work on condition-based maintenance technologies demonstrates the importance of such a monitoring capability. Using sensors designed to track the real-time condition of helicopter parts, ARL researchers can determine exactly when repairs and replacements are needed. ARL estimates that resulting efficiencies will save the Army $9.3 million in maintenance test flight costs.10 The benefits are not just monetary, however. In one instance, real-time information on an Apache’s helicopter’s tail rotor saved two soldiers’ lives by alerting operators to a loose bearing.11

Reverse logistics/retrograde

DoD’s largest logistical challenge, the withdrawal from Afghanistan, further illustrates the importance of having information on the location and status of deployed high-value assets. The military has promised to dismantle all bases not transferred to the Afghan National Security Forces and remove the huge supply of weapons, equipment, and vehicles it has brought into the country since 2001. This involves sorting through 100,000 shipping containers and stripping down thousands of vehicles and bases scattered across Afghanistan by a 2014 deadline, all while ensuring soldiers still fighting have what they need.12 Retrograde from Afghanistan is even more difficult than from Iraq given the country’s geography and often uncooperative neighbors. In December 2013, ground shipments through Pakistan were halted by anti-drone demonstrations.13 This type of obstacle drastically increases transportation expenses, as alternative multimodal shipments cost roughly six times as much.14

In the future, as the military shifts to a lighter footprint deployment model, reverse logistics challenges will become even more important. The stakes are both monetary—Afghanistan retrograde could cost up to $6 billion15—and

“ENERGY USE, ASSET MAINTENANCE, AND REVERSE LOGISTICS STAND OUT AS ISSUE AREAS WHERE DOD CAN REAP SIGNIFICANT BENEFITS FROM ENHANCED AWARENESS”

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By gaining real-time information on the location and status of mission critical assets, DoD can reap the benefits of greater energy efficiency, enhanced awareness of maintenance needs, and streamlined reverse logistics. M2M can help the Pentagon learn exactly which buildings and installations should be prioritized for energy reduction efforts; determine asset maintenance needs and facilitate remote repairs in real time; and precisely map the location and status of high-value assets deployed abroad. In each case, DoD can take a step toward audit readiness by acquiring a better understanding of everything it does.

The benefits of enhanced visibility are not limited to the case studies discussed above. Across the board, M2M presents an opportunity for the Pentagon to become financially accountable while enhancing mission effectiveness and readiness.

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security-related. Inadvertently leaving equipment behind could aid the very people the military fights, and unfortunately there is a precedent for doing so. In 2007, the DoD inspector general reported that the military lost track of many thousands of weapons and several million dollars worth of vehicles in Iraq.16

Monitoring assets with wireless technology

These case studies demonstrate a need to leverage technologies that enhance asset visibility. One such technology is machine-to-machine (M2M), which involves transmitting information through sensors, meters, and other devices over a network to automate tasks previously done by inspectors or analysts. In the private sector, companies are already leveraging M2M to enhance asset visibility and have incorporated it into their best practices.

About GBC Government Business Council (GBC), the research arm of Government Executive Media Group, is dedicated to advancing the business of government through analysis and insight. GBC partners with industry to share best practices with top government decision-makers, understanding the deep value inherent in industry’s experience engaging and supporting federal agencies. Contact Zoe Grotophorst, Manager of Research & Strategic Insights, Government Business Council, at zgrotophorst@govexec.com

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Sources 1 “DoD Financial Accountability Message from U.S. Defense Secretary (SECDEF) Chuck Hagel,” Department of Defense video, August 2013, http://comptroller.defense.gov/fiar/ 2 Claudette Roulo, “Clean Energy Tied to National Security, Official Says,” Armed Forces Press Service, February 7, 2013. 3 “January 2013 OMB Scorecard on Sustainability/Energy: Department of Defense,” Office of Management and Budget, May 31, 2013. 4 “Sustainability Performance Report: FY 2013,” Department of Defense, August 14, 2013. 5 Keith Johnson, “Military Aims for Energy Efficiency,” Wall Street Journal March 9, 2012. 6 Johnson, 2012. 7 Scot Paltrow, “Behind the Pentagon’s Doctored Ledgers, a Running Tally of Epic Waste,” Reuters November 18, 2013. 8 Paltrow, 2013. 9 “Army Should Track Financial Benefits Realized From its Logistics Modernization Program,” Government Accountability Office, November 13, 2013. 10 T’Jae Gibson, “Army researchers exploring prognostic and diagnostic solutions to find and fix military and commercial maintenance problems,” DVIDS, October 25, 2013. 11 Gibson, 2013. 12 Emma Graham-Harrison, “US Faces $6bn Bill to Ship Equipment Home from Afghanistan,” The Guardian, March 25, 2013. 13 Associated Press, “US Halts Military Shipments Out of Afghanistan,” The Guardian, December 3, 2013. 14 Col. David Banian, “From Hard to Harder: Iraq Retrograde Lessons for Afghanistan,” www.army.mil, October 9, 2013. 15 Graham-Harrison, 2013 16 Dana Hedgpeth, “Military Lost Track of Equipment in Iraq Worth Millions, Audit Says” Washington Post, December 8, 2007.    Image: Flickr user U.S. Army

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