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PRE-DECISIONAL/ UNCLASSIFIED
PDI 2015 DWCF Current Issues v1.0
Defense Working Capital FundsCurrent Issues
Gretchen Anderson, Director, Revolving Funds
Cynthia Jones, Senior Analyst
May 2015
PRE-DECISIONAL/ UNCLASSIFIED
PDI 2015 DWCF Current Issues v1.0
Agenda
I. Department-Wide Initiatives with WCF impacts
1. Information Technology
2. Institutional Reform
3. Intergovernmental Transactions
4. Transportation Financial Auditability
5. Cash Accountability Model
II. Applied Initiatives and WCF Management Issues
1. Cash Management
2. Carryover
3. Fuel
4. Budgetary Resources
1
Goal: Present WCF initiatives in context of Departmental objectives
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PDI 2015 DWCF Current Issues v1.0
Information Technology:
Joint Information Environment (JIE) &
Joint Regional Security Stack (JRSS)
• JIE:
– Designed to create an enterprise information environment that
optimizes the use of DoD IT assets
– A concept, NOT an end-state--continually re-evaluated and
changed as appropriate
– Transitioning to the JIE Single Security Architecture (SSA) will
increase operational effectiveness, achieve cost effectiveness,
and enhance cyber security posture
• JRSS:
– Designed to improve network defense--a new architecture-
sharing/modernization approach to managing the network,
started in FY 2014
– Reimbursably funded prior to FY 2016; then funded in the DISN
Subscription Services
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PDI 2015 DWCF Current Issues v1.0
Linking Activities, Outcomes, Resources, and Costs for Transparency and Cost Visibility
Institutional Reform: Three “Cost-Related” Initiatives in Perspective
3
Cost Management Framework (All of DoD)
• DCFO / DCMO joint strategic initiative to develop enterprise-level cost
management capability, unifying disparate cost efforts across DoD (long term)
• Goal is to provide DoD leaders a framework and capability to allow
organizational cost information to inform business decision making
Financial Flow Management Reform (Selected elements of FM
Costs)
• 1 of 6 key business functions reviewed under 90 day assessment of FM
processes
• Created a DoD-wide baseline of cost by business function
• Baseline costs being refreshed for performance analysis & benchmarking
BPSR “Deep Dive” (Fourth Estate Underway)
• DCMO / CIO joint initiative to review business & supporting IT systems within
the orgs of the PSAs and their associated agencies & field activities
• PSA is expected to clarify organization alignment to Departmental outcomes
• IDs resources and investments; focuses on obstacles to achieving outcomes
• Represents the Fourth Estate “slice” of Financial Flow Management costs
18-May-15 | Slide: 4
Initiative: Intragovernmental Transactions
System Improvement
• Establish enterprise data warehouse of intra-governmental transactions for audit, research and analysis
• Automate handshake and agreement between buyer and seller before settlement (reduces chargebacks)
• Leverage DoD Global Exchange (GEX) solution and Standard Line of Accounting (SLOA)
Standardization
• Establish common identifier to synchronize buyer and seller accounting transactions
• Establish proper general ledger treatment for all events
• Build common Intragov Data standard
Process Improvement
• Documented terms and conditions
• Documented performance and receipt
• Eliminate the pay and chase mentality
IGT Summary Process
Transportation Financial Auditability (TFA)
5
• Current Status
- Three active Working Groups: TPPS, TWCF, & HHGs
- Standardizing Policy, Processes, Systems, Billing, & Training
• Major Recent Accomplishments
- DCFO and ASD L&MR Approved Way Ahead on Feb 23, 2015
- Policy Guidance Memo signed by ASD L&MR on Apr 23, 2015
• Major Challenges and Impediments
- Unique Processes and Systems
- Access to Key Supporting Documentation & Control Measures
• Key Next Steps and Milestones
- Develop Department-wide Standardized Processes
- Codify Standardized Processes into Policy and then Implement
TFA Analytical Approach
Army Navy Air Force
STAGE 1: Inventory policy, processes & systems
STAGE 2: Analysis & Courses of Action development
Key Supporting Documents (KSD)
WarehouseProof of Delivery
Financial Management Systems Improvements
6
TFA Working GroupAuditability Guidance
STAGE 3: Enterprise Solution development, policy guidance & execution
USMC DLA
DCMA
TRANSCOM
USCG
Obtain ESC guidance & OSD Senior Leader approval
18-May-15 | Slide: 7
Initiative: Cash Accountability Model
System Improvement
• Single system – Defense Cash Accountability System – to perform expenditure reconciliations
• Adapt legacy disbursing systems to perform daily disbursing using Treasury standards
• Reduce the number of systems reporting to Treasury
Standardization
• Formation of DoD Cash Accountability Working Group
• Expand development of data standards around a FBWT Business Enterprise Architecture
• Leverage Treasury Shared Services processes and procedures
Process Improvement
• Single DoD solution for Cash Reconciliation and Reporting
• Leverage ERP capabilities to perform Treasury Direct Disbursing functions
• Partner with Treasury and DoD Disbursing Offices to implement CARS and GTAS reporting
Cash Notional Target
PRE-DECISIONAL/ UNCLASSIFIED
PDI 2015 DWCF Current Issues v1.0
Agenda
I. Department-Wide Initiatives with WCF impacts
1. Information Technology
2. Institutional Reform
3. Intergovernmental Transactions
4. Transportation Financial Auditability
5. Cash Accountability Model
II. Applied Initiatives and WCF Management Issues
1. Cash Management
2. Carryover
3. Fuel
4. Budgetary Resources
8
Goal: Present WCF initiatives in context of Departmental objectives
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PDI 2015 DWCF Current Issues v1.0 9
Cash Management Policy
Background
• Historically, operating cash was budgeted at 7-10 days of disbursements
– Arbitrary rubric that sufficed for decades, because better data was not
available
– Lacked rigor needed to adequately manage cash in today’s environment
• Modernized systems
• Auditability requirements
• NDAA 2011 Study focused on appropriate level of cash to prevent execution
year price changes
• Internal 2013 Study focused on Government Wide Accounting
– Each business has unique challenges and capabilities
– Daily visibility / reporting may require higher cash balances
– Managers need tools to address specific risks and business events
– Managers need flexibility to tailor cash level requirements to ensure
solvency
• Increased transparency
• More granular data and reporting
PRE-DECISIONAL/ UNCLASSIFIED
PDI 2015 DWCF Current Issues v1.0
Cash Management
Interim Policy
• Implemented interim policy for the FY 2016 PBR
• Provided flexibility to explore best cash management parameters for
each activity’s business and operating environment
• Eliminated the “7 – 10 day” cash metric
• Managers developed upper and lower cash requirements tailored to
ensure solvency for their funds
– Based on relevant business events and activities like:
• Collection and disbursement cycles
• Retention or Return of Accumulated Operating Results to customers
• Capital investments
• Liquidation of direct appropriations
• Risk and Volatility
• Reserves for Commodity Price Fluctuations and/or future capital investments
• New exhibit, Fund 13b, Cash Requirements
10
Management techniques and policy must evolve with the fiscal environment
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PDI 2015 DWCF Current Issues v1.0
HASC and SASC FY 2015 NDAA Language
11
• The House Armed Services Committee was supportive…
“The committee commends the Department for initiating processes to determine
the correct cash corpus thresholds for each working capital fund.”
• The Senate Armed Services Committee wanted more…
“…the committee is concerned that the Services are purposefully building up
excess cash as the Department of Defense (DOD) determines the
appropriate amount of cash balances
[needed under Government Wide Accounting]”
– Directed a report by October 2015 on:
• A specific definition of sufficient cash
• The methodology used to calculate such definition
• Recommendations on how to mitigate the need to carry excess cash to avoid
Anti-deficiency Act violations
Congressional feedback on the interim cash policy was mixed
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PDI 2015 DWCF Current Issues v1.0 12
Cash Management Policy
2015 Workshops
• Five Cash Management Policy Workshops (February – April)
• Overview for Revolving Fund and DWCF Senior Leaders across the
Department – set ground rules and goals
• Action Officers (AOs) and Subject Matter Experts (SMEs) briefed each other
on:
– Fund status and cash flows
– Successes and challenges
• Each organization developed an Agency policy position or proposal and shared
electronically with the group
• Built a composite policy concept that met the following criteria:
– Provided managers flexibility to manage
– Driven by business events and conditions
– Simple and easily understood by all stakeholders
– Framework that can be applied by all
• Each organization tested and provided feedback on the policy concept
– Management tools, triggers and actions
– Best business practices and good ideas
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PDI 2015 DWCF Current Issues v1.0 13
Cash Management Policy
Workshop Results
• Developed a conceptual framework; began drafting the next
iteration of cash management policy
• Identified list of management tools / actions for controlling
cash, for example:
– Change the frequency of collections
– Control timing of contract renewals and large obligations/disbursements
– Negotiate timing of customer orders
– Using command and control to foster responsibility and accountability at lower
levels
– Using non-recoverable authorities to re-size corpus based on mission changes
– Request policy waivers and approvals when needed, for example:
• To make AOR non-recoverable
• To return AOR over more than one year
• To make out of cycle rate increases or advanced billings
Cash doesn’t just “happen.” We MAKE it happen!
PRE-DECISIONAL/ UNCLASSIFIED
PDI 2015 DWCF Current Issues v1.0
The 3 ‘R’s
14
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The 4 ‘R’s
1. Rate
2. Range
3. Risk Mitigation
4. Reserves
15
New conceptual framework for cash management
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PDI 2015 DWCF Current Issues v1.0
Notional Example
16
$0
$-100M
$-200M
$-300M
$-400M
$400M
$300M
$200M
$100M
Cumulative impact of net outlays on cash
– Disburse $6.0B annually – Collect twice a month
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PDI 2015 DWCF Current Issues v1.0
1. Rate
17
Average Disbursements
Average amount disbursed between collection cycles
$0
$-100M
$-200M
$-300M
$-400M
$400M
$300M
$200M
$100M
Average disbursed
between collections
$250M
$6.0B Disbursements / 24 Cycles = $250M
• The amount of cash needed to get from one collection cycle to the next
• Influence the amount of cash needed by changing the number of collection
cycles
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2. Range
18
Range of Operation
The difference between the highest and lowest expected cash level
• Expect cash balance to fluctuate within this range during the year
• Range is based on budget assumptions and past experience
• Captures seasonal trends and periodic events
• Allows us to identify causes of cash volatility and develop strategies
for reducing the range of operation
• Reducing the range reduces the amount of cash needed to operate
$450M
$0M
Average disbursement
amount will fall within
this range
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PDI 2015 DWCF Current Issues v1.0
3. Risk Mitigation
19
Risk Mitigation
• Identifies cash held to mitigate risk of unplanned or uncontrollable
events
• Level reflects management’s tolerance for risk and tools to mitigate
risk in short term
• Examples:
– Estimation error
– Commodity price fluctuations
– Crisis response
Cash Held for Unplanned or Unforeseen events
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4. Reserves
20
Reserves
• Identifies cash on hand for a specific requirement that is not
expected to disburse until subsequent fiscal years
• May not be required every year
• Examples:
– Return of Accumulated Operating Results (AOR)
– Liquidation of a direct appropriation
– Planned investment
Cash Reserved for Known Future Requirements
PRE-DECISIONAL/ UNCLASSIFIED
PDI 2015 DWCF Current Issues v1.0
• The expected operating range [NOTE: NOT “limit”] is between
$250M and $700M
• The rate falls within the operating range (measured from lower bound)
• The lower bound of the operating range equals the sum of amounts
held for reserves and risk mitigation
Notional Example
Complete Cash Plan
21
How the 4 ‘R’s come together
$700M
$600M
$500M
$400M
$300M
$200M
$100M
$0M
$800M
4. Reserves
3. Risk Mitigation
2. Range of Operation
Upper bound of operating range
Lower bound of operating range
1. Rate (Average Disb)
PRE-DECISIONAL/ UNCLASSIFIED
PDI 2015 DWCF Current Issues v1.0
• How much cash is needed to begin the next fiscal year?
• What are the tools and capabilities, other than holding cash, to react
to unplanned events?
• How much time is needed to take action if things go wrong?
• How can we reduce the operating range?
Cash Planning Considerations
22
$700M
$600M
$500M
$400M
$300M
$200M
$100M
$0M
$800M
4. Reserves
3. Risk Mitigation
2. Range of Operation
Upper bound of operating range
Lower bound of operating range
1. Rate (Average Disb)
Things to consider when building the cash
plan and setting rates
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PDI 2015 DWCF Current Issues v1.0 23
WCF Management Issues:
Carryover
Definition:
Carryover is the dollar value of work that has been
ordered and funded (obligated) by customer appropriations
but not yet completed by working capital fund (WCF) activities
by the end of the fiscal year (FY)
• Large drivers of carryover within DoD include depot
maintenance, ordnance, and research and development activities
• SF-133 Line 3090 Uncollected Federal Orders
• Carryover is necessary at year end (allowable carryover) so
that WCF activities have enough work to ensure a smooth
transition between FYs (especially during a continuing resolution)
• Too much carryover indicates an activity is receiving orders for
work that clearly cannot be performed until subsequent years
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PDI 2015 DWCF Current Issues v1.0
Carryover Guidance
• Congressional interest:
– The committees review budgeted, allowable, and actual
carryover as submitted in the budget materials
– Exceeding budgeted carryover places the component at
risk of a mark against the appropriation used for funding
• Ensure that sufficient labor, parts, tools, processes, and capacity
are available to complete a given workload before accepting the
funded order
• Activities are required to provide written justification as part of the
budget submission when actual carryover balance (with
exemptions) exceeds the computed allowable carryover in any year
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Regulatory Guidance: DoD FMR Vol 2B, Ch. 9, pp 96-102 (Dec 2014)
PRE-DECISIONAL/ UNCLASSIFIED
PDI 2015 DWCF Current Issues v1.0
• The Department uses industry standards.
• Jet fuel is the most widely consumed fuel product
• DoD consumption ranks 6th in the US jet fuel petroleum market
• About the same as Southwest Airlines
• 61 million barrels (90m/bbl including non-DoD customers)
(FY 2014)
• Two parts to the fully burdened standard fuel price:
• Product – The cost of refined petroleum products
• Non-product – The costs for transportation, terminal operation,
facility sustainment restoration & maintenance, and operations
WCF Management Issues:
DoD Fuel
Evaluating current FY 2015 composite fuel rate
25
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PDI 2015 DWCF Current Issues v1.0
• Can create execution year turbulence
• Bill or surplus ($1.4 billion bill in FY 2013 reprogramming,
$750 million surplus in 1st quarter of FY 2015)
• WCF goal is to preserve customer program but swings of
such magnitude exceed WCF’s ability to absorb the shock
• Leads to frequent price changes
• Twice in FY 2005 through FY 2007, 5 times in FY 2009
• No price change in FY 2013 and FY 2014, but the
Department had to reprogram into the DWWCF
• FY 2015 standard price budgeted at $155.40bbl, reduced to
$136.92 (February 1st)
26
Market Volatility
Customer O&M accounts retain the $18.48/bbl savings
PRE-DECISIONAL/ UNCLASSIFIED
PDI 2015 DWCF Current Issues v1.0
• National Defense Authorization Act (H.R.1735):
– Reduces the Department’s Operation and Maintenance
accounts by $1,628 million for fuel
– Requires the Department to establish a reserve fund of up to
$1 billion to offset future fuel market fluctuations.
– House Appropriations Committee – Defense:
– Reduces appropriations $814 million for fuel costs
Setting the Stage for FY 2016
To date, the Department has not appealed.
27
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PDI 2015 DWCF Current Issues v1.0 28
Fuel Humor
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PDI 2015 DWCF Current Issues v1.0 29
WCF Management Issues:
Evaluating Budgetary Resources
• Budgetary resources means the legal authority that allows an
activity to incur obligations on behalf of the government and must
be apportioned by OMB
• Not the same as the cash balance (FBWT), which may be
fully encumbered by obligations
• Additional sources for obligations may be required
• The SF-133 is the monthly report that provides the status of
budgetary resources
PRE-DECISIONAL/ UNCLASSIFIED
PDI 2015 DWCF Current Issues v1.0
• Reimbursable authority (Spending authority from offsetting
collections) allows an activity to obligate against the resources
provided on a customer order
– The authority to obligate resides in the order itself
Anticipated orders do not provide obligation authority
(reimbursable authority carries forward into the next FY)
– Non-federal orders must be collected in advance before an
obligation can occur
30
Evaluating Budgetary Resources
PRE-DECISIONAL/ UNCLASSIFIED
PDI 2015 DWCF Current Issues v1.0
• Contract authority allows an activity to incur an obligation
in advance of appropriated resources.
– Applies to Supply activities and Capital Investment Programs.
– Expires at the end of the FY
– Does not provide a source for disbursement
– Collections must be posted against contract authority
(USSGL 4139) before a disbursement can be made
• Direct appropriations to the DWCF cash balance allow
financing of obligations and carries forward into the next FY
31
Evaluating Budgetary Resources
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PDI 2015 DWCF Current Issues v1.0 32
Evaluating Budgetary Resources - Indicators
• Line 1000 PY Unobligated Balance Brought Forward
• Amount of reimbursable authority, direct appropriations, and
unencumbered cash available for obligation in the current period
• Line 3090 Uncollected Federal Orders
• Amount of workload accepted but not completed and collected
(carryover plus accounts receivable)
• Amount should not perpetually grow; that could indicate potential
workflow inefficiencies
• Line 3200 Net obligations, End of period
• Amount of reimbursable authority remaining for non-supply activities
or amount of obligations above customer orders for supply activities
• Negative indicates the amount of obligation authority remaining
(non-supply) (normal balance is negative for non-supply activities)
• Positive number indicates obligations above customer orders
(supply)
PRE-DECISIONAL/ UNCLASSIFIED
PDI 2015 DWCF Current Issues v1.0
• Fund Balance with Treasury
– The amount of financing available for obligations that can be
disbursed (may be entirely encumbered by obligations)
• Obligated Contract Authority (USSGL 4139)
– Amount of obligated contract authority without an offsetting
collection to source a disbursement (should not grow endlessly)
• Obligations to Collections Comparison
– Obligations for supply activities should not perpetually exceed
the amount of collections
– Resulting cash balance for the activity will decrease
33
Evaluating Budgetary Resources - Indicators
Subsidizing an activity from the corporate account risks misaligning the
effect of operating results from another activity
PRE-DECISIONAL/ UNCLASSIFIED
PDI 2015 DWCF Current Issues v1.0
AND In Summary . . .
34
Break even over time
Support the leadership
Meet the mission goals
WCF
Go to PDI!
Adapted from The
annual meeting of the
World Economic Forum
PRE-DECISIONAL/ UNCLASSIFIED
PDI 2015 DWCF Current Issues v1.0
Backups
35
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PDI 2015 DWCF Current Issues v1.0
HASC FY 2015 NDAA Report Language
“The committee has been concerned for a number of years that the determination of
process and rates for Defense Working Capital Fund activities is driven by an
arbitrary, outdated goal of maintaining 7 to 10 days of cash to sustain business
operations. This metric cannot respond to changes related to external pressures such
as fluctuations in commodity markets that are outside of the Department of Defense’s
control.”
“The committee commends the Department for initiating processes to determine
the correct cash corpus thresholds for each working capital fund.”
“The committee looks forward to future budget submissions with prices and rates set
to maintain an adequate cash balance to absorb external pressures, thereby
maintaining a steady, dependable rate for the customer throughout the fiscal
year.”
36
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PDI 2015 DWCF Current Issues v1.0
SASC FY 2015 NDAA Report Language
“The committee is concerned that the Department of the Treasury’s decision to migrate
from monthly to daily cash balances for the defense working capital funds will likely be
delayed beyond October 1, 2014. In preparation for such migration, the committee is
concerned that the Services are purposefully building up excess cash as the
Department of Defense (DOD) determines the appropriate amount of cash
balances or sufficient cash balances in accordance with DOD’s financial military
regulation policy. It remains unclear to the committee precisely what DOD intends with
respect to defining sufficient cash balances.”
“…The committee directs the Secretary of Defense to prepare a briefing or report to
the committee no later than October 1, 2015, on: (1) DOD’s status made on the
proposed change to daily cash balances; (2) A specific definition of sufficient cash
balances that DOD and each military service will follow; (3) The methodology used to
calculate such definition; (4) Recommendations on how to mitigate the need to carry
excess cash to avoid Anti-deficiency Act violations; and (5) A mitigation plan to address
the projected ARA shortfall, including any initiatives that could result in savings.”
37
PRE-DECISIONAL/ UNCLASSIFIED
PDI 2015 DWCF Current Issues v1.0
Government Wide Accounting (GWA)
• Department of Treasury initiative to:
– Streamline accounting and reporting processes across the
government
– Increase transparency and improve accuracy of financial information
for stakeholders
• Eliminate stovepipe reporting – brings proprietary and budgetary
accounting in synch
• Real-time classification of transactions and reporting on Fund
Balance with Treasury (Cash)
– Disbursing entities will report transactions directly to Treasury on a
daily basis
– Central Accounting Reporting System (CARS) will provide daily
visibility of cash transactions and balances
38
DoD plans to implement GWA in 2016
PRE-DECISIONAL/ UNCLASSIFIED
PDI 2015 DWCF Current Issues v1.0
Current Monthly View of Cash
39
700.0
800.0
900.0
1,000.0
1,100.0
1,200.0
1,300.0
1,400.0
Treasury Reported Cash
Treasury Reported Cash
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PDI 2015 DWCF Current Issues v1.0
Daily View of Cash
40
700.0
800.0
900.0
1,000.0
1,100.0
1,200.0
1,300.0
1,400.0
Treasury Reported Cash Daily Cash Balance
PRE-DECISIONAL/ UNCLASSIFIED
PDI 2015 DWCF Current Issues v1.0
Revolving Fund Issues and Concerns
• Revolving Funds are subject to the Anti-Deficiency Act for
cash balances
• Loss of flexibility and reaction time– Extraordinary actions ( reprogramming / advance billing) take time to
implement
• Factors outside managers’ control influence cash– Commodity cost volatility; Congressional transfers
– Customers delaying payments and incremental ordering
• Fiscal constraints and budget uncertainty create additional
challenges
– Operating on tighter margins
– Stakeholder and customer decisions (loss of sales / work)
– Improved financial records and accounting systems
41
Daily visibility poses unique challenges to Revolving Funds
PRE-DECISIONAL/ UNCLASSIFIED
PDI 2015 DWCF Current Issues v1.0
FY 2013 Cash Study
• In February 2013, WCF managers were asked to provide:
– Daily collection, disbursement and cash balance data
– An evaluative report addressing fund unique challenges, controls,
planned actions and policy recommendations
• What we learned:
– Each business area has unique challenges and capabilities
– Cash tends to decrease as daily disbursements occur, but increase only periodically with collection cycles
– Some funds have good visibility of daily cash through ERPs today; others have limited visibility of cash during the month
– Some funds plan to increase the frequency of their collection cycles
– Most funds will need to grow and maintain a larger cash corpus
– Need to justify and defend cash balances based on actual risks and business events; the standard 7-10 day metric is no longer sufficient
42
Need to re-think our traditional rules about cash
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PDI 2015 DWCF Current Issues v1.0
DoD’s Place in the Petroleum MarketTotal DLA Energy Purchases
vs.
US Petroleum Consumption
(Thousand Barrels)
43
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PDI 2015 DWCF Current Issues v1.0
FY 2015 Fuel Requirement
44
DLA Energy Sales96.2 million barrels
DoD (89.8 mbbls)
Non-DoD (6.4 mbbls)
DoD Sales89.8 million barrels
Base (77.8 mbbls)
OCO(12.0 mbbls)
Non-DoD Sales include ~ 1.8
mbbls of sales to
USTRANSCOM Commercial
Contract Carriers
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PDI 2015 DWCF Current Issues v1.0
7
W A RFIGHTER-FOCUSED, GL OB A L L Y RESPON SIVE, F ISCA L L Y RESPON SIB L E SUPPL Y CHA IN L EA DERSHIP
BULK BUSINESS MODEL
Refinery Intermediate Depot ConsumerInstallation-Level Depot
Aviation
Contract Facility ConsumerInstallation-Level DepotGround
Vessel
Refinery Intermediate
DepotFleet Logistics
Center
Point of SaleEnergy Supply Chain
Point of Sale
Point of SaleDLA Energy Pays
Market Price for
Product Purchases
Service Pays
Standard Price for
Product Received
DLA Capitalized
Fuel Inventory
Defense Working Capital Fund
Bulk Fuel Business Model
45
FY 2016 PB Price
per Barrel Breakout
Refined product $122.56
Transportation
$4.43
Terminals
$4.23
FSRM
$5.16
Operations
$5.01
Product Loss$2.51
Rounding
$0.16
Total
$144.06
FY 2014 total sales of 89.9m/bbls with an average refined product cost, $141.49/bbl ($7.81/bbl Above budgeted )
FY 2015 PB Price
per Barrel Breakout
Refined product $134.46
Transportation
$4.05
Terminals
$4.04
FSRM
$5.33
Operations
$4.62
Product Loss$2.52
Rounding
$0.38
Total
$155.40
FY 2015 sales through April 52.7m/bbls with an average refined product cost, $96.16/bbl ($38.30./bbl Below budgeted )
FY 2015 Feb 1st Price
per Barrel Breakout
Refined product $115.98
Transportation
$4.05
Terminals
$4.04
FSRM
$5.32
Operations
$4.63
Product Loss$2.41
Rounding
$0.49
Total
$136.92
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PDI 2015 DWCF Current Issues v1.0
46As of: April 2015
$25
$45
$65
$85
$105
$125
$145
$165
$185
Budget Execution Pricing for WTI Crude
WTI Crude
Budget Forecast for WTI Crude
Standard Price
Product Cost
Refined Product Forecast
WTI Trend
Cost Per BarrelCost Per Barrel
FY 2014FY 2013FY 2012FY 2011FY 2010FY 2009FY 2008
FY 2007FY 2006FY 2005
FY 2015
• No price change in FY 2013 and FY 2014.
• Except in FY 2011, multiple price changes every year:
- FY 2005 through FY 2007 two upward prices changes per year
- FY 2008 price changed 3 times, $170.94 to $97.02 - FY 2009 price changed 5 times, $170.94 to $89.46
- FY 2010 price changed 3 times, $116.76 to $98.28 - FY 2012 price changed 4 times, $165.90 to $97.02
• FY 2015 PB price budgeted at $155.40per barrel
FY 2015 price changed February 1st to $136.92
Crude Market Drives Standard Price Changes
Monthly Average Fiscal Year 2005 – Present
$2.9 B
Rescission
$1.283 B
Congressional
Transfer Out
$1.0 B
ASFF Transfer
In
$1.394 B
O&M Transfer
In
$0.3475 B
Congressional
Transfer Out
5
Price
Changes
4
Price
Changes
PRE-DECISIONAL/ UNCLASSIFIED
PDI 2015 DWCF Current Issues v1.0
Comparison To Airlines
DLA Energy Acquisition Tool Airlines
One Year Contract Length Typically One Year
75 percent Min Lift Guarantee ~ 90 percent
Tied To Market Index Pricing Tied To Market Index
Primarily Producers (Refiners)
Military & Commercial SpecsSuppliers
Producers & Third Parties
Commercial Specs Only
Majority Origin – Intermediary
Storage and Distribution PointsDelivery
Destination (Pipeline) Direct to
Airport Point of Use
~2 percent of Overall DoD Budget
Percent of Total
Budget/Operating Costs
Financing Mechanism
~30-40 percent
DWCF Financing MeansVaries – Use of Financial
Instruments
Comparison to Commercial Practices
47
June 10, 2015
Draft Pre-Decisional