Office of the Chief Management Officer and Deputy

Chief Financial Officer Cost Management Activity

NCR PDI | March 2018

1

Executive summary

CMO and DCFO began this cost transparency in summer of 2016

Our approach to cost transparency draws upon private sector experience from commercial consulting

partners to deliver rapid insights, allow for quick decisions, and drive smarter transformations (i.e., re-

org, business process optimization) by:

• Leveraging cost and non-cost data: Identify cost and performance implications of various scenarios

• Delivering meaningful insights: Managers can immediately use insights to manage spend

• Identifying key transformation opportunities: Isolate high-impact areas for long-term change

• Developing a unified cost framework (CODE): Quickly identify key segments which drive business

decision making within a given line of business

We implement our approach within various lines of business during a time-boxed period: initial

hypotheses and insights derived within 120 days; final within a 300-day sprint

• Our first line of business was Real Property, implemented successfully in '16

• Medical and IT were successfully completed in fall '17, with follow-on extension work currently ongoing

• Currently ~ 120 days into Supply Chain LoB and ~45 days into FM

2

Initial cost baseline with preliminary

analytic capability

2016 2017 2018 2019 2020

Miscellaneous

Operations

LoB

Testing and RDT&E

Community Services

Real Property

FM

HR

Service Acquisitions

IT

Medical

Maintenance

Supply Chain

Initial 300 days Sustainment

Today

Annual refresh complete (year over year data available)

Finalized baseline with advanced analytic

capability

Calendar Year

Notional timeline for future LoBs

Initial view on timing and major milestones for all LoBs

Developing the Framework

4

Cost transparency journey delivered in three phases

• Define key segments• Based on commercial

best practice• Tailored to DoD• Assess materiality,

actionability, variance

• Collect and map actuals• Develop commercial

reference (CORE) model• Impute data gaps and

recommend way forward

• Train users• Sustain and refresh

model• Close data gaps• Leverage for

decision-making

Define the Cost Decision Framework (CODE)

Create and populate CODE

Manage cost performance

321

5

Key business questions drive our approach to cost transparency within a given LoB

Assess cost TransformImprove efficiency

• What are the primary cost drivers?

• What are the baseline costs?

• How should systems & accounting be best aligned to capture costs?

• How do overhead costs compare to benchmarks?

• Are personnel at efficient levels to manage workload?

• What is the value of optimizing transport?

• How do outsourced costs compare to insourced?

• Is there opportunity to consolidate warehouses?

• Are procurementprocesses & personnel efficient?

• What is the cost of non-optimal demand signals?

• Are IT investments improving cost efficiency?

• Where is centralization cost-effective?

• What is the cost of duplication?

• What is the cost of non-optimal supply chain planning and execution?

• How can the DoD operating model be modified?

6

Real Property: Cost Decision (CODE) framework

CODE focuses first on product segments:

Level of Materiality, Variance, and Actionability

Real Estate Maintenance Operations Utilities

Highly material, variable and actionable

• Construction • Sustainment• Maintenance & Repair

(overhead)

• Road clearance– Snow removal– Street sweeping– Dirt and sand

• Electricity

Highly material or variable or actionable

• Planning / management• Leasing

• Restoration & Modernization

• Custodial• Grounds• Environmental operations

• Natural gas• Water • Sewer

Moderately material or variable or actionable

• Divestment / demolition• New land / property• Environmental restoration

• Refuse • Steam

Neither material nor variable nor actionable

• Other • Other • Pest control• Other

• Other

Geography (Service)

• Army• Air Force• Navy, Marine Corps• 4th Estate (DLA, WHS, DoDEA, DHP, DECA)

Site / Footprint (Installation)

All installations (U.S. and overseas)

Facility profile

• Facility class (e.g., Administrative, Hospital & medical, Troop housing & mess, etc.)• Age• Condition• Other

Object class • Personnel cost• Contractor cost

• Supplies• Travel

• Communications• Other

Hig

hLo

w

CODE covers additional key segments of geography, footprint, facility type and OC

7

Medical: Cost Decision (CODE) framework

Level of Materiality, Variance, and Actionability

PurchasedCare

Direct CareOperational Care

& ServicesOther Health

ServicesTraining & Education

Future Med. Capabilities

Command & Headquarters

Highly material,

variable and

actionable

• Purchased professional services

• Pharmaceuticals

• Med. personnel pay & benefits

• Pharmaceuticals• Mgm't activities

& admin costs

• Medical personnel pay and benefits

• Pharmaceuticals

• Command & cross-cutting administrative functions

Highly material or

variable or

actionable

• Administrative costs

• Durable medical equipment

• Medical supplies • Dental

• Medical supplies • Medical equip.• Admin costs

• Public / occupational health

• Health and training programs

• Med. research, development, testing & evaluation

• Human resources

Moderately

material or

variable or

actionable

• Contractor fees • Other • Aeromedicalevacuations

• Other

• Other non-MTF, non-operational health services

• Scholarships, grants, etc.

• Other

• Congressionally mandated research

• Other

Hig

hLo

w

Depts

• IP, OP, & other

departments

• Metric: Cost per

RVU/RWP

Medical code

frequency

• Number of instances (e.g. of CPT

66920, Extraction of Lens)

• Number of prescriptions (e.g. brand vs.

generic)

Service • Air Force • Army • Navy• Reserve for each

service

• National Guard

for each service• DHA

Facility type• Specialty clinic

• Non-GME

hospital

• GME hospital

• Etc.

Benefit plan• Prime

• TFL

• Standard/Extra

• Etc.

REA

DIN

ESS

8

Mission Systems

Enterprise Systems &

ServicesIT Security IT Management

End-User Devices and Support

Non-tactical Network Infrastructure

Hardware

• Processing and storage devices

• App development and testing devices

• Tactical data switching, routing, and wireless

• Processing and storage devices

• App development and testing devices

• Network intrusion monitoring devices

• Cryptographic hardware

• Hardware for IT admin and finance

• All end-user devices incl. printers (PCs, tablets, handhelds)

• Voice premise and Wide Area Voice hardware

• Non tactical data switching, routing, and wireless

Software

• Enterprise andstorage software

• App dev't and support software

• Tactical Network operations software and peripherals

• Enterprise andstorage software

• App dev't and support software

• Security software • Administrative software for IT

• End-user software (MS Office, email etc.)

• Non-tacticalNetwork operationssoftware and peripherals

Personnel

• O&M personnel for storage & servers

• App development & support personnel

• O&M personnel for storage & servers

• App development & support personnel

• IT security personnel

• CIO staff, IT admin staff

• Helpdesk/Service desk personnel

• End-user O&M

• Operations & maintenance (NOC) personnel

Facilities

and Power

• Facilities and power for data centers

• Facilities and power for data centers

External

Services

• Operations &maintenance contracts for storage and servers

• Development contracts for Apps

• Tactical voice anddata contracts

• Operations &maintenance contracts for storage and servers

• Development contracts for Apps

• Cybersecurity managed services

• Outsourced ITmanagement (incl. training, marketing)

• User Support Services

• IT service desk

• Non-tactical voice and data contracts

Ass

et

Capability

CODE will also exclude IT expendables (paper, ink, toner, CD and DVD media, etc.), consistent with the definition of IT in Clinger-Cohen Act

Information Technology: Cost Decision (CODE) framework

Populating the Framework

10

Followed five step process to populate CODE framework with data

Acquired raw data from complex systems landscape

Mapped data to CODE framework

Identified and assessed confidence levels

Closed data gaps where actuals were unavailable or unreliable

Validated mappings and confidence levels with key stakeholders

1

2

3

4

5

11

Navigated complex systems landscape to populate Is-Cost

SystemOrganization

Budgeting(Obl. Authority)

Procurement(Expected Obs.)

Execution(Obligations)

Army AFMCNavy

OSD

EFD

GFEBS PBIS-DB SABRSCRIS/

DEAMS

MC1 MC2 BSO1 BSO2 MC1 MC2 MC1 MC2

GFEBS SPS NAV-ITAS ITPRAS AFWay SPS

GFEBS STARS SABRS NAVY-ERP

SABRSCRIS/DEA

MS

Budgeting(Obl. Authority)

MC3MC3BSO3MC3MC3MC3 MC3MC3MC3 MC3MC3MC3

NAVY-ERP

DISA

WAAS

WAAS

WAAS

Cost Center

DHA

DAI

DAI

DAI

Cost Center

DLA

EBS

EBS

EBS

Cost Center

LMPPADS

12

All mappings and data gaps were validated with Service stakeholders

Navy NAV/EIE membersNAVFAC AONAVOP AO

NAVFAC contacts

Marines HQMC members Multiple AOs MCICOM contacts

Army ACSIM membersUSACE members

ACSIM AOs ACSIM contacts

Air Force AF/A4 members SAF-IE AOs SAF/FM contacts

OSD

EI&E membersDCMO membersDCFO membersDCFO members

DCFO contactsDCMOATL

Multiple data stewards

Steering Committee Action Officers Data Stewards

Sample list of key Real Property stakeholders for FY16

Over the course of the Real Property 300 Day Proof of Concept, we held:

• Over 150 interviews across all Services and 4th Estate agencies,

• Site visits to over 15 installation

• Over 20 “Supermarket” tours that focused on the Real Property CODE dashboards and how to enhance the dashboard visualizations

13

Real Property: Key themes and opportunities

Estimate potential savings through establishing and managing to cost performance baselines

Leased administrative space is within a 30-mile commute of dense DoD footprint

Potential for CODE analytics to inform regional consolidation

Wide variation in electricity spend

Significant lease spend near existing DoD facilities

Identification of regional clusters

Above: Electricity cost per square foot plotted for 400+ installations across all

Services (each dot is different installation)

Above: Administrative leases arrayed according to cost and amount of “nearby” owned/leased administrative facilities

Top: DoD sites with administrative square footage. Bottom: Top 20 “high density” clusters of administrative facilities

14

Key themes and opportunities for Medical

On average, MTFs are more expensive than equivalent workload performed in Purchased Care network• Adjusted to locality (where

possible)

Departments, MTFs, and Markets have large variance in cost performance when compared to peers• Controlled for potential

causes (e.g. readiness, GME, OCONUS, etc.)

Lower utilization rates drive inefficiencies in cost performance at Department, MTF, and Market levels

High spend compared to Purchased Care

MHS outliers define performance gaps

Low FTE utilization relates to high unit cost

MTFs above red line cost more than Purchased Care workload equivalent

Comparable MTFs have large variances in cost performance for same department

Physician utilization generally correlates with cost performance for each department/MTF combination

15

Information Technology: Key themes and opportunities

Delta with Commercial Reference model, driven primarily by:• External services • IT personnel

High concentration with top vendors, with long tail of spend

IT spend/FTE increases in MAJCOMS that have greater % of spend on external services

Higher spend compared to Commercial References

Lack of consolidation in third party vendors

Inefficiencies in usage of external service providers

16

The final end-user tool is composed of three primary components

View of what analogous commercial entity would incur in functional execution costs

Accounts for some systematic DoD-unique cost drivers

Commercial Reference (CORE) model

Consolidated DoD-wide view of annual execution costs aligned to cost decision (CODE) framework

Is-Cost model

Visualization dashboard

Interactive cost analytics views designed to aid in managerial decision making, e.g., • Internal and external benchmarking• Portfolio variance • Data quality assessment

17

Underpinning all reform levers is a foundational need for cost transparency

Potential reform levers forpublic sector leaders

Invest in new capabilities

Divest non-core activities

Reduce cost inefficiencies

Optimize performance

Influence demand

What are the potential reforms under consideration?

What are the key management questions with respect to cost?

What data elements should be captured within cost framework?

What business analytics are required to support decision making?

Cost transparency lays the foundation across

the spectrum of reform

Sustaining the Framework

Tone-From-The-Top

The DEPSECDEF signed the Enterprise Cost Management Project Memo (JUL 13 2017) articulates DoD-wide

use of the CODE Model to inform cost decisions at enterprise level

• Enable a shift towards a cost-focused culture

• Ensure cost information is consistent and legitimate

• Provide accessible cost analytics to inform improved decision making

• Deploy the tools and technology required to enable the creation of standard ECM information

• Embed cost analytics in existing performance management processes

ECM Project Goals

19

Aligning Sustainment Activities with DEPSEC Memo

Using the Model

(End Users)

Maintaining the Model

(CODE Data Model

team)

Data Capture

(Data Stewards)

• Use standard set of reports, dashboards and visualizations in support of performance management and data quality improvement

• Collaborate with the CODE Data Model team on a regular basis to evolve the model utility

• Stand up sustainment groups at executive, functional, and financial level• Ensure the data model is accurate, updated and accessible to relevant users• Manage and update documentation as needed (e.g., business rules, SOPs) • Maintain and improve a set of standard reports, dashboards and

visualizations (in collaboration with the end user community)

• Support data refresh and validation efforts of new data uploads, assist in managing issue resolution, solving exceptions, etc.

• Understand CODE Data Model and how source data is being used within the model; collaborate with CODE Data Model team when source data environment has had a material change (e.g., changes to coding, system replacement, etc.…)

Demand management

and end user alignment

Liaison to data sources

and change control

20

Initiate

Sustainment

CODE

Populate

Manage

Real

Property

Refresh

Refresh

Refresh

Cost

baseline

Proof of Concept Sustainment

CODE

Populate

Manage

IT

CODE

Populate

Manage

Medical

Repeats for

additional LoBs

Integrate

Across

Organization

1

Integrating Performance Management

Sustaining a DoD Cost Culture

Extending Org.

Capabilities

Institutionalize Sustainment

Platform

2 3

21

Progression from Proof of Concept into Sustainment

Comptroller Sustainment Focus

Cost Data Refresh and Analytics

Technology Enablement

Cost OperationsChange Management

& Governance

1 2 3 4

22

23

6

Launch

updated

CODE Model

3

Validate data

2

Request data

4

Iteratively

enhance

model

5

Sign off on ‘Is-

Cost’ Model

Making Proof of Concept Data Sustainable

Streamline

data sources

1

24

2

Review design &

build – provide

feedback

3

CODE BIO Team

builds updates

5

Launch updated

FY17 CODE

Model

Iterative

Apply change

control

process

4

Identify new

enhancements

1

Prioritize

identified

enhancements

Advancing Analytics to Enhancement the CODE Model

25

Financial

Reporting

Compliance /

Control

Decision Analytics on

Financial Performance

Decision Analytics on

Mission Performance

• Sound transaction

processing

• Creation of traditional

finance reports (e.g.,

balance sheet)

• Provide assurance on

strength of internal controls

and risk management

processes

• Perform cost

management analysis

• Provide resources for

performance review

• Link cost performance

data to related priority

mission objectives

• Partner on cost and

mission analytics

~ Annually ~ Quarterly ~ Montlhy or better ~ Daily / Real time /

predictive

Distributed, non-standard Distributed, standard Centralized, standard Centralized, standard,

automated

• Disaggregated systems

approached on a one-off

basis

• No enterprise view

• Disaggregated systems

• Central "translation"

ability via single taxonomy

• UoT collecting data from

multiple sources

• UoT central host system

• UoT leverages existing

data linkages to receive

specific updates/refreshes

• UoT central host system

• Automated feeds for cost

& audit

• Shared service provider

for analytics on financial

performance and cost

FM

RP

Med SC

IT

FM

RP IT

SCMed

FMRP

SC

HR IT

MedCFO

An

aly

tics

Pe

rfo

rme

dT

ime

Da

ta

Arc

hite

ctu

re

CF

O

Ro

le

Ro

le o

f

Uo

T

CFO impact

HigherLower

Driving to a Centralized, Standardized CFO Function

Functional/operations Financial

Data Stewards

Functional

Data

IT Executive Leadership

Comptroller

(DCFO-BIO)

OSD CIO

Leadership

Service

Comptrollers

(FM)

Service CIO

Leadership

Data Stewards

Cost Data

Engaging Financial and Functional CommunitiesS

tee

rin

g

co

mm

itte

eO

SD

Se

rvic

es

Part-time support

DCFO/

Comptroller

Leadership

CAPE

Cost

Management

TeamBIO

This requires vested leadership across Comptroller, CMO, and the functional community

Part-time support

CMO/DCFO

Change Champions

Change Agents

Se

rvic

es/O

SD

Working GroupWorking Group Working Group Working Group

Change Management Approach

Organization Engagement

Functions

Sustained

Change

Organization

Readiness

Organization

Engagement

Organization

Adoption

Organization Readiness Organization Adoption

• Stakeholder

management

• Communications

• Change network

• Change impact analysis

• Target organization

metrics

• Change readiness

assessment

• Training

• Support and monitoring

27

Fostering Stakeholder Engagement

The CODE Business Integration Office (BIO) Team will help facilitate Sustainment efforts by communicating

OSD’s cost management vision and enabling cross-LoB integration

The Cost Management Board is a meeting that connects the CODE BIO Team to the functional communities

and enables two-way communication

Cost Management Board

• An LoB-specific forum for

CODE BIO and Action

Officers (AOs) to discuss

pertinent cost management

topics

• Meetings are held on an

as-needed basis

• Enables CODE BIO Team

to provide updates on

milestones and next steps

for DoD’s ECM

• Functional communities

can provide insight/context

on relevant operational

issues, priorities, etc.

Functional Community

(LoB AOs)

• Provides functional-

specific context to cost

management questions

• Communicates and

escalates broader cost

issues and potential

impacts (e.g., source

system changes)

• Informs ODCFO on

current operating

environment

CODE BIO Team

• Communicates OSD

cost management

vision

• Facilitates AOG

progress towards

Sustainment

milestones

• Serves as a liaison

between OSD

ODCFO and the

functional

communities

28

Stakeholder Engagement & Change Leadership

AOG Members Leadership

• Improve the functionality and integrity of the

CODE Model

• Provide strategic direction for CODE Model,

based on LoB-specific and OSD priorities

• Fulfill data requests to support the refresh

process and enhancements to the CODE

Model

• Review and provide input on AOGs’ progress to

confirm alignment with OSD and functional

community priorities; approve critical changes

• Serve as a Subject Matter Resource to

support closure of data gaps and validate

data mapping

• Define AOG members, remove obstacles to

Sustainment efforts’ progress

Direction from OSD and

Functional Leadership

AOG 2

Analytics

Advancement

AOG 1

Data

Refresh

AOG 3

Data Quality &

Standards

Service, Functional, and Financial Management (FM)

representation

Roles & Responsibilities

• OSD ODCFO and DCMO, in

coordination with functional

communities, may “activate”

AOGs to improve the

functionality and integrity of

the CODE Model in an

adaptive, flexible approach

• Members of the activated AOG

will depend on the objective

and scope of the issue

29

Change Process

The commitment curve is used to track progress of stakeholders and serves as a stage gate for

realizing when the objective of communications can shift to the next phase

Inform Engage Enable

Hear it Believe it Live it

Awareness Understanding Buy-in Transition Reinforcement

Achieving desired communication outcomes can help DoD’s shift to a

cost-focused culture progress along the commitment curve

30

Data mapping

confidence scores

Allocations for

capability/asset

applied as

appropriate

Product overlay

based on

commercial

reference model

Shared

services allocation

Spend is categorized to CODE assets and capabilities based on GL data elements

Allocations to CODE capabilities and assets include

Spend is allocated to products according to commercial references

Shared services are identified by spikes in spending on a given capability and allocated to customers

Closing data gaps

1 2 3 4

Desired Communication Outcomes

Functional communities and financial managers across the Services and Defense Agencies/Components, at the executive- and stakeholder-levels, should understand:

• What is happening?

• Why is it happening?

• Who is impacted?

• What are the implications of the change?

• What will happen?

• What they are expected to do and when they are expected to do it?

• How they will be supported through the change?

32

Reactive / Manual Proactive / Automated

Analyze Cleanse Control Enhance

• Define, group and prioritize critical data elements; document in CODE data dictionary

• Identify data quality issues (CODE data quality heat maps)

• Define profiling metrics and thresholds

• Prioritize data requiring remediation on profiling / analysis and cleansing complexity

• Identify trusted source data provider

• Design cleansing program for existing data identified during profiling / analysis

• Identify process / systems improvements for timeliness and validity issues

• Identify data quality issues resulting from lack of optimized controls around the entry, movement and provision of data

• Identify issues to be remediated

• Develop system or compensating controls to address data quality issues at source for systems / processes unaffected by the future state (typically source systems)

• Design continuous data quality monitoring tools to identify data quality issues as they enter the pipeline

• Design processes for the identification of data quality issues by the end user, providing channels for issue resolution

Establish a framework to guide data management and data

quality improvement

33

Each LOB has evaluated data quality issues

against CODE framework and identified areas to

focus first

• Created outlier analysis or data quality heat map where

highest impact data quality opportunities exist (largest

dollar value, lowest data quality)

CODE Framework Data Quality Heat map

1,2

Continue to leverage business rules for interim

treatment of low quality data in CODE models

• Built allocation logic to allocate data marked as “low

confidence” using the distribution of budget data

• Developed business rules to allocate data to a lower level

detail or organizational unit (e.g., IT allocated spend to the

“product” level based upon commercial references, and also

allocated shared IT purchases to beneficiaries – example

below)

• Developed scaling methodology for missing values

• Developed replacement methodology for statistically

validated outliers

Data Quality Color KeyHigher % of high quality data

Lower % of high quality data (requires allocation)

0.0

0.2

0.4

0.6

0.8

Execution

Data

$ B

Total

Spend

Shared

Services

Allocation

Driven by

CORE

industry

mapping

IT Shared Service Provider Allocation

Example

Leverage CODE data quality heat maps to prioritize data quality

improvement initiatives

34

1. Initiation2. CODE Model Impact

Analysis

3. Service/Agency

Support Evaluation 4. Approval

Change Request Initiator

Reviewers:CODE BIO Team

Approver:CODE BIO Team

Establishing a Change Control Process to Manage CODE Model

Data model change requests follow a four-step process used to facilitate the review, approval, and

model update process:

Apply escalation process as needed

35

Change Request

TypeDescription Example

Technical IssueDashboard or dashboard function is

malfunctioning/not working properly

End-user filters within a dashboard and it

returns a blank visual or error message

Data Quality Issue Dashboards present cost/visuals that seem

incorrect or not aligned with what is expected

End-user believes electrical costs should be

significantly higher and is unsure why

ClarificationLack of understanding of what/how to

interpret a dashboard/data

End-user is unsure on how to read a graph

and needs assistance to develop an

understanding

Dashboard view

Altering dashboard functionalities,

capabilities to meet end-user needs and / or

a new visualization

End-user would find it beneficial to add a

filter for a particular visual or see a pie chart

instead of a bar graph

Additional / new dataRequest to add new data that does not exist

in the current data model

End-user requests to see contracting data,

which is not currently in CODE data model

Document and categorizes CRs in

internal log

1

Evaluates CRs based on defined criteria

2

Communicates status and decision to an end

user

3

Managing future requests with Change Request Categorization

36

Defining a path forward for end-user training

Develop and deliver training

Establish vehicles for delivery

Establish

curriculum

needed for each

user community

Identify user

communities

requiring training

3 4

Define, plan, and implement organizational change levers6

Establish vision,

governance, and

leadership alignment

1 2 5

37

Training Content and Activities

Delivery channels Material/Activity Descriptions

Self-service

Documentation

(MilSuite)

Data Model PlaybookDocuments overall design of LoB-specific data models (e.g.,

approach, framework, mappings, business rules)

Tableau access instructionsProvides step-by-step instructions, for new users, on how to

access and use the CODE Model Tableau dashboards

Detailed design documents Describes data sources, fields, mapping, transformations, and

step-by-step instructions to populate the data model

End-user dashboard training

material

Describes how to navigate dashboards, interpret data, and

draw insights to help facilitate value-driven cost performance

discussions, specific to each LoB

Tableau Skillsoft coursesProvides intermediate-level instructions on how to use the

Tableau software

MilTube “Supermarket”

videos

Walks through the latest set of dashboards after the data

model has been refreshed

Instructor-led

Training CODE Model dashboard

demos

Provides interactive training for end-users on how to engage

with CODE Model (e.g., traditional “Supermarket Tour”)

Sho

rt-t

erm

Lon

g-te

rm

38

Data Model Playbook

CODE Data Model Playbook

Design

Populations of Actuals

Functional-specific Data

CORE Data

Business Rules and Allocations

Overview of Dashboards

Define the LoB-specific CODE Framework and segment into

Products

Describe the cost data gathering process for each Service and

provide snapshot “Is-Cost” views

Guide to LoB-specific performance data (e.g., RPAD and

workload)

Outline the methodology for commercial reference factbase and

summarize its use

Summarize standardized rules required for apples-to-apples cost

comparisons across the Service actuals

Provide example dashboard visualization produced by the Model

as well as summarized views of cost information

39

Tableau End-user Training GuideMedical LoB

Medical CODE Tableau End-user Training Guide

Enterprise View

MTF Management

Department Management

Training & Education

Command & HQ

Purchase Care Overlay

Defining Readiness

Readiness

Review cost across segment (e.g., direct care), Service, and

cost type (e.g., personnel, supplies)

Review cost at the military treatment facility- (MTF-) level across

Services

Review and compare direct care costs at MTF- and HQ-levels

Identify opportunities to make vs. buy

Understand how the definition of readiness can impact cost

Highlight opportunities to improve readiness across the Military

Health System (MHS), based on selected definition

Review MTF cost by department (e.g., Surgical)

Review training and education costs across Services

40

Visualizing the Framework

Insights-to-Action Approach

Systems

Data

Management

Policies &

ProcessFinance &

Accounting

Systems

Data

Management

Policies &

ProcessFinance &

Accounting

Innovative

Team BCG

approach

Traditional

approach

Insights

Rapid insights

up front

Infrastructure tailored based on up front insights

$

$

Insights front-

loaded to enable

immediate action

Insights back-

loaded and

often

underperform

Can take up to five years to achieve actionable insights

Leveraging Team BCG

innovative analytic approach

Tier 1 opportunities Tier 2 opportunities Tier 3 opportunities

Low

High

Impact

More difficult Less difficultEase of Implementation

CyberROI

AI / MachineLearning

Vendor CostData Calls

ResellerElimination

Biometrics

DemandManagement

Eliminate Rogue IT Spending

DISA WCFTraceability

InterfaceSimplification

Move to SAAS /Cloud Solutions

Focus areas(current)

Data QualityStandardizationHelp desk

Optimization

Linking BudgetTo Spend

ERP / FMStandardization

JELAs

HW/SW AssetManagement

JESAs

Measuring ITAsset Utilization

HR SystemStandardization

UnifiedCommunications

Currently in flight (not managed by reform effort)

NSA GLExploration

Contract Renegotiation / Vendor Management

ContractManagement

AutomatedContract Writing

Key Business Questions to Focus Approach and Analytics

Key Business Questions to Focus Approach and Analytics

Preliminary

Costs as

% Total1

~35% ~30% ~20% ~10% ~3% ~2%

HQ Transport Store Source Plan Return

~20% Personnel

~20%Contract

Services

~5% Facilities

~2% Equipment

~2% IT

~1% Other

~50% Materials

Supply Chain Function

Co

st T

ype

2. How do overhead

costs compare to

benchmarks?

3. What is the value of optimizing transport?

4. How do outsourced

costs compare to insourced?

5. Is there opportunity

to consolidate

warehouses?

6. Are procurement processes & personnel efficient?

7. What is the cost of

non-optimal demand signals?

1. Are personnel at efficient levels to manage workload?

8. Are IT investments improving cost efficiency?

10. What is the cost of non-optimal category management?

Cost optimization opportunity based on supply function and cost type

Relatively HighRelatively Low

9. What is the cost of non-optimal supply chain planning

and execution?

44

Real Property: CODE gives Installation-level cost comparisons

across all categories of spend

Specific installations

Categories of spend (ex: construction, utilities, custodial, operations, etc.)

Service-level spend and installations considered in-scope

Real Property: Flexibility to compare costs across installations

Spec

ific

inst

alla

tio

ns

IT: cost comparison of current spend against commercial

references

External services

Personnel

Hardware

Software

Facilities

Medical: CODE heatmap of medical spend by both purchased

and direct care

Purchased care - levels of spend by color

Direct care

Management Questions to Drive Analytical Insights

How do overhead costs compare to benchmarks?

Are personnel at efficient levels to manage workload efficiently?

Is there opportunity to consolidate warehouses?

Are IT investments improving end-to-end cost efficiency?

49

Are there cost efficiency

opportunities for overhead

centralization or decentralization

within the DoD?

Compare overhead

breakdown to commercial

benchmarks

Overhead costs misallocated based

on total cost of activity; potentially

skewed to low-activity functions

Are personnel positions higher-

graded in certain areas?

Functions? Across Services?

Compare personnel cost

by tenure by function for

similar levels

DoD organizations are conducting

similar tasks, but one has relatively

higher-graded and/or layered

workforce

What are potential cost savings

from consolidating warehouses?

Identify facilities costs of

warehouses and

differentiate by storage

type

Significant facility and overhead costs

to maintain underutilized warehouses

Detailed sub-questions Analysis & Visualization Potential Insights

Does spend on supply chain

enabling IT and non-IT equipment

improve supply chain cost

performance?

Spend on supply chain

enabling IT equipment,

maintenance and

personnel as a percentage

of supply chain operating

costs

Insufficient IT capabilities for

automated process workflows

Question: Where is medical treatment facility consolidation likely

to yield cost savings?

Relevant Audience: Defense Health Agency seeking opportunities for cost efficiencies in its oversight of

healthcare administration

Insight

(provided to

date):

A. To evaluate Military Treatment Facilities and clinical departments for consolidation

opportunities

B. To identify clinical departments that could benefit from improved utilization of clinicians

through consolidation

Desired Data

Frequency:

Financial Management Sources (quarterly): GFEBS, STARS-FL, CRIS, DAI

Non-Financial Management Sources (quarterly): MHS MDR workload, PCOLS, FPDS, DHMRSi,

DMDC

Limited benefits to

increased utilization in

Primary Care

Increasing

utilization drives

down unit cost in

OBGYN

Question: Are there inefficiencies in the usage of external service

providers?

Relevant Audience: Procurement and FM Action Officers seeking opportunities for cost efficiencies to consolidate

contracts with vendors to increase DoD buying power

Insight

(provided to

date):

A. To understand IT spend/FTE increases in MAJCOMS that have greater percentage of spend

on external services

B. To indicate inefficient outsourcing to determine opportunities

C. To identify potential redundancies with in house personnel use in services and contracts

being provided by external service providers

Desired Data

Frequency:

Financial Management Sources: Annually

Non-Financial Management Sources: Annually

Dashboard provides user

with visibility into

MAJCOMS effectiveness

in outsourcing IT projects.

With outsourcing the

internal organization

should be more effective

Dashboard provides user

with visibility into areas

where DoD can become

more effective in

outsourcing of IT projects

Question: How can Components identify inefficiencies within

their Real Property operating costs?

Relevant Audience: Component installation portfolio management organizations seeking to reduce facility

operating costs

Insight

(provided to

date):

A. To assess materiality and variability of operating cost across installations

B. To “shine a spotlight” on a subset of installations where greatest opportunity for cost

reduction exists

C. To prioritize outlier installations where operating cost per sq. ft. is relatively high

Targets costly installations compared on a square foot basis against installations within the

same Service and in other Services

Desired Data

Frequency:

Financial Management Sources: Monthly

Non-Financial Management Sources: Annually

Installations with greatest cost /

square foot should be primary

focus of additional follow up

Median cost / square foot can be

used to calculate potential

savings targets for cost

management initiatives aimed at

bringing underperforming

installations in line

53

Financial

Reporting

Compliance /

Control

Decision Analytics on

Financial Performance

Decision Analytics on

Mission Performance

• Sound transaction

processing

• Creation of traditional

finance reports (e.g.,

balance sheet)

• Provide assurance on

strength of internal controls

and risk management

processes

• Perform cost

management analysis

• Provide resources for

performance review

• Link cost performance

data to related priority

mission objectives

• Partner on cost and

mission analytics

~ Annually ~ Quarterly ~ Montlhy or better ~ Daily / Real time /

predictive

Distributed, non-standard Distributed, standard Centralized, standard Centralized, standard,

automated

• Disaggregated systems

approached on a one-off

basis

• No enterprise view

• Disaggregated systems

• Central "translation"

ability via single taxonomy

• UoT collecting data from

multiple sources

• UoT central host system

• UoT leverages existing

data linkages to receive

specific updates/refreshes

• UoT central host system

• Automated feeds for cost

& audit

• Shared service provider

for analytics on financial

performance and cost

FM

RP

Med SC

IT

FM

RP IT

SCMed

FMRP

SC

HR IT

MedCFO

An

aly

tics

Pe

rfo

rme

dT

ime

Da

ta

Arc

hite

ctu

re

CF

O

Ro

le

Ro

le o

f

Uo

T

CFO impact

HigherLower

Driving to a Centralized, Standardized CFO Function

Thank you