AMERICA’S ARMYTHE STRENGTH OF THE NATION

A

rmy

Cost

Man

agem

ent &

Fin

anci

al T

rans

pare

ncy

M

. Anv

ari

Army Cost Management & Financial Transparency

Predictive AnalyticsSymposium

Washington, DC November 18-19, 2014

Mort Anvari

Director, Programs and Strategy

US Army, ASA(FM&C)

AMERICA’S ARMYTHE STRENGTH OF THE NATION

A

rmy

Cost

Man

agem

ent &

Fin

anci

al T

rans

pare

ncy

M

. Anv

ari

Army Financial Transparency

Challenges

• DOD Audit Readiness

• Visibility into Cost and Spending

• Meaningful Business Analytics for Decision Making

• Financial System Interface Errors and Rework

Progress

• Cost Culture and Cost Management (CM) Initiatives

• Army General Fund Enterprise Business System (GFEBS)

• Addressing Financial Material Weaknesses - LSS

• Army Financial Management Optimization (AFMO)

• Army Financial Benefits Reporting and Tracking (AFBRT)

• Army CM Steering Group

2

Opportunity

• Army Cost Data Capture Strategy and CM

AMERICA’S ARMYTHE STRENGTH OF THE NATION

A

rmy

Cost

Man

agem

ent &

Fin

anci

al T

rans

pare

ncy

M

. Anv

ari

Army Cost Management (CM) is working

Technology4. Data Quality (ERP Cost Data, Performance Metrics)5. Tools & Models (Analytics, BI)

Process6. Cost Planning (Cost Estimates, …...)7. Cost Analysis (CBA, AoA, ….)8. Cost Integration to Requirement, Acquisition & Resource 9. Cost Control (LSS, AFBRT, …..)

CM Goal: Better Value for Lower Cost• Stewardship of nation’s resources • Cost informed decision making• Continuous improvement• Accountability for costs• Tracking progress

Data Quality

Cost Analysis

Training

3

People1. Leadership Commitment2. Training3. FM Workforce (AFMO)

CM Maturity Model

CM Process Model

AMERICA’S ARMYTHE STRENGTH OF THE NATION

A

rmy

Cost

Man

agem

ent &

Fin

anci

al T

rans

pare

ncy

M

. Anv

ari

Perform Cost

Analysis

Perform Cost

Controlling

Perform Cost

Planning

Perform Cost

Accounting

Develop & Maintain Cost

Model

Compare Results to Plan

Process Improvement

Adjust TargetsSelect Method of Control

Implement (changes to) Policies & Procedures

Manage Tradeoffs

Capture Actual Costs

Perform Cost Assignment

Perform Period End Close

Capture Actual Outputs

Capture Actual Costs

Perform Cost Assignment

Perform Period End Close

Capture Actual Outputs

Establish Planned Output

Establish Planned Costs

(inputs)

Develop Cost and Performance

Targets

Develop Metrics

Determine Cost

Objectives

Maintain Cost Model

4

Army Cost Management End-to-End Process

CM Process Activities Level One

CM Process Activities Level

Two

AMERICA’S ARMYTHE STRENGTH OF THE NATION

A

rmy

Cost

Man

agem

ent &

Fin

anci

al T

rans

pare

ncy

M

. Anv

ari

Army Cost Management and PPBE

5

Integrating Cost Management with

PPBE Process

AMERICA’S ARMYTHE STRENGTH OF THE NATION

A

rmy

Cost

Man

agem

ent &

Fin

anci

al T

rans

pare

ncy

M

. Anv

ari

6

Aligned CM to PPBE

AMERICA’S ARMYTHE STRENGTH OF THE NATION

A

rmy

Cost

Man

agem

ent &

Fin

anci

al T

rans

pare

ncy

M

. Anv

ari

7

CM Activities and PPBE Phases

Planning Programming Budgeting Execution(6 - 10 Years) (6 Years) (1-2 Years) (Current Year)

HQDA

Strategic Decision-Making:

- Cost Benefit Analysis

- Analysis of Alternatives

- Army Cost Position (LCCE)

- Cost Models / Tools * FORCES Costing Model * Capability Costing Tool

- Cost of Army - Workforce Analysis

Outyear Forecasting: - Cost Factors & Models * TRM/OSMIS * FORCES Costing Model * AMCOS / Civ Pay Rates - Army Cost Position (LCCE) - Contingency Cost Model - CBA's, LSS - Incorporate AFBRT Benefits

Formulation / Justification: - Cost Factors * OPTEMPO Cost Factors

* Mil Pay Rates * Civ Pay Rates - Cost & Spend Plans - Include AFBRT Initiatives - Historical Trend Analysis - Establish Should Cost Goals

Allocation/Funds Distribution: - Cost Analysis to Support * Cash Management * Reprogramming * Rate of Executution - Budget vs Actual (Variance) - Monitor Will /Should Cost - Track Cost Savings (ARFIT) - Mid-Year Reviews

Command / DRU

Strategic Planning:

- Cost Benefit Analysis

- Cocept Plans

- Workforce Mgmt - Submit Initiatives to AFBRT

- Trend Analysis

- Cost Models / Tools - Investment Decisions - Identify Efficiency Initiatives

Outyear Plans / Controls: - Cost Targets/ - Annual Efficiency Goals - Assess Cost & Spend Plans - Plan Output (Capacity Mgmt) - Cost Benefit Analysis - Trade Space Analysis - Establish AFBRT Milestones

- TRAPS

Measure & Control:

- Variance Analysis (Cost & Output) - Benchmarking Best Practices - Adjust Cost Targets - Mid-Year Reviews - Measure Reduction Initiatives - Adjust Allocation Rules

Operational Activity

Operational Planning:

- Establish Annual Cost Plans - Set Output Goals / Objectives - Optimize Capacity - Adjust to Directives (e.g. TRAPS) - Establish Activity Rates (Labor / Equip) - Estimate OH Allocations

Continuous Improvement: - Qtrly Cost Mgmt Reviews - Variance Analysis * Resources (Inputs) * Labor Rates * Output (Unit Cost, Qty) - Budget vs Actual (Variance) - OH Allocations

- Product/Service $, Customer $

AMERICA’S ARMYTHE STRENGTH OF THE NATION

A

rmy

Cost

Man

agem

ent &

Fin

anci

al T

rans

pare

ncy

M

. Anv

ari

4. Funding

2. Contracts

8

Full Visibility - Big Cost Data

2.Co

ntra

cts

3.Se

rvic

es

1. Customers

4.Fu

ndin

g5.

Cost

Ce

nter

s

Multi-dimensional Polygon Cost Visibility

1- Customers by Contracts2- Customers by Services 3- Customers by Funding4- Customers by Cost Centers5- Contracts by Service6- Contracts by Funding7- Contracts by Cost Centers8- Services by Funding9- Service by Cost Centers10 –Funding by Cost Centers

for 10 views 45 cost visibility table is needed

Views

# Tables = N * (N-1) / 2

Org, Year, Supplier, Type . . ?

. . .. . . .

3. Services

3

2 5

4

6

7

8

9 10

1

Enterprise CM Data Need

AMERICA’S ARMYTHE STRENGTH OF THE NATION

A

rmy

Cost

Man

agem

ent &

Fin

anci

al T

rans

pare

ncy

M

. Anv

ari

Prioritized, Aligned, and Optimized Cost Data Capture

Improve data quality and cost data visualization tools for decision making. Incorporate rigorous Cost Management in funding decision to reduce future cost risk. Plan for capture of execution data in support of CM and PPBE processes.

Integrate Cost Management into PPBE and Core End-to-End processes

9

Cost Management Data Capture Strategy

AMERICA’S ARMYTHE STRENGTH OF THE NATION

A

rmy

Cost

Man

agem

ent &

Fin

anci

al T

rans

pare

ncy

M

. Anv

ari

Cost Management Data Architecture

Presentation Layer

DataWarehouse & Information ManagementLayer

Data IntegrationLayer

Data SourcesLayer

Data Marts

Dash BoardsReports Analysis

Data Warehouse(AESIP)

OLAP

ERPsFile Systems

SOA, ESB,Web

ETLUnstructured Data

Databases Unstructured DataSources

BI Engine

A

B

GCSS-AIPPS-A

GFEBS

GFM-DI

Co

mm

on

Dat

a V

alu

e

Co

mm

on

Exc

han

ge

Mec

han

ism

Co

mm

on

En

tity

Mo

del

Data Standardization

10High Cost of Data Standardization at Data Source Layer ?

AMERICA’S ARMYTHE STRENGTH OF THE NATION

A

rmy

Cost

Man

agem

ent &

Fin

anci

al T

rans

pare

ncy

M

. Anv

ari

Cost Attribution Models

11

Data Views

AMERICA’S ARMYTHE STRENGTH OF THE NATION

A

rmy

Cost

Man

agem

ent &

Fin

anci

al T

rans

pare

ncy

M

. Anv

ari

12

Army Cost Management Steering Group

Cost and Performance Knowledge

enables Resource Informed

Decision Making

1st meeting on18 November 2014

AMERICA’S ARMYTHE STRENGTH OF THE NATION

A

rmy

Cost

Man

agem

ent &

Fin

anci

al T

rans

pare

ncy

M

. Anv

ari

Army Cost Management Architecture

13

CM E2E ProcessCM Technology Tools

CM Training & Workshops

AFBRT

CM Model

Big Data Analytics

& BIPM

Dashboards

ERP Data

PPBE Enterprise

Cost Models

BIG DATA

COST & PERFORMANCE MANAGEMENT

PPBE

FORCE 2025 PPBE

TAA

APS

AMERICA’S ARMYTHE STRENGTH OF THE NATION

A

rmy

Cost

Man

agem

ent &

Fin

anci

al T

rans

pare

ncy

M

. Anv

ari

Army Cost Management Architecture

Cost Performance knowledge will improve with subsequent iterations

14

Army Enterprise Cost Management Needs & FM Transparency

Data Capture Strategy (Big Data)

Advanced Analytics

Advanced Capabilities

AMERICA’S ARMYTHE STRENGTH OF THE NATION

A

rmy

Cost

Man

agem

ent &

Fin

anci

al T

rans

pare

ncy

M

. Anv

ari

External

• To aid in building budget materials.

• Justify budget decisions to OSD and congressional staff.

Internal (Army Senior Leader questions)

• What is the readiness impact if we assume more risk in funding?

• How much funding can be reduced and still maintain minimum required deployable units?

• Where is the knee in the curve between cost and readiness?

• Major funding reductions put readiness at risk.

• If we don’t know what readiness cost how can we say it’s not enough.

Why Readiness Costing is Needed?

15

Cost of Readiness Example

AMERICA’S ARMYTHE STRENGTH OF THE NATION

A

rmy

Cost

Man

agem

ent &

Fin

anci

al T

rans

pare

ncy

M

. Anv

ari

Read

ines

s/Re

quire

men

ts

Capacity/Cost

As-

Is R

equi

rem

ents

Target Readiness Level

TargetCapacityMinimum Readiness Level

Under Capacity

MarginalCapacity

Over Capacity

ABCD

Fut

ure

Req

uire

men

ts

Cumulative Distribution/Density Function (CDF)16

Readiness & Requirements Capacity & Cost

A Conceptual Model

AMERICA’S ARMYTHE STRENGTH OF THE NATION

A

rmy

Cost

Man

agem

ent &

Fin

anci

al T

rans

pare

ncy

M

. Anv

ari

FY14 FY15 FY16 FY17 FY18 FY19 FY20

A B C D

Notional Example:Cost of Readiness for Personnel

Readiness Component Capacity BaselineCapacity’s Impact on Readiness

Cost

Illustrative Data

Illustrative Data

 Zone Capacity/Cost Readiness

A No Change

B  

C  

D Under Capacity Below Minimum

Readiness Component

A B C D

Personnel P    

Supply-on hand   P    

Readiness-Equipment P      

Training    P  

Readiness/Requirements vs. Capacity/Cost

Requirement

17

Illustrative Data

Cost of Readiness Example

AMERICA’S ARMYTHE STRENGTH OF THE NATION

A

rmy

Cost

Man

agem

ent &

Fin

anci

al T

rans

pare

ncy

M

. Anv

ari

Big Data !

18

AMERICA’S ARMYTHE STRENGTH OF THE NATION

A

rmy

Cost

Man

agem

ent &

Fin

anci

al T

rans

pare

ncy

M

. Anv

ari

Questions?

19

AMERICA’S ARMYTHE STRENGTH OF THE NATION

A

rmy

Cost

Man

agem

ent &

Fin

anci

al T

rans

pare

ncy

M

. Anv

ari

20

AESIP - Army Enterprise Systems Integration Program

AFBRT - Army Financial Benefits Reporting and Tracking

AFMO - Army Financial Management Optimization

AoA - Analysis of Alternatives

BI - Business Intelligence

CBA - Cost benefit Analysis

CM - Cost Management

ERP - Enterprise Resource Planning

ESB - Enterprise Service Bus

ETL - Extraction Transformation and Load

GCSS-A - Global Combat Support System-Army

GFEBS - General Fund Enterprise Business System

GFM-DI - Global Force Management Data Initiative

IPPS-A - Integrated Personnel and Pay System-Army

OLAP - Online Analytical Processing

PPBE - Planning, Programing, Budgeting, and Execution Process

SOA - Service Oriented Architecture

Table of Acronyms