Cost Awareness of Financial Operations in Theater Army Day 2010 June 2, 2010 Steve Bagby - MG Phil McGhee – COL Sawyers

Agenda Operationalizing Cost Management Cost Education and Training Cost Management - Policy / Guidance / GFEBS Support Resource Informed Requirement Processes USARCENT Financial Management Operations Financial Management School GFBES Sustainment Training Products Cost Management and Cost Accounting Courses

Cost Culture - Cost Management Single Use Estimated Future Cost Cost Informed Decision Making Cost-Benefit Analysis Persistent Use Expected & Actual Cost Continuous Improvement Cost Managed Enterprise Universal Use Planned & Actual Cost Role Based, Org Based, Output Based Control Cost Culture Cost War Cost War High Cost War Full Spectrum Insurgency Intensity Conflict Operations Starting here TARGET (some work is being done)

Cost Management Full Cost Measurement Accurate, timely and relevant data Connecting operational output/performance data to financial data Allocate Overhead, Unfunded Costs, Indirect Support Cost Planning Operational managers set cost targets and efficiency goals Plan cost based on outputs produced Cost Planning Controlling Analysis Accounting Management Process Cost Analysis Variances Trends and forecasting Product, service or activity cost by expense (labor, material, contracts, etc…) Understanding full costs of organizations, operations, products and services Comparison Analysis & Benchmarking Resource Informed Decisions Take action based on analysis and external demands Change targets Change resources Change quantity / quality

Cost Management Enablers Policy & Guidance Training (Operational & Resource Mgrs) Cost Management 101 - Cost Management Overview Cost Object (ERP) Definitions Cost Flow Methods Cost Analysis and Reporting GFEBS – Cost Management Training These courses are either computer-based or instructor-led training classes to learn how to operate within the GFEBS cost module. Cost Management Certificate Course The program of instruction (POI) is designed to teach the fundamentals of cost management with a view to developing a cadre of Army personnel who are professionally knowledgeable, analytically competent, and personally motivated to serve as proactive change agents within their respective Enterprise line and staff organizations. Self Study-Cost Management Community of Practice https://www.us.army.mil/suite/page/593701 Cost Management Courses in all Professional Development Programs Tools

Cost Informed Decisions Cost Benefit Analysis The Value of Cost Benefit Analysis: Supplements professional experience and judgment with sound analytical techniques Ability to make better resourced-informed decisions Results in a strong “value proposition” Costs Benefits Thinking Domains Decision Forums/ Approval Generate Capability Gaps / Require-ments Top Down Initiatives Various Formal Force Design Update FD QDR/TAA/Portfolio – Business Area Reviews SA/CSA Army Campaign Plan Process VCSA Concept Plan (TDA Updates) JCIDS /AROC AROC /JROC Basis of Issue Plan ORDAB AoA Studies SAG/Other Acquisition Process Milestones Installation/MILCON/Sustain MILCON IPT Unit/Institutional Training Train’g Plan AMC/G4 Depot /Sustainment/Ammo AMC ONS/JUONS/Rapid Transition AR2B/AROC Doctrine Organization Training Materiel Leadership Personnel Facilities POM / BES Manning Equipping BCA is not a budget, business plan, acquisition strategy, balance sheet. Training Sustaining Organizing Installation

USARCENT Financial Management Operations Specified Tasks Manage Title 10 funds Resource OEF/OIF Theater Army Financial Management Report Imperatives Visibility Accountability Transparency Oversight Controls DoD Resources Materiel Enterprise Strategic Partners FM/Contract Systems Lean Six Sigma Team Cost Analyst Team Banking Team Mgmt/System Accts Exceptional Stewardship Performance metrics Resource informed Cost savings Cost avoidance Process efficiencies Near cashless Theater Link end-to-end processes Effect major cost drivers Model and analysis Lean out inefficiencies Maximize e-commerce Theater FM Initiatives FM/Contracting systems Cost culture Cost of war FM doctrine FY10 Monthly Disbursements $396M $714M Cost Avoidance $434M Cost Savings $1,148M 91% EFT Payments 9% Cash Payments 1 % Goal Credibility Confidence Trust v2 as of 18 APR10

GFEBS Sustainment Training Products The US Army Financial Management School will implement GFEBS financial management training products no later than 1 OCT 2011 in order to sustain FM Community knowledge and skills Instructor Led Training Distributed Learning (dL) Cost Management (80 hrs) GFEBS Essentials (20 hrs) Reimbursables (20 hrs) Financials (80 hrs) Funds Management (24 hrs) Non FM Roles Spending Chain (50.5 hrs) Training Support Packages GFEBS PM Training (53 Courses) Project Systems (8 hrs) dL Products Technical Training Our Soldier Support Mission with respect to GFEBS is to develop and implement sustainment training products after fielding is complete….currently scheduled for 2nd Quarter FY12. We are shooting for 1st Quarter FY12 to have products available. Our strategy is simple. We plan to take the Program Managers training products that he’s currently using for fielding – and transform them into our sustainment training products. Using our resources and expertise here, we plan to add more Army terminology and scenarios to ultimately develop a superior product for long term sustainment training. The courses listed above in the light blue field are GFEBS technical training courses….to show students how to operate within the GFEBS system. - We plan to offer 5 distributed learning courses you see listed here on the right. Students will be able to take these courses sitting at a computer using the Army Learning Management System. The GFEBS Essentials course is simply a foundational course that provides the big picture view of GFEBS, what an ERP is, and the benefits of integrating multiple processes and systems into this single system. The other 4 dL courses focus in on those particular business areas. - Additionally, we plan to offer two – 2 week functional courses here at the FMS – Cost Management and Financials. While these courses will delve into the Financials and Cost Management business processes, they will also cover a broad range of GFEBS topics that will be of interest to several of the various GFEBS User Roles. - For the roles other than Financial Management – We are coordinating with IMCOM and the Logisticians to develop training for their specific needs. Generally speaking – this training is for the property, plant, and equipment personnel on the installations. The courses below in the gray field are the Education training courses. - Legacy: Updating our existing legacy courseware is a top priority. We have 82 hours of new GFEBS training that will be integrated into our Professional Military Education courses such as AIT, NCO, and Officer courses; and our functional courses. - The other two courses are new initiatives to address the need for a Cost Culture within the Army. - the Principles of Cost Accounting and Managemnt – and Intermediate Cost Accounting and Management. With the fielding of GFEBS, the capabilities will eventually be available to leverage cost data unlike ever before. This will allow resource managers across the Army to get better cost data so our leaders can make good sound resource informed decisions. These courses will provide the knowledge and skills to use these cost tools effectively. Education Principles Cost Act/Mgmt (120 hrs) Intermediate Cost Act/Mgmt (120 hrs) GFEBS Material w/in Legacy Courseware (AIT, NCOES, OES, Functional Courses) 14

Cost Management (CM) within Professional Military Education Course: FM BOLC FMCCC Purpose: Provide CM foundation. Introduce cost concepts and terms. Describe the Army’s cost culture. Relate CM to GFEBS capabilities. Introduce advanced Cost Accounting and CM concepts. Cost Benefit Analysis (CBA) case study. Develop communications skills to influence leaders decisions. Audience: 2nd Lieutenants Captains Length: 8 Hours 16 Hours Content: Cost Management (CM) Cost Culture within the Army Cost Terms and Concepts Cost Benefit Analysis (CBA) Practical Exercise Cost Management (CM) Cost Accounting (CA) Cost Decision Briefings Intensive Group CBA Exercise In addition to the PCAM and ICAM functional courses – We are adding cost management material to the Professional Military Education courses ….specifically The BOLC course which is the initial Financial Management Course for new Finance officers…typically 2nd Lieutenants. …and the FM Captains Career Course for officers who have completed about 3-5 years of service. The BOLC students will get a total of 8 hours. 4 hours of lecture and classroom discussion…and another 4 hours of Cost Management practical exercises. The Captains will get a total of 12 hours. They’ll receive cost management material that is slightly more advanced…with a focus on performing cost benefit analysis. Additionally, they will get an intense Cost Benefit analysis group exercise where they will brief their analysis to a senior leader and justify their recommended course of action. The FMCCC students are doing this now – In fact, they will brief the CMDT next week.

Cost Management (CM) Functional Courses Principles of Cost Accounting & Management (PCAM) Intermediate Cost Accounting & Management (ICAM) Purpose: Offer a basic cost management and cost accounting functional course Provide underlying cost accounting (CA) and CM principles, theories, and application. Prepare military and DA civilians to leverage CM tools within GFEBS Build on the PCAM course and provide more advanced CA and CM concepts. Provide an increased focus on analysis, reporting, and communication skills. Provide the knowledge necessary to fully leverage the CM and analytic tools within GFEBS. Target Audience: SGT, LT, CPT, entry level CP 11 Personnel SSG, SFC, CPT, mid level CP 11 Personnel Course Length: 3 Weeks Prerequisites: Math dL Prep Course Math dL Prep Course, PCAM Course Content: Cost Management Principles Cost Term/Concepts Cost Accounting Cost Benefit Analysis Variance Analysis Practical Exercises Cost Management Cost Management Paper Cost Management Briefings Intensive Case Studies/Exercises Here is a look at PCAM and ICAM. These courses are not intended to show students how to use GFEBS; rather, they are to provide students with the necessary knowledge and fundamental skills so they have a good foundation of cost management. This way, they’ll understand the importance of cost – and will be able to leverage the tools within GFEBS when required. PCAM is an introductory course while ICAM will build on PCAM, but offer more in depth material. The target Audience for PCAM is SGTS, company grade officers, and entry level CP 11 personnel. ICAM is for more senior NCOs, senior Captains, and mid-level CP 11 personnel. Both courses are 3 weeks in length Prerequisites: Both courses will require a dL Math refresher course to better prepare students for the Math requirements of Cost Management. ICAM will require completion of PCAM. Listed at the bottom, you can see the course content for each. - PCAM will be about 2 weeks of in class lecture and discussion with about a week of practical application exercises. - ICAM is intended to be more intensive with about 1 week of lecture and class discussion with 2 weeks of application. Specifically, more case studies, CBAs, Briefings, and possibly a written paper requirement.

Cost Management and Cost Accounting “Achieving Readiness at Best Value” Soldier Support Institute Naval Postgraduate School Principles of Cost Accounting and Management PCAM Cost Terms Cost Concepts Fundamentals of Cost Acct. and Cost Mgmt Practical Exercises Intermediate Cost Accounting and Management ICAM Cost Flow Methods Analysis and Reporting Practical Exercises Complex Case Studies CMCC Managerial Costing Operations Management Cost Control Organizational Development Cost Management Certificate Course Here is a big picture view of how Cost Management will be provided to the FM community through functional courses: In addition to PCAM and ICAM being offered here at the Soldier Support Institute – The Cost Management Certificate Course is currently offered at the Naval Post-Graduate School. This is a graduate level course intended for the more senior level personnel. I graduated from this course in March. CMCC is a 4 week course focused on implementing better cost management throughout the Army. The whole idea centers around better overall management, and continuous process improvement regardless of what your activity is. Any savings generated from better, more efficient processes…is to be executed on existing unfinanced requirements. Bottom line – lets get the most bang for our buck. End State: FM personnel are not just aware of cost management; but they possess the necessary knowledge and skills to put it into practice. CMCC: Managerial Costing—instruction in cost concepts and analysis techniques with a strong focus on analytics. Operations Management—the fundamentals of design, management, and control of operational processes used in cost management. Cost Control—control theory, practical ex-amples of cost control issues and solutions, and Army case studies. Organization Development— systems thinking, interpersonal communication, listening, motivation, leadership, message framing, decision-making, persuasion, power and social influence, and negotiation. LT CPT MAJ LTC / COL SGT SSG SFC MSG / SGM End State: FM Community possesses the knowledge and skills necessary to leverage cost management and cost accounting 17