1. DFAS. . . Road to Transformation
Tom Bloom
Director
Defense Finance and Accounting Service
September 2003

2. The DFAS Mission and Vision
Mission: Provide responsive, professional finance and accounting services for the people who defend America.
Vision: Best value to our customers
World-class provider of finance and accounting services
Trusted, innovative financial partner
One organization, one identity
Employer of choice, providing a progressive and professional work environment
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3. DFAS Magnitude of Operations
5.7M military, civilians, retirees, annuitants paid
7.3M travel payments
11.2M invoices paid
$346.6B in disbursements
124M accounting transactions
$1.45T total liabilities
$12.5B in foreign military sales
$176B Retirement Trust Fund manager
267 active DoD appropriations
World’s Largest Finance and Accounting Operation
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4. Your Financial Partner @ Work
DFAS at a Glance
Total Workforce
OAS Overall Ratings Results
FY 03 Operating Costs excludes 1 time DPPS charge
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5. 24% Decline in Total Workforce since July 1999
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6. Customer Service Matrix
Corporate Overview
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7. Your Financial Partner @ Work
Why Transformation?
In today’s arena, continual adaptation to changing customer requirements, market influences, and technology improvements is a matter of survival
External Drivers
President’s Management Agenda
Quadrennial Defense Review (QDR)
Defense Planning Guidance (DPG)
2005 Base Realignment and Closure (BRAC)
Internal Influences
Achieve tenets of DFAS-vision to increase mission effectiveness
Strive for operational excellence
External Drivers
President’s Management Agenda challenges government to improve financial management, budget, and performance integration, and promote competition in commercial activities
Quadrennial Defense Review (QDR) concludes DoD must transform in order to meet future challenges
Defense Planning Guidance (DPG) required Transformation Roadmaps
2005 Base Realignment and Closure (BRAC)
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8. What is Transformation?
Transformation is the Roadmap to move DFAS forward
Transformation is Integration of all DFAS initiatives to accomplish our mission and achieve our strategy
Transformation is Action to implement the best course of change to improve our operations
Transformation is a Journey...
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9. Transformation Objective
Transformation supports the DFAS Vision to be the Best-Value for our customers and a World-Class organization
Best-Value
Competitive in the marketplace
World-Class
“Brand name” is accepted as industry leader
Organization becomes a benchmark for others
DFAS success stories:
DFAS Garnishments - best-value due to cost, efficiency, timeliness, and systematic approach
DFAS Civilian Pay - 1 of 4 to provide pay services for entire civilian government workforce
DFAS Transformation is designed to support the DFAS vision of providing best value to our customer. The objective of Transformation is to find additional methods of providing best value by being more effective, more efficient, and more productive.
There are a number of external factors that support our Transformation objectives.
The Executive Office has identified their 5 government-wide priorities in the President’s Management Agenda as
1. Strategic Management of Human Capital
2. Competitive Sourcing
3. Improved Financial Performance
4. Expanded Electronic Government
5. Budget and Performance Integration
Our Department’s leadership has noted in the Quadrennial Defense Review (QDR) that among the areas needing transformation: “DoD’s financial systems are decades old and not well interconnected, and accounting and auditing processes would struggle to meet the standards of generally accepted accounting principles.”
As a follow-up to the QDR, the FY Defense Planning Guidance (DPG) continues developing the theme of transformation. In particular, the DPG tasked the Defense Agencies to prepare Transformation Roadmaps by June 2002 for review by the Secretary of Defense.
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10. Competitive Sourcing (A-76)
DFAS Transformation from the Beginning
1991
1995
2000
2003
2001
2002
Site Consolidation
Competitive Sourcing (A-76)
DFAS Implementation
DFAS Business
Evolution
DFAS has embodied Transformation from day 1!
DFAS Chartered in 1991
Site Consolidation ( )
Combined operational sites to consolidate infrastructure
Competitive Sourcing (A-76) ( )
Competition with Private-Sector increased efficiency of functions
6 Studies Completed / 2 Cancelled / 1 In Process
Facilities, Logistics & Admin (1997) - MEO
DeCA Vendor Pay (1997) - MEO
DeCA Accounting (1999) - MEO
Transportation Accounting (1999) - MEO
Depot Maintenance Accounting (2000) - MEO
Retired & Annuitant Pay Services (2001) - Contractor
Civilian Pay Services, Debt & Claims Services - Cancelled
Security Assistance Accounting - In Progress
DFAS Business Evolution (DBE) ( )
Changed organization to a service based structure
Balance Score Card (BSC) ( )
Focused improvement efforts through process measurement and comparison
Transformation (2002-future)
Focus DFAS Product Line improvement on “best-value” to our customers
Balanced Scorecard
Transformation
Integration
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11. Your Financial Partner @ Work
DFAS Strategic Direction
World-class provider of finance and accounting services
Trusted, innovative financial partner
One organization, One identity
Employer of choice, providing a progressive & professional work environment
Vision
DBE
Strategy & BSC
Transformation
From: Regional Focus
To: BL & PL Focus
From: Budget-Driven Organization
To: Leadership-Directed Strategy $
Strategy
BSC
Budget
Define
Enable
Future State
Customer Focused
Value Driven
Efficient
Transact
Process
Build
Own
Analyze
Advise
Current State
Build & Operate System
Process Transactions
Respond to Customers
From: Processors
To: Value Creators
DFAS has been on a path of strategic change since our formation in We have been on a path to rightsize our organization and best position ourselves in the marketplace.
We have implemented the DBE which was an initiative to drive customer focus and responsiveness.
In 2000, we gathered to develop a strategic plan that would drive this agency to our vision of being a world class finance and accounting services provider. In 2001, we began to implement the BSC methodology and utilize this as a means of measuring the agency’s progress in achieving our strategic goals. Current initiatives around our strategy and BSC will be discussed later.
Now, we are embarking on the next step – transformation. We will discuss this in more detail.
Customer Focused
Strategy Based
Metrics Driven
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12. Customer Perceived Value
Competition Generates Value
Competition
Customer Choice
Customer Perceived Value
Competition has given customers the ability to choose
Their choice is based on their perception of value
DFAS has to evolve our value proposition in order to change their perception of DFAS value
Generate Value
DFAS has chosen to TRANSFORM the Agency in order to increase value to the customer
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13. Transformation Process
Transformation process begins with analysis of a function and leads to implementation of the best improvement
Must fully understand the business function before determining best course of action to effect improvement
Functional analysis tool is the Business Case Analysis (BCA)
Analysis by Business/Product Lines (Segment Approach)
BCA presents alternatives and supporting information to DFAS leadership for a decision
BCA presents a recommended course of action from available Transformation Strategy options
Given our theme of identifying improved methods of delivering value to our customers, we have designed a tool to help us achieve this objective.
The tool is the Business Case Analysis methodology which will provide us with critical information on where DFAS value currently resides. Recommendations from this analysis will include where additional value may be generated and will form the basis for management decisions.
The BCAs will also help identify potential process improvements.
As you have heard throughout this briefing, let me reiterate that our evaluation criteria and recommendations will all be based on best value for our customers.
The Business Line Executive (BLE) is primarily responsible for conducting these BCA studies
Each DFAS Product Line will be analyzed to determine the best transformation approach. The BCA is not designed to restrict the potential solution sets, but rather should examine all possible options.
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14. BCA Process Government Private Identify Function for Transformation
Conduct BCA
Six Step BCA Process
1. Identify Team
2. Define Scope
3. Define Current Organization
4. Conduct Market Research
5. Analyze Options
6. Provide Recommendation
Transformation Option
Decision
Transformation Actions
Let me now speak in a little more detail on the BCA process:
The DFAS Transformation Strategy is effectively a three-part process:
Part One identifies a function as a candidate for transformation.
Part Two is the Business Case Analysis (BCA) of the identified function and provides a recommended transformation option. The completed BCA is presented to the DFAS Leadership Council (DLC).
Part Three implements the DLC decision whether it is one of the options identified in the transformation plan or some other yet to be defined direction identified in the BCA.
6-Step BCA Process
Step 1 - BLE establishes BCA Team
Step 2 - Define the Scope/Business Unit. Identify functions that can be grouped together
Step 3 - Define the Current Organization. a) Develop a work center description b) Define activities performed by FTEs under study c) Look at current processes and locations d) Asses “AS-IS” performance in terms of workload volume and required FTEs
Step 4 - Market Research. a) Identify industry best practices b) Summarize level of Industry Interest
Step 5 - Define Alternatives. a) Prepare alternatives cost estimate and compare to baseline “AS-IS” b) Assess alternatives benefits c) Conduct risk assessment d) Conduct decision analysis and determine the selection criteria based on costs, benefits & risks
Step 6 - Provide Recommendation. Team selects the recommended alternative and provides recommendation to Leadership Council
As a result of the BCA process we end up with (outcomes):
A clear description of each BCA option including any proposed organizational changes
An examination of the benefits, weaknesses, and risks associated with the proposed option
A recommendation which is the course of action that has the greatest benefit and lowest risk
The transformation options are:
Competitive Sourcing most closely approximates what we would call A-76 and is similar to what has taken place with Retired & Annuitant Pay.
High-Performing Organization (HPO) represents retaining the product line within the purview of the government with a level of staffing that closely approximates what we know today as a Most Efficient Organization.
The Public-Private Venture is probably the newest organizational form and the least understood. It represents a true partnership between the government and a private company to join together to produce a given output or DFAS Product Line. There will be a government control and presence (CGA) that is smaller than HPO but larger than the Competitive Sourcing form.
High Performing Organization (HPO)
Competitive Sourcing (A-76/FAR Part 15)
Government
Private
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15. DFAS Transformation Schedule
21 BCAs from FY
9 BCAs scheduled for completion to support DFAS BRAC planning
FY2003 BCA Schedule:
Marine Corps Accounting (Completed)
Vendor Pay (Completed)
Technical Services Organization (TSO) (Completed)
Acquisition Services Division (Completed)
Disbursing (In Progress)
BCA status current as of June 30, 2003
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16. Business Case Analysis - FY 2004 Schedule
Here is the FY04 schedule.
Accounting in preparation for BRAC.
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17. Transforming DFAS through Lean Thinking
Lean Thinking -- tool for stopping waste and creating value
5 principles of Lean Thinking
Customers determine value
Identify the value stream
Make the process flow
Let customer demand pull the process along
Drive for perfection
Progress comes in bursts (kaikaku) and incremental improvement (kaizen)
Simple Principles for Banishing Waste and Creating Value
Lean Thinking teaches that we are warriors against waste. To fight waste, everyone at DFAS should understand the basic principles of Lean Thinking.
The Customer Determines Value
Customers determine the value for all we do. Their needs determine our requirements and their satisfaction determines our success. Lean Thinking reminds us to hear the voice of the customer in everything we do.
Know the Value Stream
The value stream includes all of the activities required for us to deliver a product or service to our final customer.
Flow Promotes Value
The principle of flow comes from the idea that for a process to generate the most value it must never stop while quickly moving to completion.
Let the Customer Pull the Product
Many of us know about "just-in-time" delivery which is the basis of the Lean Thinking principle of pull. This principle suggests that real customer demand should drive our work and the delivery of products and services rather than pushing products onto customers who may not need or want them.
The Drive for Perfection Never Stops
When does the transformation journey and the continual change stop? It doesn't. Driving for perfection is a life's work because there's always room to improve and our job is to seek out and seize those opportunities.
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18. Your Financial Partner @ Work
Lessons Learned
Detailed functional flowcharts of “As-Is” processes are mandatory for complete understanding of current processes & functions
A clear, well-defined scope statement of the function is critical to the successful completion of the BCA and a recommendation that is achievable
Transformation actions must be integrated and reviewed continuously by the leadership to ensure the agency is moving forward together
LEAN THINKING must be a foundation of any transformation option
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19. Transformation Integration
Leadership Council determines the best course of action to achieve:
Greater effectiveness
Increased efficiency
Continued productivity gains
Transformation consolidates all internal DFAS improvement efforts utilizing:
Corporate restructuring
Workload consolidation
Business process improvement
Transformation integrates external impacts to include:
Competitive Sourcing
Base Realignment and Closure (BRAC)
Business Management Modernization Project (BMMP)
Integration – We realize that there are many ‘transformation’ initiatives currently underway or in planning in various organizations. In order to make sure we are all pulling in the same direction, we will be collecting this information and building a DFAS-wide integrated transformation plan.
The Leadership Council determines the best course of action from the BCA recommendation, while always focusing on the goal of Best Value for our customers
Transformation does not eliminate other DFAS improvement efforts, it brings all the efforts under a coordinated effort and plan
DFAS must include the external inputs (Competitive Sourcing, BRAC, FMEA, etc.) in Transformation planning
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20. Your Financial Partner @ Work
Success Stories
We have already reaped benefits from BCAs
Identified duplicative processes – Marine Corps Accounting
Multiple entry of the same data in the Journal Voucher process
Identified non-standard processes – Vendor Pay & TSO
Different practices for paying invoices & processing payments even within the same network
Non-standardized practice & delivery of voice communications function results in increased cost for DFAS
Identified antiquated processes – Acquisition Services
5 copies made, stapled, and sent
4 copies thrown away, 1 used
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21. Your Financial Partner @ Work
What Does It All Mean?
Transformation involves “Moving Forward Together”
Transformation will allow us to become more competitive and provide the best value to our customers
Active participation enables best ideas to emerge
Customer and employee involvement is critical to define changes necessary to support transformation actions
Communication - Communication - Communication
“Straight Talk” video presentations by Director, DFAS
“By All Accounts” newsletter articles
Employee and customer presentations
ePortal postings
Feedback via
Communication is not a one time event
W are employing many options to keep the workforce fully informed
Currently, we have published transformation information on the ePortal under Competitive Sourcing. With the launch of the newly designed ePortal, we will be moving to a new page – “Transformation Central”. In addition, in the June timeframe, we plan to launch a two-way dialogue component of this page called ‘Ask the Expert’
While we have already used our current communication vehicles (i.e., videos, newsletters, and briefings) to update you , we are also planning to publish regular articles in these vehicles as follows:
By All Accounts – monthly
As I See It – quarterly
Straight Talk – semi-annually
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22. Transformation is a Journey
Conclusion
Bottom Line -
Transformation is a Journey
Long-term path to continually evaluate and improve functions
Integration roadmap for past, current and future change efforts
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23. Your Financial Partner @ Work
DFAS
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