1. Taxing Times: The Federal Efficiency Opportunity [Release Date] Sponsored by:

2. 2 Introduction On November 10, 2010, President Obama’s Deficit Commission suggested a regimented plan to curb discretionary spending by 16 percent by 2015 – generating vociferous reaction on both sides of the aisle. How do we cut spending while maintaining service levels to the American public at this critical time? In March 2011, SAS worked with MeriTalk to survey 150 Federal financial, operations, and performance managers to understand how and where agencies are identifying and mining new efficiency opportunities, commitment to and support for such initiatives, obstacles to further optimization, and potential efficiency savings.

3. Executive Summary4 Key Findings5 Recommendations14 Methodology and Demographics15 3 Table of Contents

4. 4 Executive Summary Upside/Downside: Feds know they need to save and see opportunity, but lack incentive and structure Just 44% of Federal managers believe they have the funding needed to accomplish their goals in FY2012 But, estimate that a better understanding of their spending could save their agencies $481B in FY2012* – an estimated 13% of their total budgets Unfortunately, fewer than one-third have a formal plan to identify spending inefficiencies Hidden Money: Feds may be missing possible savings Many review operational costs for efficiency opportunities, but few review program overlap or enterprise IT architecture Less than half share best practices between departments; Just 54% say they identify redundant activities/opportunities for consolidation Many managers (62%) rely on manually compiled reports and spreadsheets to uncover inefficiencies Where From Here?: Feds offer suggestions to save Feds say listening to employees, implementing targeted cuts, improving reporting, and creating real incentives will deliver savings * Based on FY2012 proposed spending of $3.7 trillion, http://www.nytimes.com/packages/html/newsgraphics/2011/0119-budget/index.html

5. 5 Take Away: Innovation Priority Filling the Gap Agencies need to spend smarter to preserve services Will your agency have the funding needed to accomplish goals in 2012? Fewer than half (44%) say yes.

6. What percentage of your total agency budget, if any, could your agency save with a better understanding of your spending? Feds estimate they can save 13% of their total agency budget, which translates to $481B in government-wide savings. 6 Take Away: Insight Key to Innovation The FUND-amental Opportunity And, Feds see significant opportunity to save if they can gain a better understanding of spending * Based on FY2012 proposed spending of $3.7 trillion, http://www.nytimes.com/packages/html/newsgraphics/2011/0119-budget/index.html

7. 7 Take Away: It Takes More Than Inspiration Structure Matters Have you specifically, or as part of a team, been asked to identify ways to save budget dollars within your department or agency? Three out of four Say Yes. Just one in three agencies has a formal plan to identify spending inefficiencies But While Feds are focused on efficiency, many do not have formal programs to identify and incentivize savings

8. 8 Take Away: Try New Angles Look Harder Agencies are applying sound cost savings methodologies, inconsistently How does your agency find opportunities to increase efficiency/save money?* Review spending for unnecessary expenses (63%) Prioritize current expenses and review the low-priority items (59%) Identify redundant activities/opportunities for consolidation (54%) Conduct data analysis to monitor spending trends (49%) Share best practices between departments (45%) * Respondents asked to select all that apply

9. Many review operational costs, but few review program overlap or enterprise IT architecture. Feds should expand their search to uncover all possible savings. 9 Take Away: Expand Your Search Look Elsewhere In which of the following areas are you currently conducting data analysis to identify opportunities for increased efficiencies, productivity, or savings?* #1 Operational costs – 47% #2 Management metrics – 38% #3 Contract management – 36% #4 Acquisition/sourcing – 27% and Program overlap/duplication – 27% #5 Asset management – 19% #6 Enterprise IT architecture – 18% * Respondents asked to select all that apply Agencies are applying sound cost savings methodologies, inconsistently

10. 10 Take Away: Look Before You Leap DoD vs. Civilian Saving DoD More Scrutiny – Civilian More Sanguine * Respondents asked to select all that apply In which of the following areas are you currently conducting data analysis to identify opportunities for increased efficiencies, productivity, or savings?* Civilian Agency DoD Contract Management24% 48% Acquisition/Sourcing14% 40% Management Metrics30% 40% Which of the following areas does your agency track? “ Civilian Agency DoD Spending by Project55% 76% Prioritization of Spending By Senior Executives 19% 36% Do you believe your agency can reduce spending and still maintain the same levels of service? Yes. DoD: 52% Civilian: 66%

11. 11 What’s Holding Us Back? In which of the following areas do you face the greatest challenge identifying savings or opportunities for greater efficiency?* Take Away: Reward Success * Respondents asked to select top three challenges ** Respondents asked to select top three obstacles Which of the following are the most significant obstacles to improving efficiency and reducing costs for your agency?** #1 #3 #2 Savings applications: Knowing that we have to spend our full budget to get it again next year (40%) Program management: Insufficient controls and insight into program performance (31%) Management: Management is not making it a priority (27%) Feds struggle to identify operations savings and overcome the “use it or lose it” mentality Operational costs Legislative/ regulatory requirements Governance processes

12. Many Federal managers rely on manually compiled reports and spreadsheets to uncover inefficiencies 12 Take Away: Compounding Inefficiencies Manual Labor Top method used to analyze data*: * Respondents asked to select all that apply #1 Response: Manually compiled reports and spreadsheets

13. 13 What Helps? What one type of information would most help your agency identify opportunities to improve spending efficiency? Take Away: Own the Inefficiency What else could your agency do to show they are completely committed to finding spending inefficiencies? Allow more local control rather than sweeping agency-wide directives Make more formal reports indicating their findings of where spending could be cut More closely examine duplication efforts across the government No clear consensus Spending by Project 23% Prioritization of spending by Senior Executives 21% Anticipated/Achieved ROI by investment15% Agency Spending by Vendor4% #1 #2 #3 #4 Which of the following does your agency track? Spending by Project 66% Agency Spending by Vendor36% Prioritization of spending by Senior Executives 27% Anticipated/Achieved ROI by investment23% #1 #2 #3 #4 New Top Statement – we were struggling with this one. Thoughts?

14. 14 When opportunities are identified, how often are they implemented? Agencies are implementing some efficiency suggestions Take Away: Why Not More? Moving the Needle 43% of Feds say agencies always or often take advantage of savings ideas. Always Often Sometimes RarelyNever

15. 15 Feds say entrenched bureaucracy and lack of incentives hamper efforts to implement savings suggestions Take Away: Greater Potential What are the key barriers to implementing suggestions for increasing efficiency/saving money? ? “Sometimes you need to invest upfront to save money down the road, and that can be difficult to sell…” “No incentive at the lower levels” The bureaucracy of the system frequently prohibits new methods. Too many levels of approval and different views on efficiency create strained decisions. Politicians protecting jobs in their districts. Employees trying to protect their own jobs. Management's failure to properly manage change. Obstacles

16. 16 Recommendations Feds offer input*: Listen: “Act upon ideas given by lower and mid-tier employees” Rethink: “Eliminate across-the-board cuts and implement targeted cuts in programs. Eliminate legal and Congressional mandates that create more expense in the name of trying to dictate efficiencies from such high levels of government that they typically yield poor results in practical application.” Improve Reporting: “More closely examine duplication of efforts across the government” Put Incentives in Place: “Would have to be a part of senior management's performance plans” *Question: What would your agency need to do differently to show they are completely committed to finding spending inefficiencies?

17. 17 Methodology and Demographics MeriTalk, on behalf of SAS, conducted an online survey of 150 Federal financial, operations, and performance managers in March 2011. The report has a margin of error of +/- 7.97% at a 95% confidence level Respondent Agencies 50% Civilian agency 50% DoD or Intel agency Respondent Roles 34% Finance 33% Operations 33% Program/Project performance management Respondent GS Levels

18. Thank You Mary Tobin – MeriTalk mtobin@meritalk.com (503) 658-7396 [SAS Contact] – SAS