A Penny Saved Is a Penny Earned: Operationalizing Army Cost Management During Contingency Operations.

Author:Zilhaver, Cody L.
 
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The Army, with its institutionalized and rigid peacetime budgeting process, is continually challenged with its attempts to exercise strong fiscal stewardship during rapidly evolving contingency operations. Indeed, the Army enjoys a cost savings benefit achieved through a requirements vetting process intrinsic in a seven year Planning, Programming, Budgeting and Execution (PPBE) process with base funding, but struggles to achieve a similar benefit with annual contingency dollars executed on a battlefield that demands flexibility. When the Army hastily funds battlefield requirements, it risks wasting taxpayer's dollars.

However, the Army can use the Force and Organization Cost Estimating System (FORCES) suite of models, a web based cost analysis tool, within the military decision making process (MDMP) to achieve much needed budgetary rigor at the lowest echelons during quick paced combat operations. Consequently, financial managers can provide real time cost estimates of alternate courses of action that inform a commander's decision to expend resources while enhancing proper stewardship of the Army's budget in a resource constrained environment.

The U.S. Army comprehensively scrutinizes its base budget through a systematic seven-year Planning, Programming, Budgeting and Execution (PPBE) process that frames commander's decisions regarding how to organize, train, and equip the Army at the strategic, operational, and tactical levels of war. In addition to managing the current year budget execution and subsequent year Presidential budget submission to Congress, commanders at all levels annually justify their future requirements for an additional five years as designed in 1961 by the PPBE architect, then Secretary of Defense Robert McNamara. However, the Army lacks a similarly rigorous approach to managing its contingency wartime budget, totaling $28B in FY 2017, due largely to a shortened 18-month timeline between requirements identification and receipt of funding. The less scrutinized contingency dollars intrinsically discourage prudent planning to develop cost-effective solutions that meet constantly changing battlefield requirements. As a result, war-fighting commands often rely on a pay-as-you-go approach, or funding requirements as they emerge, without a holistic consideration of all future requirements; commanders simply ask for more money when their coffers are empty. The Army must properly steward taxpayer resources by replicating the rigor inherent in the seven-year base budget PPBE process to its management of short-term contingency budgeting that demands flexibility. Consequently, the Army must integrate cost analysis into the military decision making process (MDMP) which will add analytical budgetary rigor to staff planning; tie costs to alternative operational and tactical solutions; and provide fiscal visibility to war-fighting commanders to make cost-informed decisions during fluid battlefield conditions.

The Army's Fiscal Environment

The high cost of training, organizing, and equipping the Army in a fiscally constrained environment has caused Army leaders to re-think how to fundamentally approach fiscal responsibility. In April 2016, then Acting Secretary of the Army Patrick Murphy issued a directive intended to change the Army's fiscal culture. (1) Murphy cited the need for the Army to move away from a "use it or lose it" approach to how units historically tend to spend their funds appropriated by Congress. With a keen eye toward readiness, a very desirable and perishable trait, the Acting Secretary charged the Army to instill a more efficient use of its finite fiscal resources. Consequently, Army units, which in the past measured fiscal success by obligating 100% of their annual budget by September 30th, must now recalibrate their measures of effectiveness toward achieving the highest possible level of readiness. In essence, commanders will no longer merely report how much money they spent, but are required to measure the cost of their requirements against the potential benefit those requirements deliver toward increasing unit readiness. While the Office of the Assistant Secretary of the Army (Cost and Economics) has been applying cost benefit analysis for years in evaluating major Army initiatives and programs, the directive requires leaders at all levels to develop measures that tie resources to outcomes driving organizational readiness. In essence, commanders will no longer merely report how much money they spent, but are required to measure the cost of their requirements against the potential benefit those requirements deliver toward increasing unit readiness. While the Office of the Assistant Secretary of the Army (Cost and Economics) has been applying cost benefit analysis for years in evaluating major Army initiatives and programs, the directive requires leaders at all levels to develop measures that tie resources to outcomes driving organizational readiness.

The Army's eye toward greater efficiency that comes from harmonizing budgets with readiness is especially critical on the heels of an unsustainable influx of funding over several years in response to wars in Afghanistan and Iraq. The Army base budget swelled from $78B in FY 2001 to $140B in FY 2011. In addition to substantial growth in the Army's base budget, Congress simultaneously authorized supplemental wartime overseas contingency operations funding, starting with $26B in FY...

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