Efficient operations and cost avoidance: careful analysis and coordinated efforts resulted in significant cost reductions without jeopardizing the mission.

During fiscal year (FY) 2006, command and staff elements in the United States Army Europe and Seventh Army (USAREUR) used fewer fiscal resources to perform the revised Balkans peacekeeping missions than were required in prior fiscal years. This reduced fiscal requirement was achieved through a deliberate and detailed analysis of the mission by the deployed commands and the USAREUR staff. Together, they developed a plan that would achieve measurable goals and then executed that plan.

The USAREUR commander issued broad guidance to the USAREUR and task force (TF) staffs to reduce "costs" by $50 million in FY 2005. This change in the middle of the year was expected to have even greater cost avoidance in the following year. The commander framed his guidance to the staff with a requirement that they " ... evaluate requirements against the new mission. Do not adjust from where we are now." This guidance was critical in achieving the goal of reducing the fiscal requirements. He also stressed the need to achieve a coordinated common goal and not to look solely at individual programs. Since the direction was to conserve resources across every element of the command, the cost of doing business became a critical consideration in the decision-making process.

Within a month of the initial guidance, the USAREUR commander's $50-million goal was revised upward to $70 million; the year-end result achieved was $100 million. The key to reducing the requirement was a coordinated effort developed with input from elements throughout the USAREUR area of responsibility. This laid the foundation for success together with command emphasis and a supportive, open, truthful, direct dialogue with known measurable and realistic milestones. It was evident that the goal of reducing outlays by $50 million to $70 million (15 percent of the annual budget) could be met only by working toward this common objective.

The main course of action was finding more cost-efficient ways to accomplish the mission. Common methods to achieve success included combining transportation programs, consolidating communications nodes and links, and performing services on a less frequent basis.

The need to redesign "the way we do business" was essential because of a $405-million reduction in resources allocated to USAREUR between the Program Objective Memorandum file for FY 2005, the total appropriated by the Congress for the Balkans, and the elimination of all funding for Bosnia in FY 2006. The end result was an initial identified shortfall of $53 million.

While NATO's Stabilization Force (SFOR) mission ended in December 2004, an Enduring Mission in Bosnia and Herzegovina (EM-BiH) continued, albeit without funding from the Department of the Army. Although the EM-Bill troop contingent is less than one-tenth the size of the SFOR mission, the cost of the operation is still about one-fourth of the amount expended for the former SFOR mission. This difference is due to resources required for aviation, communications, overocean transportation, and maintenance of the force's infrastructure and equipment. Clearly, troop population is not the main cost driver.

The EM-BiH mission was adequately funded in FY 2005 with one-quarter of the funding for the former SFOR mission. However, the command recognized that FY 2006 would be the critical year, given the continuation of that mission and no funding allocation.

The process to achieve the desired result was led by the USAREUR Deputy for Operations (G3) in close coordination with the Deputy for Resource Management (G8) and all other staff sections. The staff set initial goals for every command and staff element based on a simplified analysis of contracts and program elements. Command and staff elements used these goals as a benchmark of required actions. In most cases, the effort to evaluate requirements against the "new mission" yielded even greater cost-avoidance measures and actions. This approach avoided using either a "salami slice" or firm individual targets because neither would achieve the desired result of producing a redesigned, coordinated, cross-functional, efficient organization.

The USAREUR G3 "battle staff," in close coordination with the deployed TF's staff, served as the springboard for action. These officers, soldiers, and civilians work with the most current and relevant information, and their established working relationships enabled quick assimilation of this new mission. They also regularly coordinated with other key members of their command or staff section, which permitted rapid assemblage of critical information.

The battle staff was given one month to develop a plan and report back to the G3 with current results. Each staff element then was required to brief the USAREUR G3/TF commander on the cost efficiencies it had found, actions taken, and missions that would go unfunded if no additional resources were provided. It was during these briefings that cross-functional, or horizontal, communication began. Each staff element gained a better understanding of the requirements for which its counterparts were responsible, which helped to coalesce a program that satisfied all requirements. These briefings led to discussions across the staff, often resulting in lucrative ideas on ways to consolidate requirements. For example, the Deputy for Personnel (G1) and the Deputy for Logistics (G4) worked to consolidate transport of AAFES (Army and Air Force Exchange Service) intra-theater stocks with the G4's regular resupply transportation network, "the Balkans Express." This action resulted in over $3 million in cost avoidance. At the end of this first review, however, USAREUR still had a significant shortfall of $30 million. Even so, the cycle of assessing current status, setting goals, taking action, and reporting had been established (Figure 1).

[FIGURE 1 OMITTED]

Our biggest single expense was the Balkans Support Contract managed by the USAREUR G4. It became necessary to engage the contractor (Kellogg Brown & Root (KBR)) for more ideas on cost reductions. The G4 informed the contractor of the command's funding constraints and asked for assistance in developing recommendations to reduce the level of effort in various services in order to "live within the budget." To more closely align the goals of the contractor with those of the government, KBR was rewarded with a cash incentive (using the contract award fee process) for identifying ideas that resulted in significant cost savings to the government.

Even with excellent horizontal communication across the staff, USAREUR had not reached its goal of reducing costs by $70 million. Consequently, the USAREUR battle staff next conducted a week-long site visit in the Balkans. While it is common for USAREUR staff experts periodically to inspect their areas of responsibility, this effort was unique in that these functional experts simultaneously conducted this site visit. The synergy of this group effort produced immediate savings of more that $5 million, as well as several good ideas that were taken back for further research. Examples of success on this trip included reducing shuttle bus service; consolidating intermediate aviation maintenance in Kosovo; eliminating stocks stored in Bosnia for potential operations; consolidating longhaul communication links (satellite and terrestrial microwave); reducing help-desk support hours; consolidating morale, welfare, and recreation (MWR) facilities; reducing Stars and Stripes distribution; eliminating the deployed Central Issue Facility; consolidating test measurement and diagnostic equipment calibration with the Kosovo facility; changing the contract guard force composition and numbers; revising linguist support from dedicated individuals to the use of a linguist pool; and changing the Internet service provider used for the MWR Cyber Cafe.

The team's mantra was that there are no "stupid ideas." Rather, it was important to brainstorm and investigate all suggestions. Only by looking hard and long from a new point of view could we expect to operate within the fiscal resource reductions that were being passed to USAREUR. The team also was held accountable for its execution of current operations. The command could not afford to operate in a business-as-usual environment. So, if a reasonable and logical suggestion was made that potentially would conserve resources, the organization executing "the old way" had to adjust or defend why the change could not be made.

We believe that further fiscal reductions are possible, but they will require legislative changes. For example, legislation is needed to allow military manpower to be included in the calculation of Equal Value Exchange transactions through the Acquisition and Cross Servicing Agreement process (Title 10, United States Code, sections 2341-2350). The United States is reimbursed for the logistical support it provides to other nations by allowing the use of allied military manpower to offset logistical support. In a peacekeeping environment, this enhances the commander's ability to accomplish the mission while simultaneously conserving resources. The most notable example is an estimated $10 million to $15 million that could be conserved using allied forces as guards rather than employing a civilian guard force of armed expatriate personnel.

As of April 2006, USAREUR had reduced its shortfall in the current fiscal year from $70 million to $13 million. Each week, the battle staff continues to meet and explore cost-saving ideas.

Good ideas implemented today save resources tomorrow. It is important to note, however, that the later in the fiscal year that cost-savings initiatives are implemented, the more difficult it is to realize savings in that fiscal year. Conserving resources and maximizing their effectiveness is not a process that can be established and implemented overnight. In fact, the lag time between implementation and a realization of savings can be as long as six months.

Throughout this major business transformation effort, our key to success has been the involvement of our senior leadership, who made efficient operations a top priority and set measurable goals for the commander on the ground and all support staffs to achieve.

Reducing Fiscal Requirements to Produce Efficient Operations

* The command must plan to execute within the published resource guidance. Given a "zero-sum gain," any new payer."

* Commanders and action officers must be held accountable for their programs. When less costly options are proposed, the execution officer must take action or defend his alternative.

* Commanders must use command discretion and execute operations, assuming some reasonable risk.

* Aggressive individuals with radical ideas are necessary to stimulate change.

* Information must be open and available for all commanders and team members. All cards must be on the table so that all concerned see the interrelationships of missions and their fiscal impact.

* The G3 and the G8 must work closely with a common outlook and a coordinated

* The major cause for funding cuts is mission reduction. The commander and staff must respond by refining operations to increase efficiency and conserve resources.