Taking business transformation to the next level: building a capability to enable rapid, well-informed financial decisions regarding America's warfighting advantage.

At Professional Development Institute PDI) 2005, my colleague Tom Modly spoke about the challenges of business and financial management transformation and how the Department of Defense (DoD) planned to overcome these challenges through focused priorities that will deliver tangible business improvements. As co-director with Tom of the newly formed Business Transformation Agency, I'd like to reiterate that the ultimate objective is to improve warfighter effectiveness while enabling better financial accountability across the Department. We can do this without one common system, but not without common standards, tools, and processes for sharing and integrating information across the DoD enterprise. The warfighting community calls this interoperability. And for today's global force, it's a critical weapon in sustaining America's competitive fighting edge.

For the business and financial management community, interoperability means that our work is more intimately tied to the execution of the DoD mission than ever before. Our infrastructure must be seamless and responsive to truly enable joint and agile military operations: delivering capabilities, resources, information, and materiel to our warfighters when they need it, where they need it, and in the condition in which they need it.

I'm pleased to report that much progress has been made since last year's PDI. Allow me to share highlights of where we've been and where we're going.

Using the Business Mission Area Framework to Unify Operations

The Business Mission Area (BMA) framework has proven to be an effective construct to unify and guide integration of the Department's business functions (for example, planning, budgeting, information technology, procurement, and maintenance) for end-to-end defense operations. The BMA consists of five Core Business Missions (CBMs):

* Human Resources Management

* Weapon System Lifecycle Management

* Real Property & Installations Lifecycle Management

* Materiel Supply & Service Management

* Financial Management

The BMA has enabled us to define and align both DoD enterprise-level and component-level business transformation priorities with warfighting needs and fiscal responsibility. The BMA is allowing us to integrate the Department's five CBMs to ensure that their processes, systems, and operations work horizontally in coordination one with another. The BMA is the lens through which we evaluate how best to leverage our information technology assets, evaluate our investments, and make our processes more cost-effective, all with an eye toward becoming more flexible, responsive, secure, and accurate.

Executing Transformation Priorities and Programs

A focused set of six Business Enterprise Priorities (BEPs) is guiding transformation activities and the evolution of systems and new capabilities toward a more interoperable business environment. These BEPs, detailed in the Enterprise Transition Plan, are as follows:

* Personnel Visibility

* Acquisition Visibility

* Common Supplier Engagement

* Materiel Visibility

* Real Property Accountability

* Financial Visibility

In essence, this initial set of priorities is opening up the flow of and access to important information about our personnel, materiel, and financial resources. The BEPs comprise common capabilities, data standards, business rules, and enterprise-wide systems that will enable us to become better, faster, and smarter users of DoD business information.

In addition to the six corporate-level BEPs, there are 30 component-level business priorities that are proceeding to plan under disciplined program management. Simply stated, through the priorities, we are building a capability to enable rapid, well-informed decisions regarding America's warfighting advantage in the unpredictable years ahead. The following are just a few examples of the anticipated benefits:

* More reliable and accurate personnel information for warfighter mission planning, and accurate and timely access to data on personnel and their skill sets for combatant commanders 

* Decreased operational costs and faster cycle times

* Proper military pay, improved health care delivery, better quality of life, and other benefits for DoD personnel and their families

* Full lifecycle management of defense acquisition

* End-to-end visibility of supply chain operations and inventory management

* Financial data integrity and auditable financial statements

Transformation Tools That Are Working

The Department's first comprehensive, integrated Enterprise Transition Plan (ETP) and the Release 3.0 of the Business Enterprise Architecture (BEA)--the blueprint of the Department's information infrastructure--were delivered to the DoD community and the Congress on September 30, 2005. As detailed in the ETP, each BEP is supported by enterprise systems and initiatives that will deliver incremental improvements through measurable milestones. Additionally, the ETP includes the business transformation efforts of the six largest DoD components (that is, Army, Navy, Air Force, U.S. Transportation Command, Defense Logistics Agency, and Defense Finance and Accounting Service). These components are enabling the Department's business transformation by supporting the BEPs while also implementing their component-specific transformation priorities.

Another effective instrument of change has been the Financial Improvement and Audit Readiness (FIAR) Plan, created in September 2005 to execute targeted, achievable, and incremental improvements of our financial management policies, processes, and controls. The FIAR is complementary to the ETP but targets improving financial information and reducing deficiencies in five specific balance sheet areas that will yield significant favorable audit results in the near-term (two to four years). The five FIAR focus areas are Environmental Liabilities, Medicare-Eligible Retiree Healthcare Fund, Fund Balance with Treasury, Military Equipment Valuation, and Real Property.

Actively Engaged Leadership and Tiered Accountability

While the preceding accomplishments have put us on the right path toward real change, all these activities would bear little fruit with out strong, continuing, and involved leadership. Senior leaders within the Office of the Secretary of Defense and at the component level are engaged in and committed to realizing transformation objectives. At the top, both Secretary of Defense Donald Rumsfeld and Deputy Secretary Gordon England are passionate about changing how we do business--because our operations are an inherent part of a force that is adaptable to new challenges and unexpected circumstances. The Defense Business Systems Management Committee (DBSMC), the highest-ranking governance body overseeing the BMA and chaired by the deputy secretary, is driving and demonstrating systemic, enterprise-wide improvements.

And progress has been significant. We have achieved investment alignment of $4.2 billion in fiscal year 2006 for budgeted transformation programs, and accountability has been established for 43 enterprise-level programs and 55 component-level programs, all of which are directly supporting the Department's transformation priorities. We have a single, standardized Investment Review Board process, aligned to the Department's acquisition system and Joint Capabilities Integration and Development System process, which ensures that information technology spending is consistent with DoD business enterprise requirements. To date, 194 business system modernization investments, representing over $3.4 billion, have been certified by the DBSMC.

Finally, in the area of improved governance and management, we have established the Business Transformation Agency (BTA) to consolidate and centralize transformation efforts across the Department. The BTA enables single-point accountability for the delivery of enterprise-wide services and capabilities within the Department and reduces duplicate efforts. Think of the BTA as the "integration hub" for all DoD business transformation activities--providing thought leadership, driving consistency of approach, emphasizing collaborative decision making, and setting the standard for excellence in program execution.

The Critical Role of Financial Visibility

As financial management professionals, you are strategic partners in DoD transformation to meet the needs of the twenty-first century force. You are engaged at all levels of the Department and throughout the operational theaters because budgeting, accounting, and finance underpin every function, transaction, and management decision. You provide financial resources to the warfighter and timely, reliable, and accurate financial information to decision makers, enabling a shared understanding of how funds are brought into the Department, how allocation decisions are made, how resources are being used to achieve the mission, and how the Department's investments are reported to the American people.

The Financial Management Business Enterprise Priority of financial visibility means having immediate access to accurate and reliable financial information (that is, planning, programming, budgeting, accounting, and cost information) in support of financial accountability and efficient and effective decision making throughout the Department in support of the warfighter. The following are the key enterprise-level financial management transformation initiatives:

* Standard Financial Information Structure (SFIS)--Standardizes financial reporting across DoD, thereby supporting management information requirements and reducing the cost of auditability. The SFIS will provide a basis for common valuation of DoD programs, assets, and liabilities.

* Business Enterprise Information Services (BEIS)--Builds upon existing infrastructure to aggregate business information from disparate processes and systems across DoD. The BEIS will be the authoritative source of data for enterprise-wide financial management analysis and reporting.

* Defense Cash Accountability System--Consolidates disbursements and collections information from a number of disparate systems from across the DoD into a single, enterprise-wide system that provides standardized Treasury reporting and enhanced data integrity.

* Intragovernmental Transactions--Addresses one of the Department's material weaknesses (financial eliminations) by redesigning and consolidating intra-agency agreements and procedures to provide a standardized process for creating requisitions, purchase orders, billings, payables and disbursements, and receivables and collections associated with intra-governmental exchanges of goods and services.

* Program/Budget Framework--Provides a foundation for a new program and budget data structure using a common language that will enable senior decision makers to weigh options versus resource constraints across a broad spectrum of challenges.

The Way Ahead

So what does all this mean to us? It means that we need to infuse our work with an even greater sense of urgency and commitment. The need for timely, reliable, and accurate business and financial information has never been greater. Our Department will face a progressively more difficult budget climate in the years ahead, making it more important to understand what we actually need in order to sustain a flexible and agile force. And we can't do that without better information.

Transformation presents us with numerous, but not insurmountable, challenges. Use these challenges as a catalyst to develop your thinking and creativity. Engage your colleagues from across the financial management community to advance new ideas and thought leadership. And maintain your focus on our brave men and women in uniform to transform the level of support you give them.

Thank you for your dedication, patriotism, and vital service in supporting America.

For more information on DoD business transformation, visit www.dod.mil/bmmp.

Paul Brinkley, Deputy Under Secretary of Defense for Business Transformation, works across military services and Defense agencies.