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Deputy Assistant Secretary, cost and economics.

In April of this year, General Spencer, Air Force Vice Chief of Staff, challenged Airmen to identify "savings that may be used to support readiness."

With shrinking defense budgets, the Air Force is looking for everyone to think about day-to-day operations and identify innovative ideas to reduce cost. Similarly, cost estimators, analysts, and economists are moving beyond the traditional areas of weapon systems estimates into O&M and non-appropriated funds business case analysis, and economic research. Cost and economic skills are in high demand in a multitude of new areas to include O&M budget risk and contractor overhead rate analysis.

SAF/FM is required to ensure the Air Force has sufficient O&M readiness funding. To help this effort, the Air Force Cost Analysis Agency (AFCAA) assisted the Air Force budget staff with risk analysis on large, recurring O&M programs. Our work entailed gathering historical data and applying risk and forecasting techniques to define the most likely cost of future O&M requirements and determine potential financial decision trade-space. Programming to the most likely costs allows senior leadership to see a more complete view of requirements, allowing for better decisions early on and ensuring funds availability in the year of execution.

At the operational level, AFCAA recently assisted Air Mobility Command in analyzing the Airlift Readiness Account (ARA) which is tied to maintaining war-ready airlift capability for US armed forces. Our analysis of the ARA business model and historical data generated projected expense and revenue streams for a range of possible operational scenarios for programming action. At the tactical level, the SAF/FMC Center of Expertise (CoE) developed a portfolio analysis process to aid wing and center financial managers to identify resource decision trade-space. CoE is concentrating on areas where efficiencies may be quickly recognized. For example, they will help wing financial managers review service contracts to identify excess standards or capacity, freeing up resources to fund other readiness requirements.

Similar to O&M requirements, weapon and IT system requirements are a focus area for cost control ... but in some new ways. The Defense Contracting Management Agency (DCMA) is leading a series of reviews of defense industry overhead rates that include utilities, rent, advertising, and insurance. In the latest study, AFCAA assisted DCMA by analyzing a defense contractor's business base projections. Our analysts observed patterns of potential discrepancies and identified where business base projections forecasted more future Government contracts and orders than actually received with no risk analysis associated with potential projects occurring. AFCAA was able to develop a method to more accurately capture a contractor's business base, enhancing the accuracy of future Government and Contractor negotiations.

General Spencer's call for innovative ideas demonstrates the imperative for Air Force personnel to think beyond traditional ways of doing business. This is especially true in the cost and economics community where analytical skills are in high demand and increasing being used in nontraditional areas.

--MS. KATHY L. WATERN

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Title Annotation:NOTES FROM
Author:Watern, Kathy L.
Publication:Air Force Comptroller
Date:Jun 22, 2013
Words:488
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