Cost Management Certificate Course CMCC Naval Postgraduate School

Cost Management Certificate Course (CMCC) Naval Postgraduate School CMCC 12 -5 Week 3 Cost Management and U. S. Army Section I: Concepts Frank A. Di. Stasio 19 -20 March 2012 © DISTASIO ASSOCIATES, LTD

Course Format • Lectures • Discussion • Exercises • Exam (30 minutes) tri rep p o not rt es 6/8/2021 © DISTASIO ASSOCIATES, LTD 2

Course Objectives Achieve a practical understanding of – – Cost Management – Army General Fund Enterprise Business System (GFEBS) and Cost Management – Cost Culture and Cost Controlling Understand the Army’s intent Become knowledgeable of Army’s initiatives Prepare you to assist in establishing a cost culture 6/8/2021 © DISTASIO ASSOCIATES, LTD 3

Course Outline • Section I: Cost Management – – – Why cost management? Focus Concept of Operation Analysis Exercise • Section II: Cost Management and GFEBS – Development – Implementation • Section III: Using Cost Management – Cost culture – Cost controlling 6/8/2021 © DISTASIO ASSOCIATES, LTD 4

“You’ve been selected to go to the Cost Management Certificate Course” Oh …. Learn about much more … Hmm …. Monterey Cutting funds …. 6/8/2021 © DISTASIO ASSOCIATES, LTD 5

Army Leadership Position On Cost Management And The Course “To help our leaders and managers make better resource-informed decisions, …. At all levels, from installation to Army Headquarters, we have implemented training and professional development programs to give … a greater understanding of the cost implications of their decisions. Training programs include a graduatelevel Cost Management Certificate Course for carefully selected mid-level analysts, professional development courses for general officers and members of the Senior Executive Service …. ” -- Army Posture Statement 2011, page 16 6/8/2021 © DISTASIO ASSOCIATES, LTD 6

Cost Management Goal Is … “To help our leaders and managers make better resource-informed decisions…” -- Secretary of the Army and Chief of Staff of the Army in Army Posture Statement 2011 Leaders Managers resourceinformed decisions 6/8/2021 © DISTASIO ASSOCIATES, LTD 7

Cost Management -- Why? What are some of the key issues that are driving the need for “better resource-informed decisions? ” • Federal examples? • Department of Defense examples? • Army examples? 6/8/2021 © DISTASIO ASSOCIATES, LTD 8

Deficits And Debt Illustrative Balanced Budget Surplus Deficit Debt (cumulative) FY FY FY Fiscal Years “… I think that the No. 1 threat to our national security is our debt. ” 6/8/2021 © DISTASIO ASSOCIATES, LTD 9

Deficits, Debt And DOD “… I think that the No. 1 threat to our national security is our debt. And we've got to get our arms around that and head it in another -– head it in the right direction –- that we have to pay our fair share of this. ” Admiral Michael G. Mullen, Chairman, Joint Chiefs of Staff, Interview, September 28, 2011 “As you know, the president announced his framework for addressing our nation’s long-term fiscal challenges, setting a goal of reducing Defense spending by $400 billion. This will be hard work and will require difficult choices about matching strategy to resources. Those choices will be painful, even unnatural for the services, for the department, and for the Congress, but they are absolutely necessary. ” Admiral Michael G. Mullen, Chairman, Joint Chiefs of Staff, Senate Committee on Appropriations, June 15, 2011 6/8/2021 © DISTASIO ASSOCIATES, LTD 10

President’s Budget Proposal For FY 2013 U. S. Government $ 3, 803 billion Outlays (23% GDP) Budget of United Sta s Governmente t FY 2013 $ 2, 902 billion Receipts (18% GDP) $ 901 billion Deficit (Tables S-1) Department of Defense DOD $ 614 billion Budget Authority $ 3, 655 billion Outlays* $ 525 billion Base $ 1, 265 billion Discretionary $ 89 billion Overseas Contingency Operations (OCO) $ 2, 213 billion Mandatory $ (Table S-12) 246 billion Interest * Includes Joint Committee enforcement (-$71) and Disaster Relief(+$2) funds (Tables S-4 & S-8 for Adjustments (-$79)) $17, 532 billion Gross Federal Debt (GFD--cumulative deficits) $15, 813 billion Gross Domestic Product (GDP) 6/8/2021 Army $ 185 billion Total $ 135 billion Base $ 50 billion OCO (Tables S-1 & S-15) © DISTASIO ASSOCIATES, LTD 11

President’s Budget For FY 2013 Outlays $2. 2 ($ in trillions) $1. 3 $0. 2 $0. 006 y r na ry a to a nd M 6/8/2021 re sc i D t tio In te s re er t as f s Di elie R © DISTASIO ASSOCIATES, LTD 12

President’s Budget For FY 2013 Discretionary: Security And Non-Security ($ in billion) $783 $97 Overseas Contingency Operations $686 Base $357 y it r cu 6/8/2021 Se l a s n io cie t Na gen A it ur y ec s S n- ncie o N ge © DISTASIO ASSOCIATES, LTD A 13

President’s Budget For FY 2013 Discretionary: National Security Agencies ($ in billions) $686 $525 $12 6/8/2021 $40 $61 $48 ity r e rs u se s i al y c & a n n a f f rg fe te tio Se - B e A e a l n t a D s f d E S rna s n f n o f f e ra o o nte t lan tio nci to e t t a p p t e ty e p p r. I e e N ge e e i m D o D r V D D the A H ecu O © DISTASIO S ASSOCIATES, LTD 14

President’s Budget For FY 2013 Discretionary: Largest Non-Security Agencies ($ in billions) $686 Non-Security Agencies 5 Largest All Other $126 $78 $38 $21 ity r u se c e Ba S l -a n s it o cie Na gen A $27 D H ep um t o an f H Sv ea D cs lth ep & to f. E du ca D tio & ep n U to rb f an H o D us D ev in ep g to f. A gr ic ul D tu ep re to f. J us tic A e A ll O ge t nc he ie r D s ep t& 6/8/2021 $67 © DISTASIO ASSOCIATES, LTD 15

President’s Budget For FY 2013 Do. D Budget Authority By Service Defense Agencies 19% Army 25% $103 Air Force 27% $133 $140 $156 Navy 29% Total: $532 billion Source: Do. D Green Book 6/8/2021 © DISTASIO ASSOCIATES, LTD 16

DOD Topline Trends Base increased, FY 01 -12: $ 234 Bil (79%) OCO cumulative, FY 01 -12: $1, 320 Bil 6/8/2021 © DISTASIO ASSOCIATES, LTD 17

Recent Cost Drivers For DOD and Army Including: • • 6/8/2021 Nine years of continuous war Increases in military end strength Acquiring new technology to counter enemy Transforming Reserve Component from strategic reserve to operational reserve Providing for the well-being of Soldiers Providing quality of life support to military families Maintaining readiness for both Overseas Contingency Operations (OCO) and other threats Preparing for future threats—rebalancing © DISTASIO ASSOCIATES, LTD 18

Secretary of Defense Gates’ Conclusion “It is simply not reasonable to expect the defense budget to continue increasing at the same rate it has over the last number of years. “We should be able to secure our nation with a base budget of more than a half a trillion dollars – and I believe this budget focuses money where it can more effectively do just that. “… each program decision is zero sum: a dollar spent for capabilities excess to our real needs is a dollar taken from a capability we do need – often to sustain our men and women in combat and bring them home safely. ” Secretary of Defense Robert Gates Opening Statement to the House Armed Services Committee, May 13, 2009 6/8/2021 © DISTASIO ASSOCIATES, LTD 19

Reference Analysis Of The Federal, DOD and Army Budget, An Analysis Fiscal Year 2012 Association of the United States Army Institute for Land Warfare www. ausa. org 6/8/2021 20

Course Outline • Section 1: Cost Management – – – Why cost management? Focus Concept of Operation Analysis Exercise • Section II: Cost Management and GFEBS – Implementation – Initiative • Section III: Using Cost Management – Cost culture – Cost controlling 6/8/2021 © DISTASIO ASSOCIATES, LTD 21

Cost Management Focus “… focuses money where it can more effectively do just that. ” [secure our nation] -- Secretary of Defense Gates Cost management is about using resources effectively 6/8/2021 © DISTASIO ASSOCIATES, LTD 22

Federal Budget Problem: Demands Exceed Resources Demands drive Outlays … and Receipts limit Resources Demands Problem Resources “This will be hard work and will require difficult choices about matching strategy to resources. ” -- Admiral Michael G. Mullen 6/8/2021 © DISTASIO ASSOCIATES, LTD 23

Federal Budget Solution Involves Balancing Demands and Resources Corrective options: A. Increase resources • Increase tax rates • Increase taxable base B. Reduce demands • Reduce quantity or quality • Increase effectiveness and/or efficiency + (-) C. Borrow • From other federal accounts • From private sources D. Some mix of all the above These types of actions are essentially the same for all cost management 6/8/2021 © DISTASIO ASSOCIATES, LTD 24

Cost Management A Key Part Of The Solution Demands Problem Resources Cost Management ü Manage business operations efficiently and effectively through the accurate measurement and ü ü thorough understanding of the "full cost" of an üorganization's business processes, products and services ü in order to provide the best value to customers 6/8/2021 © DISTASIO ASSOCIATES, LTD 25

Cost Management Focus For “Best Value” And Economic Performance • Best value – when making decisions • Economic performance – when executing decision • Common principles: – – – Eliminating waste Minimizing costs Avoiding future spending Increasing effectiveness Enhancing quality Not just cutting cost Rather … getting more/most for every dollar 6/8/2021 © DISTASIO ASSOCIATES, LTD 26

Whether “Best Value” Or Economic Performance Cost Management Is … • Is about allocating resources to -– – Minimizing costs Getting the most benefit Using resources efficiently Using resources effectively • Is NOT about -– Providing resources regardless of costs – Reducing resources regardless of how important the objective, product, service, etc. “… a dollar spent for capabilities excess to our real needs is a dollar taken from a capability we do need --” 6/8/2021 © DISTASIO ASSOCIATES, LTD 27

Cost Management Is About Allocating Resources “It is simply not reasonable to expect the defense budget to continue increasing at the same rate it has over the last number of years. “We should be able to secure our nation with a base budget of more than a half a trillion dollars – and I believe this budget focuses money where it can more effectively do just that. “… each program decision is zero sum: a dollar spent for capabilities excess to our real needs is a dollar taken from a capability we do need – often to sustain our men and women in combat and bring them home safely. ” Secretary of Defense Robert Gates Opening Statement to the House Armed Services Committee, May 13, 2009 6/8/2021 © DISTASIO ASSOCIATES, LTD 28

Cost Management Examples Re-allocation Of Resources Secretary Gates: • Cut or eliminated 20 high-profile weapons, averting some $330 billion in future spending, including F-22 fighter, C-17 transport aircraft, DDG-1000 destroyer and the Future Combat System • Supported programs that were more useful, e. g. , Littoral Combat Ships and MRAP (going from zero in Afghanistan in January ’ 09 to 5, 000 today) Understand that “… each program decision is zero sum. ” Therefore, resource decisions must be based on balancing requirements, priorities and risks 6/8/2021 © DISTASIO ASSOCIATES, LTD 29

Cost Management Example Focus On Outcome And Improving Effectiveness Gates became unusually exercised when he recalled his efforts to make sure soldiers wounded on the battlefield in Afghanistan were evacuated in what doctors call “the golden hour”—the time when the badly wounded may be saved if they can get to a doctor. The standard for medical evacuation [from the battlefield] in Iraq was an hour, ” says Gates. “ But Afghanistan is a lot tougher terrain. And so it came to my attention that they had settled on two hours. And I said: ‘Bulls--t. It’s going to be the same in Afghanistan as in Iraq. And the medical guys, the medical bureaucracy, pushed back on me and said: ‘No, no, it really doesn’t matter. ’ And I said: ‘Well, if I’m a soldier and I’m going out on patrol, it matters to me. ’ Continued Understand define the outcome clearly 6/8/2021 © DISTASIO ASSOCIATES, LTD 30

Cost Management Example Focus On Outcome And Improving Effectiveness And so we sent a bunch of new helicopters, three new field hospitals, a whole bunch of stuff. And so now we have the ‘golden hour’ in Afghanistan. “It took pressure from me to make all these things happen, ” he says. Nobody but the secretary can compel different parts of the vast military machine to work together: the medevac problem concerned ground forces; the Air Force had the helicopters to solve it; but the Army couldn’t make that happen. “People didn’t want to disturb the programs that they already had, ” says Gates. “They didn’t want to think outside of the box. I think there’ve been some real improvements, but we’ve still got a ways to go, in my view. ” A War Within, Newsweek, by John Barry and Evan Thomas, September 12, 2010 Think outside the box 6/8/2021 © DISTASIO ASSOCIATES, LTD 31

Chief of Staff’s Perspective “…achieving greater effectiveness in global security. ” “I know that our Nation expects us to be a part of the solution to our debt. This implies we must more wisely share resources -- and burdens -- and apply them in the most efficient and effective manner. It's ultimately about achieving greater effectiveness in global security. ” Gen. Raymond T. Odierno, Chief of Staff of the Army Apply resources most efficiently and effectively 6/8/2021 32

Cost Management Is A Personal Duty Constitution “…to establish Justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty. " Oath of Office -- Civilian and Military Officer I, [name], do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter. So help me God. “… well and faithfully” includes stewardship 6/8/2021 © DISTASIO ASSOCIATES, LTD 33

Course Outline • Section 1: Cost Management – – – Why cost management? Focus Concept of Operation Analysis Exercise • Section II: Cost Management and GFEBS – Implementation – Initiative • Section III: Using Cost Management – Cost culture – Cost controlling 6/8/2021 © DISTASIO ASSOCIATES, LTD 34

Cost Management Concept Managing business operations efficiently and effectively through the accurate measurement and thorough understanding of the "full cost" of an organization's business processes, products and services in order to provide the best value to customers. • Efficiently is “doing things right”, e. g. in the best and most economical way, not wasting resources • Effectively is “doing the right things”, e. g. setting the goal (effect or outcome) and targets to achieve or attaining the goal • Full Costs is the inclusion of all and only those costs related to generating the goal (effect or outcome) • Best Value is a qualitative measurement to be taken into consideration 6/8/2021 © DISTASIO ASSOCIATES, LTD 35

Cost Management A Systematic Concept of Operations A systematic approach “… in order to provide best value…” 6/8/2021 © DISTASIO ASSOCIATES, LTD 36

Cost Accounting System Cost Accounting • Focus: Produce cost management data for use by internal managers • Requires: Cost Planning – Capturing data – Assigning and allocating cost – Connecting performance to cost data Cost Management Process Cost Analysis Cost Controlling Supports: -- Planning (what, why, how and how much…) -- Controlling (how well …) -- Decision making (whether to …) 6/8/2021 © DISTASIO ASSOCIATES, LTD 37

Cost Analysis Cost Accounting • Focus: Provide decision makers with competing alternatives Cost Planning • Requires: Cost Management Process Cost Analysis – Valid data – comparable financial expenditure and performance/outcome/output data – Suitable analytic methods – to include tools Cost Controlling for comparison of annual program cost, comparable systems costs over time, etc. – Skilled analysts – with knowledge of analytic methods, an understanding of the financial and performance data, and the ability and experience to apply the data and methods to analyzing the implication to the Army -- Relies on data from cost accounting -- Supports both planning and controlling 6/8/2021 © DISTASIO ASSOCIATES, LTD 38

Cost Planning Cost Accounting • Focus: Produce baseline for focusing activities and evaluating progress • Requires: – – Cost Planning Setting objectives for future Formulate actions to achieve objectives Identify methods Estimate resources Cost Management Process Cost Analysis Cost Controlling -- Relies on data from cost accounting -- Applies analysis -- Provides baseline for controlling 6/8/2021 © DISTASIO ASSOCIATES, LTD 39

Cost Controlling Cost Accounting • Focus: Continuously improve – must do better than before – and eliminate waste and reduce cost Cost Planning • Requires: – Performance reports that compare actual to planned performance – Uses information to evaluate performance – Identify favorable or unfavorable deviations – Take corrective actions, e. g, change processes Cost Management Process Cost Analysis Cost Controlling -- Compares to cost planning -- Relies on data from cost accounting -- Applies cost analysis 6/8/2021 © DISTASIO ASSOCIATES, LTD 40

Cost Planning and Cost Controlling Involve Allocating And Applying Resources Cost Accounting Cost Planning Operational Managers Cost Management Process Resource Managers Cost Analysis Cost Controlling Leaders and managers are critical to obtaining “best value” because they allocate resources to work and evaluate performance 6/8/2021 © DISTASIO ASSOCIATES, LTD 41

Cost Management Is Everyone’s Responsibility • Responsibility: allocate and use available resources effectively and efficiently • Scope of responsibility: Varies depending upon one’s position, i. e. , different for -– – Secretary of Defense Army Leadership Leaders and managers Individuals • Responsible parties: Leaders, managers and individuals at every organizational level are responsible for using the resources available to them effectively and efficiently in everyday operations 6/8/2021 © DISTASIO ASSOCIATES, LTD 42

Concept Of Operations Applies A Systematic Approach … for recording, analyzing, allocating and re -balancing resources Input: all sorts of resources 6/8/2021 Processes involve allocating and using resources © DISTASIO ASSOCIATES, LTD Output focuses on objectives 43

Cost Management Example Applying Systematic Approach To Readiness • Battalion Level Training Model (BLTM) – Objective: relate training to readiness – Readiness driver: training events – Training drivers: equipment and usage for events • Operating & Support MIS (OSMIS) Outcome: readiness Cost per unit of performance – Objective: relate historical, full cost to readiness – Cost driver: historical, full cost of maintaining equipment and relationship to usage and readiness • Training Resource Methodology (TRM) – Objective: Compute cost of readiness by applying OSMIS data to BLTM training profile, e. g. , C-1 Decision support tool Applied in Budget Formulation, Justification and in distributing funds for Execution 6/8/2021 © DISTASIO ASSOCIATES, LTD 44

Course Outline • Section 1: Cost Management – – – Why cost management? Focus Concept of Operation Analysis Exercise • Section II: Cost Management and GFEBS – Implementation – Initiative • Section III: Using Cost Management – Cost culture – Cost controlling 6/8/2021 © DISTASIO ASSOCIATES, LTD 45

Cost Management And Systems Analysis • System translates… – Inputs through processes into outputs • Cost management … – Uses resources efficiently & effectively to achieve outcome • Economics model of a system: Input Process Output Economics model provides a basic structure for cost management and all analyses 6/8/2021 © DISTASIO ASSOCIATES, LTD 46

Cost Management And Systems Analysis • Military Senior Staff Colleges describe a strategy model as a 3 -legged stool – Ends: outcome – Ways: process – Means: input resources Essentially same as economic model • Army is a system: – Input: people, equipment, doctrine, organization and facilities – Process: manning, equipping, training and sustaining force – Output: ready and sustained operating forces Army includes thousands of ‘systems’ 6/8/2021 © DISTASIO ASSOCIATES, LTD 47

Cost Management Analysis Principles • Define and understand clearly the outcome • Analyze processes for producing outcome, product, service or other objectives • Consider whether the processes and activities do or do not add value and -– Eliminate activities and processes that do not add value – Enhance activities and processes that do add value • Consider whether alternative resources could be used in the processes • Identify the “full cost” to produce outcome, etc. life cycle, for the current and alternative methods 6/8/2021 © DISTASIO ASSOCIATES, LTD 48

Cost Management Analysis Requires Accurate And Valid Data Requires both cost and performance data: • Cost data: require systematic procedures for classifying, allocating, accumulating, aggregating and reporting cost data; typically involves -– Relational structure for consolidating direct, assigned and allocated cost to produce “full costs” – Cost accounting system for recording cost data • Performance data: require performance data that relate to the full cost data – Quantity of the output – Quality of output 6/8/2021 OSMIS Example: © DISTASIO ASSOCIATES, LTD BLTM T R M 49

Cost Management Data Accounting Systems Accounting systems record and provide data that can support cost management • Accounting systems involve-– Input: financial transactions – Process: recording, collecting, summarizing and validating – Output: information to users • Two types of accounting systems – Financial accounting system – Cost accounting system The two types of accounting systems involve different outputs and different user 6/8/2021 © DISTASIO ASSOCIATES, LTD 50

Financial And Cost Accounting Systems GFEBS Is Both Input Process Output • Financial accounting system Financial accounting • Complies with US Standard General Ledger; Federal Accounting Standards, etc • Produces financial statements, budget status, special reports • Used for external review • Cost accounting system Cost accounting • Focuses on cost of outcome/ output/ service • Produces data for analysis, decision support, control & management • Used for internal management 6/8/2021 © DISTASIO ASSOCIATES, LTD 51

Cost Management Involves Applying Resources To Priority Outcomes “… I want to re-emphasize that this agenda is not about cutting the department’s budget. It is about reforming and re-shaping priorities to ensure that, in tough budgetary and economic times, we can focus defense resources where they belong: in America’s fighting forces, investment in future capabilities and, most important on our men and women in uniform. ” Note: Italics added by DAL Source: Secretary of Defense Robert M. Gates, Statement on Department Efficiencies Initiative, August 09, 2010 6/8/2021 © DISTASIO ASSOCIATES, LTD 52

Do. D Priorities And Pressure To Manage Costs • Do. D Budget priorities -– – Sustain high state of military readiness Maintain ground force strength for threats of this new age Strengthen combat capabilities of America’s Armed Forces Improve quality of life for service members and families • But pressure for cost management -– Do. D Budget decisions avoided $300 billion • Curtail or cancel about 20 troubled or excess programs – Sec. Def tasked services to find $100 billion in savings over the next five years – OMB reduced Defense by another $78 billion in 5 years – Debt deal: cut $350 billion from Defense over 10 years – Sequestration: cut $650 billion from more over 10 yrs 6/8/2021 © DISTASIO ASSOCIATES, LTD 53

Reference The Classic Systems and Cost Reference 6/8/2021 © DISTASIO ASSOCIATES, LTD 54

Course Outline • Section 1: Cost Management – – – Why cost management? Focus Concept of Operation Analysis Exercise • Section II: Cost Management and GFEBS – Implementation – Initiative • Section III: Using Cost Management – Cost culture – Cost controlling 6/8/2021 © DISTASIO ASSOCIATES, LTD 55

Exercise Prepare Cost Management Proposal • Example: DOD INVEST Contest -- Sec. Def Gates asked Do. D military and civilian employees to submit their ideas to save money, avoid cost, reduce cycle time and increase the agility of the Department • Provided cash prizes for 25 best ideas • Accepted ideas via website from Aug. 9 th - Sept. 24, 2010 • See: http: //www. defense. gov/home/features/2010/0710_invest 6/8/2021 © DISTASIO ASSOCIATES, LTD 56

Apply Defense Efficiency Principles • • Elevate affordability on a par with desirability Strive for more efficiency Ensure putting resources where most needed Eliminate unnecessary redundancy and direct more resources to places where needed • Create a system of fewer, flatter, and more agile and responsive structures with reductions in rank at the top that cascade downward and outward • Start setting priorities, making real tradeoffs and separating appetites from real requirements Important cost management principles 6/8/2021 © DISTASIO ASSOCIATES, LTD 57

Exercise Framework • Task: Formulate a proposal to use resources more wisely and to achieve greater effectiveness • Objectives may include: – Eliminate unnecessary or redundant practice, product or organization – Minimize cost and/or avoid future cost – Increase effectiveness and /or enhance quality • Approach: – Break into small groups and work for 30 minutes – Discuss and select outcome, e. g. , business practice, product or organization – Identify full costs that you believe are relevant – Describe alternatives and potential savings or cost avoidance – Designate a spokesperson to present and discuss the group’s proposal– particularly your cost considerations 6/8/2021 © DISTASIO ASSOCIATES, LTD 58

Analysis Considerations • • Identify a candidate—what’s the issue? Goal? What are your objectives? See Cost Benefit Analysis (CBA) Scope, assumptions and limitations Guide Analytic method and evaluation criteria Current situation – “as is” What types of cost data should be considered? Formulate alternatives – Cost and benefits of each • Make a recommendation THIS IS A NON-ATTRIBUTION EXERCISE 6/8/2021 © DISTASIO ASSOCIATES, LTD 59

When Conducting Analysis Begin With The Analytic Model • Economic model: Input Process Output • National Security model: Ways Means What resources: people, equip, etc Ends How to do it-options What is the outcome? Start analysis with defining outcome 6/8/2021 © DISTASIO ASSOCIATES, LTD 60

When Conducting Analysis Apply ‘Willie Sutton’ Rule In Selecting Candidate When asked why he robbed banks, Willie Sutton replied "because that's where the money is. " NOTE: According to Willie’s autobiography, he never said it – but wished that he had. When looking to apply cost management, go where the money is to leverage the results 6/8/2021 © DISTASIO ASSOCIATES, LTD 61

When Conducting Analysis Never Lose Site Of The Outcome "However beautiful the strategy, you should occasionally look at the results“ -- Sir Winston Churchill 6/8/2021 © DISTASIO ASSOCIATES, LTD 62

When Conducting Analysis Consider Priorities And Tradeoffs President Eisenhower’s response to fund requests usually included questions: where is the money going to come from, and what will the military cut in its place? 6/8/2021 © DISTASIO ASSOCIATES, LTD 63

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Reference Army Posture Statement 2011 6/8/2021 https: //secureweb 2. hqda. pentagon. mil/VDAS_Army. Posture. Statement/2011%20 APS. pdf © DISTASIO ASSOCIATES, LTD 65

Chairman’s Focus Key themes: • Achieve our national objectives in the current conflicts – As long forces in harm’s way, ensure that they have what they need to succeed. • Look beyond our current requirements—to 2020—and develop Joint Force 2020 – Provide the greatest possible number of options for our nation’s leaders and to ensure our nation remains immune from coercion – Keep our military the best led, best trained, and best equipped force in the world is the non-negotiable imperative – Do so in a new fiscal environment will be hard • Renew our commitment to the Profession of Arms • Keep faith with our Military Family General Martin E. Dempsey Chairman of the Joint Chiefs of Staff 6/8/2021 © DISTASIO ASSOCIATES, LTD 66

Need For Cost Management Has Been Continually Recognized “A person employed in a redundant task is one who could be countering terrorism or nuclear proliferation. Every dollar squandered on waste is one denied to the warfighter. ” Source: Secretary of Defense, Donald Rumsfeld, September 10 th, 2001, as quoted by Secretary of Defense Robert Gates, May 8, 2010 6/8/2021 © DISTASIO ASSOCIATES, LTD 67