Homeland Security United States Coast Guard U S

Homeland Security United States Coast Guard U. S. Coast Guard Logistics Transformation: How Logistics Transformation Supports CFO Act Compliance Mr. Jeffery Orner Deputy Assistant Commandant for Engineering and Logistics CG-4 D Remarks for: Assistant Commandant for Engineering and Logistics (CG-4) November 8, 2006

Homeland Security Briefing Outline United States Coast Guard • CFO Compliance: Shared Problems, Shared Solutions • Coast Guard Logistics Today and Tomorrow • Importance of Sound Logistics to CFO Compliance • Unified Logistics and Financial Management; A Coast Guard Perspective Assistant Commandant for Engineering and Logistics (CG-4) 2

Homeland Security Our Shared Responsibility United States Coast Guard “Transparency of Information Breeds Self-Correcting Behavior. ” ADM Thad Allen Commandant of the Coast Guard Assistant Commandant for Engineering and Logistics (CG-4) 3

Homeland Security • • • • Typical Coast Guard Day United States Coast Guard Save 15 lives & Assist 117 people in distress Conduct 90 search and rescue missions Protect $2. 8 million in property Enforce 129 security zones Interdict and rescue 15 illegal migrants at sea Board 4 high interest vessels Board 192 vessels of law enforcement interest Board 122 large vessels for port safety checks Seize 71 lbs of marijuana and 662 lbs of cocaine with a street value of $21. 1 M Conduct 317 vessel safety checks and teach 63 boating safety courses Conduct 19 commercial fishing vessel safety exams Respond to 11 oil and hazardous chemical spills Process 280 mariner licenses and documents Service 140 aids to navigation Monitor the transit of 2, 557 commercial ships through U. S. ports Investigate 20 vessel casualties - collisions, and groundings Assistant Commandant for Engineering and Logistics (CG-4) 4

Homeland Security Our Shared Problem United States Coast Guard “GAO and other auditors have repeatedly found that the federal government lacks complete and reliable information for reported inventory and other property and equipment, and can not determine that all assets are reported, verify the existence of inventory, or substantiate the amount of reported inventory and property. ” Source: GAO-02 -447 G, Executive Guide, Best Practices in Achieving Consistent, Accurate Physical Counts of Inventory and Related Property March 2002 Assistant Commandant for Engineering and Logistics (CG-4) 5

Homeland Security Our Shared Problem (cont’d) United States Coast Guard “Further, the lack of reliable information impairs the government’s ability to (1) know the quantity, location, condition, and value of assets it owns, (2) safeguard its assets from physical deterioration, theft, loss, or mismanagement, (3) prevent unnecessary storage and maintenance costs or purchase of assets already on hand, and (4) determine the full costs of government programs that use these assets. ”. Source: GAO-02 -447 G Assistant Commandant for Engineering and Logistics (CG-4) 6

Homeland Security Our Shared Problem (cont’d) United States Coast Guard “Consequently, the risk is high that the Congress, managers of federal agencies, and other decision makers are not receiving accurate information for making informed decisions about future funding, oversight of federal programs involving inventory, and operational readiness”. Source: GAO-02 -447 G Assistant Commandant for Engineering and Logistics (CG-4) 7

Homeland Security USCG OM&S Audit United States Coast Guard CFO Audit Findings re USCG: – You don’t know what you have • Accuracy and Completeness – You don’t know why you have it • What equipment your parts go to – You don’t know the value or condition • Local units expected to record and track – You don’t properly classify it • PP&E vs OM&S Assistant Commandant for Engineering and Logistics (CG-4) 8

Homeland Security USCG OM&S Problem Areas United States Coast Guard • Problem Areas – Count, valuation and classification – Substantial excess & obsolete • Removed $160 M of inventory not used in 3 yr/7 yr timeframes • Much NRFI – Secondary storerooms not “on the record” • Completeness – Internal Control Problems • Who acquired it and why? • What does it go to? • Why is it still there? Assistant Commandant for Engineering and Logistics (CG-4) 9

Homeland Security United States Coast Guard Challenge for FY 07: Completeness This is not on the books Assistant Commandant for Engineering and Logistics (CG-4) 10

Homeland Security Completeness United States Coast Guard Challenge for FY 07: Completeness Neither is this Assistant Commandant for Engineering and Logistics (CG-4) 11

Homeland Security The Real Property Existence Test Assistant Commandant for Engineering and Logistics (CG-4) United States Coast Guard 12

Homeland Security What is Logistics? United States Coast Guard Definition of Logistics encompasses all the activities associated with developing, acquiring, sustaining, and eventually retiring the components of capability: v People, v Information, and v Material/Systems (COMDTINST 4000. 5 A) Assistant Commandant for Engineering and Logistics (CG-4) 13

Homeland Security Current State of Logistics Key Characteristics United States Coast Guard We propose a logistics business model with centralized planning and control and distributed execution. Coast Guard Logistics Community Centralized Logistics Management & Control Distributed Shore Facilities Cutters Electronics Boats Aviation Assistant Commandant for Engineering and Logistics (CG-4) 14

Homeland Security Case For Change United States Coast Guard Distributed Business Model tends to be weaker in the planning and control areas, resulting in a more reactive logistics process. Characteristics of Distributed Logistics Responsibilities Higher inventory costs. . Not tightly linked to business needs (false sense of security) Higher purchasing costs. . Due to local buying and non-standard purchases Higher personnel costs. . . To handle exceptions, coordination between organizationally distributed logistics providers & unnecessary expediting higher Infrastructure costs. Handling & storage costs for unneeded parts Reduced capabilities. . . asset availability Poorly documented & controlled maintenance leads to lower Additional assets to cover lower availability Increased total ownership cost. Local buying, lack of CM discipline result in lack of equipment standardization and thus increased TOC. CFO Compliance Unlikely Supply & maintenance spending is widely distributed & unfocused, making CFO compliance unlikely Assistant Commandant for Engineering and Logistics (CG-4) 15

Homeland Security Case For Change CFO Non-compliance ANALYSIS OF 60 CFO UNITS Parts Usage History by NIIN . . . And This is Just the Inventory We Knew About!. . . We also (SO FAR) have found >$500 K Per Unit of Inventory We Didn’t Know About Assistant Commandant for Engineering and Logistics (CG-4) United States Coast Guard Situation • Units have been carrying no/low-demand inventory • Units have been carrying no-allowance inventory Impact • Less than 6% of demand inventory is on the allowance • More than 46% of the parts carried by the unit have no/low-demand are not on the allowance. • Difficult to find parts actually on board. • Some vessel classes are weight constrained • CGC MELLON alone had over 20 -tons of no demand parts removed at a value of $4. 9 M. 16

Homeland Security Case For Change United States Coast Guard CGC MELLON Example Situation • Excess inventory Weight Removed Repairable Value Consumable Value Parts Removed 40, 747 lbs $132, 000 $4. 9 million 41, 000 Impact • Difficult to find parts actually on board. • Some vessel classes are weight constrained Assistant Commandant for Engineering and Logistics (CG-4) 17

Homeland Security Logistics Transformation Tenet #1 United States Coast Guard Support the mission, support the field: While we have grown a culture of field unit “heroes” who battle mightily to keep their units operating, we need to shift that energy and responsibility to the logistics infrastructure that should be responsible for it, so that unit commanders and their personnel can focus on preparation and performance. Assistant Commandant for Engineering and Logistics (CG-4) 18

Homeland Security Logistics Transformation United States Coast Guard • A transformation of our business processes, Coast Guard-wide is underway – Will improve effectiveness & efficiency of our logistics processes & outcomes & – Will contribute to accountability/CFO Act Compliance Assistant Commandant for Engineering and Logistics (CG-4) 19

Homeland Security • Logistics Transformation Implications Status Quo: Outside of Aviation, we have: – High degree of reactive responsiveness by logistics providers to individual requirements of unit, District & Area Commanders – Spending is not directed at measurable readiness metrics or enterprise-level priorities • No clearly developed or articulated enterprise-level readiness priorities – Largely decentralized priorities, decision making, & spending in maintenance & supply – Lack of configuration control – Non-standard & poorly documented maintenance practices – Configuration data, maintenance & supply not linked – Lack of formal accountability (non-CFO compliant) – Highly agile, adaptable & reactive logistics at unknown cost Assistant Commandant for Engineering and Logistics (CG-4) • United States Coast Guard In the New Logistics Business Model we will have: – A set of CG-enterprise-level requirements (readiness-driven) – A formal requirements process to weigh & prioritize local needs – Spending & priorities driven by enterprise-level requirements • All logistics $’s centrally controlled & spent by the logistics organization on enterprise requirements – Standard Supply, Maintenance & CM • Compliance Program – Logistics providers accountable for providing assets & support IAW enterprise-level requirements – Little discretion at the local level over investment & logistics spending • Local desires/priorities subordinate to enterprise-level priorities. – However, we have to manage the risk of inability of the enterprise to quickly respond/adapt to changing conditions at the local level 20

Homeland Security Requirements Examples Statutory Requirements Federal Agency Business Requirements • US Code • OMB Circulars • CFR • JFMIP Publications • Executive Order Example: • Public Law “Evaluate and select capital asset investments that will support core mission functions performed by the Federal Government, and demonstrate projected returns on investment that are clearly equal to or better than alternative uses of available public resources. ” OMB Circular A 11 Example: “Survey real property under its control, maintain its inventory of real property at the absolute minimum consistent with economical and efficient conduct of the affairs of the Coast Guard, and promptly report to GSA real property that it has determined to be excess. ” 41 CFR 102 -75. 60 Assistant Commandant for Engineering and Logistics (CG-4) United States Coast Guard Best Practices (Derived Reqs. ) • Do. D Acquisition Policy • Configuration Mgmt • Aviation Business Model Example: “Prime Unit shall perform prototyping and verification of configuration changes prior any change in configuration. ” CONOP 21

Homeland Security Today’s Logistics Assistant Commandant for Engineering and Logistics (CG-4) United States Coast Guard 22

Homeland Security Future Operational Unit Support Construct Aviation Product Lines “Pushed” Products & Services Supporting Assets Engineering support, technical authority, supply chain management, technical documentation, including: Surface Forces Product Lines • Spares, maintenance manual, tools & test equipment, tech pubs • Depot maintenance (scheduled & unscheduled) C 4 I Product Lines United States Coast Guard • Materiel condition reports OPERATIONAL UNITS (Sector, AIRSTA, Cutter, TRACEN etc. ) • Contract field teams (oversee PBL/CLS support & procure spares) Shore Infrastructure Product Lines Assistant Commandant for Engineering and Logistics (CG-4) • Time critical technical order kit delivery 23

Homeland Security Commandant’s Intent United States Coast Guard “The inadequacy of the status quo as well as future requirements require that the Coast Guard develop and deploy an integrated, transformational business architecture that aligns with DHS and, above all, facilitates more effective mission execution. ” ADM Allen Confirmation Testimony Assistant Commandant for Engineering and Logistics (CG-4) 24

Homeland Security Maintenance: The Missing Link United States Coast Guard Why Improve Maintenance Planning? – Reduce burden on field units • Reduce time/effort to conduct maintenance – Drive our inventory requirements & improve accountability • Remember this? – Increase Safety • RB-S MISHAP Report: “DISCOVERED THE WIRING HARNESS HAD BEEN INSTALLED INCORRECTLY DURING LAST ENGINE CHANGE OUT WHICH CAUSED THE ENGINE WIRING TO CHAFF AND GROUND OUT TO THE ENGINE BLOCK. ” – Improve Reliability/Availability • Reduce maintenance-induced failures – Reduce Cost • Preventive is cheaper than Corrective Assistant Commandant for Engineering and Logistics (CG-4) 25

Homeland Security MPC Today Inconsistent Maintenance Procedure Cards 378 MPC- Change Bow Thruster Hydraulic Oil & Filter United States Coast Guard Situation • Different MPC standards for each community • Some non-aviation MPCs are vague • does not say “what” systems to tag out) • Some non-aviation MPCs do not quantify inventory requirements Impact • Chance for mishaps • Chance for self-induced CASREPs • Allows for non-standard maintenance Assistant Commandant for Engineering and Logistics (CG-4) 26

Homeland Security MPC Tomorrow Aviation Maintenance Procedure Cards United States Coast Guard Specific Tools Specific Inventory Collect Data Clear Cautions Detailed Procedures Assistant Commandant for Engineering and Logistics (CG-4) Detailed Graphics 27

Homeland Security Current State of Logistics Same Functions – Different Process Flows United States Coast Guard logistics is characterized by “stove-pipes” between current communities, who perform the same functions in different ways. s a Ex le mp LEGACY VESSELS LEGACY AIRCRAFT SHORE FACILITIES DEEPWATER ASSETS VLS ALMIS SAM LIMS Ø Acquisition Logistics Ø Maintenance Mgmt. Ø Supply Management Centralized Policy Decentralized Control Distributed Execution Centralized Policy Centralized Control Mix of Centralized and Distributed Execution Centralized Policy Decentralized Control Distributed Execution No Configuration Mgt No Inventory Mgt Vision is Centralized Policy Centralized Control Execution TBD . . . and None of These Families of Logistics IT Systems are Seamlessly Linked with CG Financial Management Systems. Assistant Commandant for Engineering and Logistics (CG-4) 28

Homeland Security Logistics Transformation Implementation Strategy Assistant Commandant for Engineering and Logistics (CG-4) United States Coast Guard 29

Homeland Security Achieving CFO Inventory Compliance United States Coast Guard FY 06 Focus & Accomplishments • Field Unit Inventory Repositioning Project • Primarily Addressed “The Symptom” • Targeted 694 field units – – Removed 3. 3 M parts worth over $160 M Redistributed $1. 9 M to units (cost avoidance) Saved over 96 K labor hours annually Reduced fuel consumption • Documented over 1, 000 Best Business Processes in Logistics for Future CG-wide Implementation – Logistics CONOP & Transformation Plans Assistant Commandant for Engineering and Logistics (CG-4) 30

Homeland Security Achieving CFO Inventory Compliance United States Coast Guard FY 07 Focus and Objectives – ICCP (Inventory Control and Compliance Program) • Begin to Address “The Cure” • Target “Completeness” – Provide Requirements-based Allowances (i. e. What you need!) – Provide detailed MPCs for 35% of missioncritical systems – Reduce Field-held Inventory & Putting in Place Repeatable Standard Processes – Putting New CM Practices in Place Assistant Commandant for Engineering and Logistics (CG-4) 31

Homeland Security • How Transformation Will Impact Operational Units United States Coast Guard CFO Compliance – Less to count, reduced CFO scrutiny • Improved Maintenance Documentation – All information needed to complete task • Parts push vice parts pull – Requirements driven allowancing – Account for what you have, don’t worry about what you need • Standard support practices & IT – Regardless of asset type • Centralized funding – Parts free to unit, controlled spending • Increased internal controls – Logistics compliance checks • 1 -800 Logistics – Simplified support chain, increased reliance on central authority • Cultural Change – Reward casualty prevention vs. response – Balance availability vs. support cost – Our strength became our weakness: unit autonomy Assistant Commandant for Engineering and Logistics (CG-4) 32

Homeland Security Supply Provisioning Process A Difficult Reality ORD Current Process: United States Coast Guard New Rqmts Assets Provisioning lists built without maintenance plan, or no parts information provided to unit at all. Missions Cu rre nt P ro Configuration & Maintenance Assistant Commandant for Engineering and Logistics (CG-4) ce ss Supplies Result: Technician hopes the part they need is onboard. If not, buy locally with unit funds. Procure “extra parts” to avoid downtime risk. 33

Homeland Security Sound Logistics United States Coast Guard Configuration Mission Requirement Maintenance (Driven by Enterprise Readiness Requirements & Data) I need a boat that goes fast! Gotta do the PMS on the boat Chief! Supply Pull the parts SK. Assistant Commandant for Engineering and Logistics (CG-4) 34

Homeland Security Business Processes First United States Coast Guard New Logistics Business Model (Standard Best Practices) Property - Acquisition – Environmental – Configuration - Maintenance – Supply – ILS Single CG Logistics IT Backbone Integrated with FM First We Get the Needed Business Processes in Place (There isn’t an IT Magic Pill) Assistant Commandant for Engineering and Logistics (CG-4) 35

Homeland Security Tip of the Iceberg United States Coast Guard CFO Compliance The Logistics Enterprise Assistant Commandant for Engineering and Logistics (CG-4) 36

Homeland Security CFO Act Compliance United States Coast Guard Balancing Availability with Compliance* STATUTORY COMPLIANCE OPERATIONAL AVAILABILITY *Compliance is not optional Assistant Commandant for Engineering and Logistics (CG-4) 37

Homeland Security Q&A United States Coast Guard Questions? U. S. Coast Guard Logistics Transformation Mr. Jeffery Orner Deputy Assistant Commandant for Engineering and Logistics (CG-4) 38