In the past, we've used the Installation Readiness Report (IRR) as an indicator of general conditions. But the current IRR cannot be crosswalked to real property inventories, thus it cannot be used to target investments needed to sustain improvements over the long

term.

We need a better set of measures for facility readiness, and have chartered a Department-wide effort under the auspices of the Installations Policy Board to standardize individual facility records in real property inventories, and improve the quality of data underpinning IRR summaries. The first round of improved IRR data is scheduled for receipt in October 2004.

Base Realignment and Closure (BRAC) in FY 2005

The Secretary's mandate to transform America's defense for the 21st Century will be impossible unless we quickly shed unneeded infrastructure now on our books, and streamline operations at the remaining facilities. Therefore, on 15 November 2002, Secretary Rumsfeld signed a memorandum officially establishing the process for recommending base closures and realignments in 2005. This year we are developing rules for the many investigative tasks necessary to make informed BRAC decisions. We will also begin to conduct the detailed analyses to reshape the Department's infrastructure to better match its future force structure requirements. Our goal is to present transformational closure and realignment recommendations to Congress by May 2005.

REALIGN SUPPORT TO THE WARFIGHTER

Transformation of our military forces hinges on being able to reduce redundancy, focus organizations on executive goals, flatten hierarchies, and cut cycle times in the decision process. If we can find ways to make real progress in these areas, small changes will yield huge gains in technology transfer, which in turn will help drive more effective operational performance.

Major Defense Acquisition Program (MDAP) Cycle Time

Acquisition cycle time is the elapsed time, in months, from program initiation until the system attains initial operational capability—that

is, when the product works as designed and is fielded to operational units. A number of years ago, we began measuring the average cycle time across all major defense acquisition programs, or MDAPs (new equipment or material systems that cost more than $365 million in FY 2000 constant dollars to research and develop, and more than $2 billion to procure and field). Since more than a third of the annual defense budget goes to buying and operating major weapons systems, we wanted to understand how quickly new technologies were moving from the drawing board to the field. This performance measure is a leading indicator of technology transfer-typically, the faster a program moves toward fielding, the quicker associated operational improvements can be introduced to the force, and the easier it is to control overall program costs.

During the 1960s, a typical acquisition took 7 years (84 months) from initiating research and development activities to achieving initial operating capability. By 1996 a similar acquisition required 11 years (132 months) from program start to initial operating capability. To reverse this trend, we have set a goal for reducing the average acquisition cycle time for major defense acquisition programs started since 1992 by 25 percent-to less than 99 months or about 8 years. Over the long term, we want to cut average cycle time to less than 5-1/2 years (66 months) for all MDAPs started after FY 2001. To achieve that objective, the Department is introducing improvements to development and production schedules similar to those it initiated for managing system performance and cost.

MDAP Acquisition Cost Growth

Like cycle times, the pace at which acquisition cost increases over time is an indicator of program performance. Acquisition cost growth measures the difference, in percentage, between total acquisition costs estimated in the current-year President's Budget and those actually incurred during the execution of the past-year's budget. The population of programs included in this comparison is all MDAPs common to both budgets -common programs are dollarweighted.

Although costs can grow for various reasons, including technical changes, schedule slips, programmatic changes, or overly optimistic cost estimates, a steady or downward trend line is a solid indicator

of how efficiently acquisition activities are being managed across the Department. Our near-term objective is to be on a downward trend by the end of FY 2003, toward an ultimate goal of no acquisition cost growth.

MDAP Operating and Support (O&S) Cost Growth

We are developing a similar measure to monitor O&S cost growth. This new measure will monitor the growth in O&S costs- that is, the costs of people and material required to operate and maintain systems. It will compare the difference, in percentage, between estimates of O&S costs associated with the current-year President's Budget and those estimates done for the past-year's budget. This measure will be an indicator of how effective our efforts are at designing systems that cost less to support and operate. This indicator, when combined with the performance indicator for acquisition cost growth, will represent the entire life-cycle cost of a typical new defense acquisition, like a new tactical jet fighter.

Our goal is to be on a downward trend for O&S cost growth by the end of FY 2003, toward an ultimate goal of no cost growth. This is a developmental performance measure—the first data will be ready for analysis soon.

Customer Wait Time (CWT)

Response time is a commonly used business measure for evaluating whether an organization's logistics operations are organized to deliver effective, efficient performance. DoD adapted this best-practice to military logistics in FY 2001, when we began measuring the elapsed time from a customer's order to receipt. The metricCustomer Wait Time, or CWT, tracks orders filled from assets on hand at the customer's military installation or naval vessel or through the DoD wholesale logistics system.

Last year, the average DoD-wide CWT was 16 days-the goal for FY 2004 is to reduce wait time to 15 days on average. CWT is a transformational approach to evaluating performance. In the past, good logistics meant holding large inventories-today, all the military services have agreed on a common set of business rules for monitoring the performance of the entire logistics enterprise.

Secretary Rumsfeld has created a Senior Executive Council to serve as the Department's senior business council. Members include the Secretary, the Deputy Secretary, the three secretaries of the military departments, and the Under Secretary of Defense for Acquisition,

Technology and Logistics. The idea was to bring senior civilian resource managers to work together on the integrated economy of defense- to build a common agenda and drive change.

Over the past 12 months, this Senior Executive Council has provided a roadmap to improving how we manage resources, systems, and people.

FY 2003 Actions to Drive Excellence in Core Processes

Institutionalize performance management by aligning management activities with the President's Management Agenda and the DoD balanced scorecard for risk management; associate performance metrics with at least 20 percent of the resources requested each year.

• Improve business practices by pooling unused cell phone minutes, recovery auditing, web-based invoicing, and improving financial practices and management of the Defense Working Capital Fund.

Implement net-centric business transformation and e-government by transitioning from a primary stovepiped, platform-based information technology (IT) environment to a more customerfocused, web-enabled, net-centric environment. (The FY 2004 budget invests $3 million in IT education and training; $10 million in initiatives to accelerate implementation of net centricity.)

Pursue commercial activities and competitive sourcing programs via the continued review non-core functions for competitive sourcing. The FY 2004 budget supports studying 10,000 fulltime equivalents (FTEs). The Department will study 226,000 FTEs over the FY 2004-2009 timeframe.

Reengineer the personnel security program by seeking statutory authority to transfer the personnel security investigation function currently performed by the Defense Security Service to the Office of Personnel Management, thus streamlining activities and eliminate redundancy. Projected savings are approximately $160 million over the FY 2004-FY 2009 timeframe.

Divest document automation and production service in the Defense Logistics Agency beginning in FY 2004, allowing the private sector to compete these services. Projected savings are approximately $80 million over the FY 2004-2009 timeframe.