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Performance Results for FY2002. The Department saw a minor increase in average acquisition cycle time for FY2002. Several programs were examined and then restructured with improved cost and schedule estimates. Although only a few programs have been restructured, the extensions have affected the average acquisition cycle time. The averaging nature of this measure means that dramatic improvements would be required in individual programs during FY2003 to reduce the average.

Performance Metric: Reduce Major Defense Acquisition Program (MDAP) annual rate of acquisition cost growth (percentage) . , .-... .'

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Metric Description. Acquisition cost growth measures the difference between the acquisition costs in the current-year's President's budget and the previous-year's budget, divided by the acquisition costs for the previous-year's budget, expressed as a percentage. The population is al! Major Defense Acquisition Programs (MDAPs) common to both current-year and previous-year budgets. A dollar-weighted average is calculated for the common MDAPs and adjusted for changes in quantity or inflation. Acquisition cost growth can occur for various reasons, including technical risk, schedule slips, programmatic changes, or overly optimistic cost estimates. Our reform initiatives seek to reduce cost growth from all sources, providing an output target for procurement managers of individual systems, as well as for the aggregate procurement programs of the individual Services. The objective is to be on a downward trend by the end of FY7003 toward an ultimate goal of no acquisition cost growth. Managerial responses are expected to include both specific cost-control initiatives and process changes.

V&V Method. Data on acquisition cost growth for MDAPs are collected from Selected Acquisition Reports (SARs), which are published by the Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics. SARs and the underlying data, which are maintained in the Consolidated Acquisition Reporting System (CARS), are used to veriFYand validate the measured values. There are no known SAR data deficiencies. The December SAR, which reflects the next President's budget, is used for calculating cost growth for the previous fiscal year If annual acquisition cost growth does not decrease, the SARs provide data useful in isolating specific causes. The DoD interim guidance on the defense acquisition system requires SARs to be submitted for MDAPs.

Performance Results for FY2002. The FY2002 actual of 7.4% (based on preliminary FY2O04 budget data) meets the FY2002 target of a downward trend toward no cost growth. The actual performance results for FY2003 will not be available until release of the December 2003 SAR in April 2004

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Metric Description. Customer Wait Time (CWT) measures the elapsed time from order to receipt when a customer orders an item of material. The customer's order may be filled from assets on hand at the customer's military installation or naval vessel, or through the DoD wholesale logistics system. For purposes of this Enterprise Level Metric, CWT includes orders for spare and repair parts ordered by organizational maintenance activities. CWT captured for orders considered below enterprise level are maintained by each of the Military Services and the Defense Logistics Agency.

VAV Method. Data on transaction volume and order-receipt times are collected monthly from various Military Service systems. The Military Services roll the inputs from their respective systems into a single Service report in spreadsheet format that they submit to the Defense Automatic Addressing System (DAAS). DAAS then calculates a weighted average (based on the relative volume of transactions) for the entire DoD, which is the figure reported above. All Military Service inputs are based on an agreed-upon set of business rules. This methodology helps to ensure consistent treatment of data and valid comparisons across DoD Components.

Performance Results for FY2002. Reporting of CWT began in FY2001. The DoD set a reduction target of one day per year for FY2002, FY2003, and FY2004 from the baseline of FY2001 actual data. FY2002 actual of 16 days exceeded the target of 17 days.

Performance Metric: Provide explicit guidance for budget and performanceIntegration '■ '.; ■■

Metric Description. Consistent with the President's Management Agenda (PMA) initiative to integrate budget and performance, the Department is adopting a DoD-wide approach to establishing performance outputs and tracking performance results. The Deputy Secretary of Defense, in Management Initiative Decision (MID) 910, "Budget and Performance Integration Initiative," December 20, 2002, informs the DoD Components that beginning in February 2003, each Component will be graded on its status and progress in:

♦ displaying the linkage of plans, outputs, and resources in budget justification materials;

♦ expanding the treatment of metrics in the FY2004 congressional justification materials; and

♦ establishing a quarterly system of reporting on progress made toward achieving goals.

MID 910 directs the Components to associate performance metrics with at least 20% of the resources requested in their FY2004 congressional justification. This requirement increases to 60% for the FY2005 budget, 80% for the FY2006 budget, and 100% for the FY2007 and beyond budgets. The Department will reiterate the guidance in the annual Budget Justification Book Material data call in the outyears.

V&V Method. The following outlines the development and publication of the guidance that has lead to the accomplishment of this outcome:

♦ Develop MID 910—October 2002

♦ Complete formal coordination of MID—November 2002

♦ Obtain signoff of final MID by the Deputy Secretary of Defense—December 20, 2002

♦ Develop guidance for inclusion in the FY2004/2005 Budget Justification Book Material data call—December 2002

♦ Publish Budget Justification Book Material data call—July 2003

♦ Reiterate guidance for outyear data calls—annually

Performance Results for FY2003. The objective to provide explicit guidance for budget and performance integration to the DoD Components was accomplished in December 2002 with the promulgation of MID 910. Guidance also has been provided in the annual Budget Justification Book Material data call. No further reporting of this metric is necessary. The Office of Management and Budget upgraded the PMA status (budget/performance integration) rating to yellow based on the improved linking of performance and budget information.

REPORT OF THE SECRETARY OF THE ARMY

THE ARMY - AT WAR AND TRANSFORMING

In October 1999, we unveiled our vision for the future - "Soldiers, on point for the -Nation, transforming, this,-the most respected -array- in. the_:world,- into -a-strategically... responsive force that is dominant across the full spectrum of operations." The attacks against our Nation on 11 September 2001 and the ensuing war on terrorism validate The Army's Vision - People, Readiness, Transformation - and our efforts to change quickly into a more responsive force.

While helping to fight the Global War on Terrorism, The Army is in the midst of a profound transformation. Readiness remains our constant imperative. Transformation advances on three broad axes: perpetuating The Army's legacy by maintaining today's readiness and dominance; bridging the operational gap with an Interim Force of Stryker Brigade Combat Teams; and fielding the Objective Force to fight and win conflicts in the years beyond this decade.

The Army - Serving Today, Balancing Risk, Managing Transformation

Soldiers are the most precise and responsive means to strike and then control enemy centers of gravity on the ground. American Soldiers are the basis of a flexible force that accomplishes missions in non-linear battlespace by integrating innovative technologies and techniques with current systems and doctrine. Our people adapt under the harshest conditions, whether in the deserts of Kuwait and the Sinai, the mountains and rice paddies of Korea, or the tropics of the Democratic Republic of Timor-Leste.

Demanding commitments mean we must nurture a balance between current and nearterm readiness and Army Transformation to meet future challenges. We accept reasonable operational risk in the mid-term to fund Army Transformation to the Objective Force. To avoid unacceptable risk, we are monitoring the current operational situation as we support the Combatant Commanders in the war against terror, conduct homeland defense, and prosecute the long-term effort to defeat transnational threats. We have designed and implemented the Strategic Readiness System (SRS) to provide a precision, predictive tool with which to monitor The Army and make appropriate adjustments to preserve current readiness. Our Nation's surge capacity in industrial base further reduces current risk by keeping production lines warm and responsive. Our first Stryker Brigade Combat Team will provide the Combatant Commanders with a new capability to further mitigate operational risk - even as we transform to the Objective Force.

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