Portfolio Analysis. Making the Most of Our Dollars and Sense

Transcription

1 Portfolio Analysis

2 Fiscal Environment Resources are becoming scarce the Department of Defense cannot expect America s elected representatives to approve budget increases each year unless we make every dollar count. -Secretary Gates, Aug 2010 Continuing budget cuts Budget Control Act Sequestration Units are in survival mode $487B taken $500B at risk 2

3 Background FY13 funding guidance id d reduced contract spending Developed contract analysis expertise Nov 12-Mar 13 Developed process applied at test base Apr-Jun 13 Adapting as we continued process into FY14 Shared expertise through some training 3

4 Efforts Completed projects 12 AFBs/1 MAJCOM/AF component of COCOM 225 contracts analyzed $347M analyzed, $66M recommended, 19% saved In progress 7 AFBs Future efforts Continue reviewing all bases under two MAJCOMs Expand into other areas Look for commonalities/trends 4

5 What is Portfolio Analysis? Process of leveraging multiple data sources to create a comprehensive picture of a unit s contracts Critically examine portfolio to identify potential areas for short and long-term cost savings Helps to monitor and continually analyze contract efficiency 5

6 Cross-Functional Team Contracting process owned by contracting, but requires many players to make the process work Key players include (but are not limited to): Contracting Contracting officer representative (COR) Project managers Functional SMEs Resource advisors FM 6

7 Period of performance (POP) Analyzing Contracts Items to Consider Is the contract close to the end of its performance? Should the option years be executed as is (if option years exist)? Contractor performance Are expenditures in line with budget/schedule? Are they meeting schedule or proposed deliverables? Validating requirements Is the contract still essential to organizational objectives? Has the mission changed so that parts or all of the contract are not longer required? 7

8 Utilization rates Analyzing Contracts Items to Consider Does past execution agree with current projections? Look for redundancies Are there other existing contracts providing the same service or procuring the same goods? Look for unique approaches Insourcing Strategic sourcing Redefining the requirement Restructure the contract 8

9 Repeat process until objectives are met Portfolio Analysis Process Identify Key Objectives Collect Data Sort Data Recommend Contracts for Review Analyze Contracts Integrate Analyses Make Recommendation Evaluate if objectives were achieved Systematic approach of building and examining a contract portfolio to help identify potential areas for short and long-term cost efficiencies Process is repeated until objectives have been met Yes No 9

10 Sample Portfolio Summary 1. Key Objective: Reduce 5XX obligations 10% Based on FY12 direct obligations of $22.0M 2. Collect data Category Count Dollar $K Description Master 40 14,100 Current contracts Renew Replacement contracts 1-Time 80 5,100 One-time purchase MIPR 10 2,100 Funds not executed locally Total ,700 Assume MIPRs stay stable Assume 1-Time can be reduced 10% Must cut remaining items by $1,660K 10

11 Portfolio Analysis 3. Sort Data Single Specials, Six months remaining, $ amount, IDIQ Commander s interest items Weighted Mission Critical Spt Critical Non-Critical Type FFP Cost-Plus $ Amount $50K-$249K; >$750K $250K-$750K <$50K PoP Left 6-36 Months >36 months <6 months 4. Result is a list of contracts to review 11

12 Portfolio Analysis Benefits Provides a trade space of options Allows decision makers to change different variables to achieve goal Shifts culture toward one where requirements are analyzed more routinely Allows for the removal/revision of contracts in concert with requirement changes 12

13 Portfolio Analysis Examples Refuse collection Grounds maintenance Postal services IBM licenses Printer rental Deployment management support 13

14 Refuse Background Refuse collection and disposal FFP; POP 1 Oct 30 Sep; 4 OYs (currently in BY) FY13 baseline: $483K Alternatives Alt 1: Status Quo ($26K savings) Alt 2: De-Scope Example 2-1: Reduce frequency Low ($182K savings) Example 2-2: Reduce frequency & containers Moderate ($271K savings) Example 2-3: Centralized collection Severe ($321K savings) Alt 3: Insource ($123K savings) 14

15 Recommendation: Ex 2-2: De-scope Reduce Frequency Moderate Saves $271K (56%) Refuse Increases dumpster space utilization from 8% to 22% Use provided de-scoping tool to determine optimal pick-up frequency Alternative 2: De-scope Alternative 1: Status Quo 2-1: Low 2-2: Moderate 2-3: Severe Alternative 3: Insource Alternative Cost $ 436,740 $ 301,709 $ 212,748 $ 162,368 $ 360,059 Benefits High Moderate Moderate Low Moderate Risk Low Low Low Moderate High 15

16 Grounds Maintenance Background BOS Contract - provides grounds maintenance services FFP; POP 1 OCT 30 SEP; 5 OYs (currently in 3 rd OY) FY13 baseline: $1,528K Alternatives Alt 1: Status Quo ($455K savings) Alt 2: Low Reductions ($754K savings) 50% conversion of Improved, Modified Improved and Xeriscaping Alt 3: Moderate Reductions ($903K savings) 75% conversion of Improved, Modified Improved and Xeriscaping Alt 4: Severe Reductions ($981K savings) All acreage moved to Unimproved standard Exceptions: BASH areas remain Semi-Improved 16

17 Grounds Maintenance Recommendation: Alt 3: Moderate Reductions Saves $903K (59%) Maintains minimal safety/appearance levels 17

18 Postal Services Background Sort and distribute mail to dorm residents and TDY students FFP; POP 1 OCT 30 SEP; 4 OYs (currently in 2 nd OY) FY13 baseline: $58K Alternatives Alt 1: Status Quo Alt 2: De-scope Example 2-1: Reduce to One Contractor ($5K savings) Example 2-2: Reduce Customer Service Hours 50% ($31K savings) Example 2-3: Reduce to One Contractor and Eliminate Customer Service Hours (infeasible) Alt 3: Insource Example 3-1: Merge OMC and PSC ($58K savings) Example 3-2: Insource Delivery ($9K savings) 18

19 Postal Services Recommendation: Ex 3-1: Merge OMC & PSC Duties Saves $58K (100%) Uses existing military Limit base distro run to accountable mail only Risk exists with deployments/pcs & high volume times 19

20 IBM COGNOS License Background Funds the licensed use of IBM s COGNOS Business Intelligence software FFP; POP 1 OCT 30 SEP Gross Obs. FY13 $233K Alternatives Alt 1: Status Quo Alt 2: De-Scope 50% ($116.7K savings) Alt 3: Do Not Renew (Infeasible) 20

21 IBM Cognos License (cont.) Recommendation: De-Scope 50% Annual savings of $116.7K Increased wait time for system generated reports IBM COGNOS License Type Current Price Current Quantity Proposed Quantity Administrator $ 2, Software & Development Kit $ 1, Data Manager Engine PVU $ Metrics $ Advanced Business Author $ Totals $ 233, $ 116, Savings $ 116,

22 Printer Rental Background Renting 70 Xerox multifunction printing devices FFP; POP 14 MAR 30 SEP; 4 OYs (currently in 1st OY) FY13 $212K Alternatives Alt 1: Status Quo Alt 2: Cut Number of Devices ($99K savings) Alt 3: Purchase Less Expensive Devices ($66K savings) Alt 4: Purchase Tabletop Devices ($142K savings) 22

23 Printer Rental Recommendation: DNR; Purchase Tabletop Devices Saves approximately $142K annually No operational impact Have the option to purchase several higher grade printers and still save 23

24 Background Deployment Management Support Subject matter expertise in deployment management FFP; POP 1 OCT 30 SEP; 4 OYs (currently in 3 rd OY) Baseline cost: $410K Alternatives Alt 1: Status Quo Alt 2: Insource ($192K savings) Alt 3: Reduce Contractor Positions by 1/3 ($137K savings) Alt 4: Do Not Renew Contract ($410K savings) 24

25 Deployment Management Recommendation: Reduce Contract by 1/3 Saves $137K annually Minimal operational impact Support Current deployment branch will pick up workload Manpower study to validate requirements then insource positions 25

26 Summary Diminishing supply of dollars You must proactively lead the effort Team effort 26

27 QUESTIONS? (720) /2101 DSN: /2101