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Release No: 617-98
December 02, 1998


Representatives from a group of Department of Defense support organizations, operating as working capital funds, will receive the prestigious Hammer Award of the National Partnership for Reinventing Government at a Pentagon ceremony on Dec. 7, 1998. This team is being recognized for significantly streamlining operations--cutting costs by more than $11 billion and reducing more than 110,000 positions over a six-year period.

The Hammer Award, in the form of an ordinary hammer mounted on a plaque, symbolizes the Clinton Administration's efforts to build a government that works better and costs less.

The winning recipients, known as the Defense Working Capital Fund Reinvention Team, are suppliers of goods and services to other parts of the DoD. (Just as in private business, these activities "charge" DoD components for services provided and are then reimbursed by their DoD customers for those costs. Thus, the funds "revolve" within the Department of Defense.) This reinvention team is made up of 40 representatives from the Department of Defense Revolving Fund staff in the Office of the Under Secretary of Defense (Comptroller), the Defense Information Systems Agency, the Defense Finance and Accounting Service, the Defense Logistics Agency, the Department of the Army Working Capital Fund, the Department of the Navy Working Capital Fund Aviation Depots, and the Department of the Air Force Working Capital Fund.

Faced with declining budgets and changing workload, reinvention team members undertook a series of efficiency and cost cutting measures. Improvements included establishing clear customer/provider relationships, adopting private market mechanisms for resource management, and using standard accounting policies to display full costs. Consequently, revolving fund customers now are charged less, have improved cost data to make repair vs. buy decisions and use funds more wisely. In addition, locations and functions have been consolidated, drastically reducing budgets and personnel requirements.

These improvements have led to a 16 percent reduction in revolving (working capital) fund operations: costs taper from $72.6 billion in Fiscal Year 1993 to $61 billion in Fiscal Year 1999. Also, the number of people employed in logistics working capital fund operations has dropped by 38 percent: from 290,310 to 179,634 positions during the same years.

Examples of streamlined operations include:

Defense Information Systems Agency: Successfully migrated 59 small data centers into 16 larger Defense megacenters, with an accompanying reduction of 2,700 people. These centers maintain computerized accounting, payroll, and other record services across the DoD. DISA's streamlined operations significantly cut costs: in Fiscal Year 1992 the rate for mainframe computer processing use was $242 per hour. This rate fell to $107 per hour in 1997 and will drop further-to $52 per hour- in 2000. Streamlining initiatives thus far have produced net savings of $500 million per year.

Defense Finance and Accounting Service: Consolidated finance and accounting operations from 332 offices in FY1991 to ultimately, five centers and 19 operating locations. Savings of $120 million annually will accrue when completed. In addition, DFAS has reduced 27 civilian payroll systems to two-and cut military pay systems from 22 to 10. Similarly, 47 of 197 original accounting systems have been eliminated. By 2003, the plan is to have only 23 accounting systems. Personnel have fallen from 31,000 in Fiscal Year 1993 to 19,000 in Fiscal Year 1997.

Defense Logistics Agency: Implemented specialized computer programs to rapidly review multiple workload/cost mix changes in operations. These analytical capabilities improved the organization's ability to oversee operations and manage their $14 billion annual budget. DLA also consolidated supply inventory control points and closed unneeded distribution depots, generating large reductions in DoD infrastructure costs. Within DoD, DLA has led efforts to adopt innovative approaches to logistics such as electronic-based purchasing, electronic billing, and direct vendor delivery programs. These new programs reduce costs and improve service.

Department of the Army Working Capital Fund: Reduced the cost of operations by $4.3 billion -or 31.4 percent--in its supply, depot maintenance and arsenal programs between Fiscal Year 1993 and Fiscal Year 1997 by "doing more with less." These efforts included reducing 7,460 employees, consolidating functions, closing unneeded facilities, and adopting new, more efficient processes. One of these new management approaches was the development of computer based information systems and reporting techniques called the "total asset visibility" program. Using this program, the Army has gained better control of its worldwide, $10.5 billion inventory of parts, supplies, and war reserve materiel. The program has led to more timely support to customers, avoided $300 million in unneeded purchases, and reduced customer prices by $559 million over three years.

Department of the Air Force Working Capital Fund: Cut costs by more than $3.3 billion or 15.9 percent between Fiscal Year 1993 and Fiscal Year 1997, largely through "right sizing" its depot and supply operations to match military force reductions in the Air Force. This effort has included closing and consolidating depot facilities, reducing more than 20,932 personnel, realigning workload responsibilities for thousands of repair items, and adopting new logistics concepts. As workload was realigned from closing facilities, Air Force managers have devised new maintenance concepts-by updating repair processes, by tailoring work to specific customer requirements, and by applying the latest production technologies, thus reducing "supply pipeline" times. Consequently, costs have dropped and service levels improved.

Naval Aviation Working Capital Funds: Successfully reduced the number of depots from six to three. During this downsizing, Depot teams successfully managed the transition of workload from the closing to the remaining facilities with minimal impact on fleet operations. At the same time, streamlined norms and standards (hours planned to complete specific repairs and overhauls of airframes and engines) led to more efficient repair efforts. For example, the Navy has established new phased depot maintenance programs for the P-3 and other aircraft. These programs allow for a more time-phased approach to maintenance activities and help to minimize costs on older aircraft. Since Fiscal Year 1993, the depots have reduced operating costs by $620 million and reduced more than 6,670 employees. Overall, Navy Working Capital Fund Activities have reduced costs by $2.9 billion and personnel by more than 55,500.

Under Secretary of Defense (Comptroller) William Lynn has applauded these achievements. He said, "Department of Defense Revolving Fund, Military Service, and OSD employees working together in various teams have been able to reinvent and re-engineer new methods of doing business. In the process they have improved service and empowered customers to do more with less. Revolving funds have made a major contribution to cost consciousness in the Department of Defense."

The Hammer Award will be presented on Dec. 7, 1998 at 1:30 p.m. (EST) in the Pentagon Auditorium, Room 5A1070. Media interested in attending should contact Susan Hansen at (703) 693-6858.

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