SAS® Arms US Air Force Materiel Command with Cost Intelligence

Air Armament Center Makes ABC Work: Reduces Costs and Cycle Times, Justifies Requirements

Equipping the United States and its allies with sophisticated weaponry, the Air Force Materiel Command's Air Armament Center (AAC) is responsible for developing, acquiring, testing, deploying and sustaining all air-delivered weapons. It's a vital mission, but like most government agencies today, the AAC is trying to do more with less.

"We are in a very resource-constrained environment," explains Michael McCain, a management analyst in the AAC's Plans and Programs Directorate. "Accordingly, the AAC is focused on knowing the details of what we do, what we produce and what it costs to provide those services." Headed by Hilory Surmiak, the Plans and Programs Consulting Branch oversees foreign military sales (FMS) and process improvement efforts for the AAC.

Using SAS solutions for activity-based costing (ABC), combined with a Web-based data collection warehouse designed by Asatte Systems Inc., McCain has led the effort to improve the utilization of AAC's scarce resources. With their new system, McCain and his team, comprised of MSgt Cameron Kuypers and Janet Lucas, can:

• Identify individual man hours that support specific processes.
• Develop cost justifications for AAC services.
• Correct funding and mission disconnects.
• Categorize work priorities
• Identify non-value-added work.

According to McCain, the solution provides the necessary data, in the format needed, to help leaders solve enduring resource utilization issues, including a strategic objective to reduce cycle-times by 50 percent. During the recent planning stages of the annual Air Armament Summit, for example, ABC helped trim more than 565 man hours – a 42 percent reduction in cycle times between 2002 and 2003.

"ABC gives us much more insight into how our resources are consumed," says McCain. "Before using the SAS solution, we had no way to consolidate all of our fragmented and parallel improvement efforts. Now we have a system to answer recurring questions regarding cost and performance management."

Divest to Reinvest
McCain and his team abide by the new mantra, "Divest to Reinvest," which encourages all Materiel Command units to eliminate nonessential policies and programs, applying new ones that generate higher productivity and provide increased customer support.

The objective has become more of a mandate since the Defense Security Cooperation Agency (DSCA) enacted Performance Based Costing of foreign military sales – a DoD-wide effort to align costs and resources, and to allocate funds from weapons sales to the correct cost centers. Implemented by the Air Force Security Assistance Center (AFSAC), this effort provides a valid way for the DoD to quantify the cost of doing business.

Thanks to their Web-based data warehouse being tightly integrated with the ABC solution, McCain's group is providing robust reporting and analysis capabilities previously unavailable within AAC. In fact, McCain says he has leveraged a relatively modest ABC investment to support a growing customer base, including the DSCA and the local FMS community by offering a solution that manages the collection of FMS work hours and allows the easy alignment of resources with specific work.

In particular, the results have helped Peggy Shepherd, management analyst and foreign military sales manager with the AAC, secure funding for new positions and realign administrative funds to support the Joint Direct Attack Munitions (JDAM) program. Orders for this new weapons system have increased dramatically during the war on terrorism, but until now, she was unable to prove the need for more staffing in this area.

ABC helped Shepherd find funds for five new AAC staff positions without increasing the overall administrative budget. Her analyses revealed other cost centers that were receiving more administrative funds than necessary, so a simple realignment solved the problem.

"We've been able to justify realigning resources and funding new areas, so that our sources of funds and the placement of our requirements support the AAC's mission and stand up to higher levels of scrutiny," says Shepherd. "We've also facilitated policy changes at all levels by using the data to gain support for those changes."

One recent policy change allowed Shepherd to establish a staff of permanent employees to replace term positions that fluctuated with each new munitions contract. She calculates that this single change has reduced cycle times by 88 percent, allowing the AAC to save more than $300,000 per year in labor costs alone.

Distinguished Recognition
Since implementing their complete ABC solution, the AAC's list of process improvements, cycle time reductions and policy changes is impressive. Perhaps more importantly, however, the system has drawn the interest of many high-ranking officials.

McCain recently built an ABC model to explore the work of the Commander's Action Group – a team of officials known as "the commander's brains." Requested by Maj. Gen. Robert W. Chedister, commander of the AAC, the model analyzes the services that unit provides, allowing the general to explore man hours and costs for specific processes, outputs and customers.

Another recent project addresses the President's Management Agenda – President Bush's program to improve government performance. Michael Dominguez, Assistant Secretary, United States Air Force Manpower and Reserve Affairs, has asked McCain and his team to help the Air Force fulfill the agenda's objectives. "This will be a huge feather in our cap, because our reputation and our solutions are being recognized at some extremely high levels," McCain enthuses.

Whether the requests come from AAC cost centers or from high-ranking officials, McCain says SAS ABC has allowed the Air Force to answer such timeless questions as: How are we utilizing our resources? What are the costs of our processes and outputs? How can we effectively calculate unit costs as benchmarks for improvement? "These are the questions that leaders continuously ask. Now we have a system that can provide the answers," says McCain.

"ABC has forced us to think about better management, so we can leverage these lessons and apply them to other areas," says McCain. "Essentially, we're building information that will help us manage the Air Force more effectively."

Copyright © SAS Institute Inc. All Rights Reserved.