Lean Six Sigma

Procure to Pay PPAWG Meeting

Procure to Pay TeamJune 6, 2012

Lean Six Sigma

P2P InitiativesHow would this work?

P2P Initiatives &

ReqmtsBEA Updates OIPT & IRB

Enforcement

System Process

Compliance

Lean Six Sigma1. Exhibit Line Item Numbers

Correct use of Exhibit Line Items

2. Streamlining External Acceptance.Need to inform community of processes for acceptance external to WAWF

3. Contract Deficiency Report Data-baseUse data-base to identify and isolate problems

4. Concurrent Mod Rules Identify rules for processing multiple modifications

5. Unit of MeasureIdentify standard to be used and services to facilitate those standards

6. Use of Payment Instructions and Info-SLINs.Processing rules for multi-funded items

7. Requirements Handshake Procedures.Controls and Procedures ensure the ERP Commitment Aligns to Obligation.

8. MIPR Business Process Re-engineeringDevelop an electronic process for MIPRs

9. Contract Data Electronically Used By Financial Systems Financial system need to consume electronic feeds of contract and closeout data.

10. Ability to Code Cost Type Contracts for Payment. Payment without an acceptance or deliverable must be accommodated based on contract provisions

11. Appropriate Calculation of Prompt Payment Act Interest Penalties Ensure to correct rules are being applied for each payment type.

12. Inspection & Acceptance DoDAACsValidate inspection & acceptance DoDAACs prior to contract award

13. Funding & Pay Office DoDAACs Consistently identify pay offices and funding orginizations

14. Integrity of Transaction Identifiers Consistent use of globally unique traceable document numbers

15. Standard Line of AccountingCreate a standard construct for the LOA

Quick Win1st Wave2nd Wave

P2P Cross-cutting Initiatives

Lean Six Sigma

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# Topic OPR

Quick Win

1 ELINs David Guinasso

2 Streamlining External Acceptance David Guinasso & Drew Morgan

3 Concurrent Mod Rules Bruce Propert

4 CDR Data-base DFAS – Ben Novotny

5 Unit of Measure Bruce Propert

1st Wave

6 Contract Data Electronically to Financial Systems

Drew Morgan & Bruce Propert

7 MIPR BPR Rodney Gregory & Bruce Propert

8 Ability to Code Cost Type Contract for Payment

DFAS

9 Appropriate Calculation of Prompt Payment Act Interest Penalties

DFAS

10 Requirements handshake procedures. Drew Morgan & Bruce Propert

11 Use of Payment Instructions and InfoSLINs David Guinasso

12 Inspection & Acceptance DoDAACs Bruce Propert

13 Funding & Pay Office DoDAACs L Sumpter/D Morgan

2nd Wave 14 Integrity of Transaction Identifier TBD

15 Standard Line of Accounting Drew Morgan

Lean Six Sigma#1 Exhibit Line Item Numbers (ELINs)

Process Gap Initiative(s) ImpactPriced ELINs are being sent as attachments to contracts rather than as part of the data in the contract resulting in manual processing.

•Eliminate the loophole in the regulations that allows priced line items not to be included in the contract data.•DPAP will issue a memo and initiate a PGI case to the DFARS.

The Automatic Payment of Invoice(API) rate for ELINs is 22% vs. 56% for all invoices.

Service and DLA Action: Train the workforce and implement the policy change in systems

Outcomes: Reduce manual payments; achieve efficiencies. Make more contract actions available as data.

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Lean Six Sigma#2 Streamlining External Acceptance

Process Gap Initiative(s) ImpactComponents have Receipt and Acceptance ((R&A) systems integrated into logistics processes. WAWF is the single face to industry for submitting R&A documents.

• A process exists for integrating component R&A with WAWF to support both single face to industry and Service integrated systems.•Process needs to be explained to emerging systems so that they fully understand their options and maximize efficiencies.

Ineffective interface requirements

Service and DLA Action: Train the workforce and implement the policy change in systems

Outcomes: Maximize use of automated systems while maintaining single face to industry.

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Lean Six Sigma#3 Contract Deficiency Report (CDR) Data-base

Process Gap Initiative(s) ImpactErrors in contract structure and formulation lead to down stream problems with payment and delivery and drive manual processing.

Develop reporting capability for CDRs in EDA. Deployment targeted for November 2012.

Errors lead to inefficiencies and inaccurate reporting.

Service and DLA Action: • DFAS to analyze CDRs and identify issues •Components totrain the workforce and implement the policy change in systems

Outcomes: Improved quality of contract documents.

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Lean Six Sigma#4 Concurrent Modification Rules

Process Gap Initiative(s) ImpactRules for applying multiple modifications to a contract are unclear.

• Rules for applying concurrent modifications have been published DFARS May 22, 2012.

• Inconsistent application of modifications.

Service and DLA Action: • Ensure logic for recording contract modifications employs rules.•Train workforce

Outcomes: Eliminate errors and rework due to posting modifications in the wrong order.

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Lean Six Sigma#5 Unit of Measure

Process Gap Initiative(s) ImpactDifferent systems within P2P use different standards for Unit of Measure.

• Inform community of regulatory standards for procurement established across federal government.

• Use of different unit of measure code sets causes confusion and data quality issues.

Service and DLA Action: • DLMSO has published proposed DLMS changes to bring DoD usage in line with ANSI. Services will need to update systems to conform to this standard

Outcomes: Reduce need for translation between code sets intersystem .Improve data quality.

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Lean Six Sigma#6 The use of Payment Instructions and Info-SLINs.

Process Gap Initiative(s) Impact

InfoSlins and Payment Instructions were created to solve the problem of allocating funding for multi-funded line items. Payment instructions for the allocation of payments have been standardized to support automation of entitlement.

Payment instructions are not consistently included by contracting personnel

15.4% of inbound contract actions fail due to misuse of InfoSLINs.

• Automate application of payment instructions (MOCAS, DAI) to reduce manual workload.

•Evaluate continued need for InfoSLINs to identify funding (map the process end to end using the payment instructions).

•Develop additional guidance or Standard Operating Procedure if needed.

•Partial automation of payment instructions has produced a 9% improvement of automated payment of invoices.•Completing automation will result in an additional 7% improvement.•Manual processing due to failure of infoSLINs results in increased costs of $3.2 million per year. •Interest penalties due to infoSLINs equals $400,000 per year in contract pay.

Service and DLA Action: • Train workforce to ensure contracts are constructed in accordance with policy•Include payment instructions when required

Outcomes: Increase of automated payments Reduced costs.

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Lean Six Sigma#7 Requirements Handshake Procedures

Process Gap Initiative(s) ImpactIrreconcilable Purchase RequestGFEBS AND DEAMS contracts fail to post because the obligation cannot be mapped to the commitment. Systems are recording the item structure from the commitment instead of the legally binding documents

•Develop approaches for pre-award reconciliation.

•Failures to properly record obligations, currently running at over half for the SPS to GFEBS interface.•Does not ensure a framework for auditability

Service and DLA Action: Modify requiring systems and procedures to ensure the ability to adjust line structure from requirement to award as a result of competitive or negotiated processes.

Outcomes: Improve data quality.Eliminate unmatched obligations and disbursements.Reduce interest penalties resulting from pre-validation failures.

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Lean Six Sigma#8 MIPR Business Process Re-engineering

Process Gap Initiative(s) Impact•The MIPR process is not automated •The MIPR process needs to be repeatable and traceable to enable auditability

•Working group established 4/2012•Meeting of co-chairs held on 16 May to review objectives, assumptions, and data needs•Obtain SOPs for MIPRs, information on Inter Agency Agreement and other Treasury/OMB efforts, IVAN data set; other relevant data standards policy, business rules, and controls•Working Group use existing information as starting point to develop data standard or interface, business rules and internal controls for MIPR process•Working Group report initial recommendations within 90 days to P2PPAWG (Report out at Sept mtg)

• The process is inefficient, inconsisten and prone to errors.

Service and DLA Action: • Train workforce•Implement solution

Outcomes: Achieve efficiencies by moving from manual to automated processes

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Lean Six Sigma

Process Gap Initiative(s) ImpactFinancial systems need to accept and consume electronic feeds for contracts

• ECP to create repository for capturing and sharing closeout information .•Score carding of distribution of contracts as data•FMR modification to require use of data feeds available from contract writing systems, WAWF, and MOCAS•Score carding of reduction in manual data entry to financial systems

• Results in manual posting of accounts payable, obligations, and closeouts.

Service and DLA Action: Implement use of standard data via GEX to financial systems to post obligations, accounts payable, contract modifications (including deobligations) and contract closeout notifications.

Outcomes: Reduced workload.Improved data quality.Proper posting of accounts.

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#9 Contract Data Electronically Used By Financial Systems

Lean Six Sigma

Problem:

Accounting systems are not being notified that contract closeout has occurred

Solution: Contract Closeout ECP to electronically post notifications to EDA in FY12

Benefit:

Status:

• EDA ECP approved at the October 2011 EDA Operational Requirements Council (ORC)• Final version of requirements document provided to EDA Program Office on November 9, 2010 for an updated cost estimate• DFAS has funded this change• Target EDA Release: August 2012

Decision Project update

#9 Contract Data Electronically Used By Financial Systems - Contract Closeout

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• Notifies financial community of available funding from contract closeout actions for potential reobligation

Lean Six Sigma

Problem:

Financial systems are not accepting electronic contract documents.

Solution:Create a regulatory requirement (FMR) for financial systems to accept contract data corresponding to the requirement of Contract Writing Systems to send data (DFARS).

Benefit:

Over 80% of contracts are now available as data.

Utilizing electronic contract documents will reduce cost and

improve accuracy of financial data.

Status:

Decision

#9 Contract Data Electronically Used By Financial Systems - Contract Documents

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Lean Six Sigma#10 Ability to Code Cost Type Contracts for Payment

Process Gap Initiative(s) ImpactEntitlement systems are applying the same criteria to cost type payments as they do for fixed-price.

•Revise entitlement system logic to match applicable law and regulation.

• Payments are being delayed.•Contracts are incorrectly structured to support the inability of entitlement systems to correctly process invoices.

Service and DLA Action: • Revise entitlement system logic to match applicable law and regulation.•Provide remedial training to contracting workforce to reverse practices developed to support improper system workarounds.

Outcomes: Improve timeliness of payments.Reduce interest penalties.Enable traceability of deliverables to contract terms, thus enabling a clean audit.

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Lean Six Sigma#11 Appropriate Calculation of Prompt Payment Act Interest Penalties

Process Gap Initiative(s) Impact

Different payment types have different basis for payment (approval vs. acceptance) that require different calculation of Prompt Payment Act interest penalties.

•Revise entitlement system logic to match applicable law and regulation.

• Prompt Payment Interest is incorrectly calculated.

Service and DLA Action: • Revise entitlement system logic to match applicable law and regulation.

Outcomes: Improve accuracy of financial systems

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Lean Six Sigma#12 Inspection & Acceptance DoDAACs

Process Gap Initiative(s) ImpactInvalid DoDAACs are being included in contracts as inspection acceptance locations.

DoDAACs without assigned inspectors and acceptors are being identified in contracts as inspection and acceptance locations.

•Create the capability to validate that a DoDAAC is valid and has an inspector or acceptor registered before contract award.

• Delays in acceptance•Frustrated freight caused by shipments to units that do not exist

Service and DLA Action: • DLA to implement web service to access appropriate field in DODAAD. All Components to ensure both requiring systems and contracting systems include validations either directly or via GEX PRDS and PDS validation services.

Outcomes: Reduced interest due to missing acceptance documents.Reduced frustrated freight.Improved visibility into shipments.

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Lean Six Sigma#13 Funding & Pay DoDAACs

Process Gap Initiative(s) ImpactInconsistent use of funding DoDAACs impacts small business reporting Inconsistent use of funding DoDAACs does not enable traceability of the funding instrument to the accurate officePay DODAACs are frequently confused with Funding DoDAACs

•Establish financial policy reqarding this business practice to match the DFARS 204.6.•Standardize the process for assigning and using funding and Pay DoDAACs working with DLA and Services.

• Lack of standardization impacts ability to generate meaningful reports•Small business results are not accurate.

Service and DLA Action: • Train the workforce and implement resulting solution in business systems

Outcomes: Accurate reporting of small business resultsClear use of DoDAAC designations

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Lean Six Sigma#14 Integrity of Transaction Identifiers

Process Gap Initiative(s) ImpactGlobally unique traceable document numbers need to used to provide enterprise visibility and interoperability of data.

•Ensure all systems in procure to pay process use the common globally unique identifiers as primary keys.•Ensure systems capturing identifiers have edits to eliminate simple data entry errors.

• Prevents traceability of data across the enterprise.

Service and DLA Action: • Incorporate common edits and fields in systems.

Outcomes: Reduce data errors.

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Lean Six Sigma#15 Standard Line Of Accounting (LOA)

Process Gap Initiative(s) ImpactMultiple formats for Lines of accounting exist.

Number of unique formats is proliferating.

•Comptroller to issue memo standardizing the data elements and format of the LOA

• Increased cost of interfaces.•Reduced accuracy of reporting

Service and DLA Action: o Submit initial Implementation Plan 120 days from date of Memoo Implementation target is by SEP 14, subject to concurrence by IRBo Priority to interfaces affecting auditabilityo Legacy systems integral to auditability included on a case-by-case basis o Ensure systems are interoperable with their trading partners’ or customers’ systems

Outcomes: Reduce data errors.Improve auditability.Reduce interface costs.

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Lean Six Sigma

Standard LOA Update

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• Coordination Update – Services

- Army, Air Force, and Navy – Concur

• Essential Language – A Five Step Plan

“Components must immediately make a concerted effort to address unreconciled differences caused by interoperability with trading partners’ or customers’ systems by:

(1) analyzing existing functionality and cost-efficiency of a mixed Legacy and Target and/or Enterprise Resource Planning (ERP) systems environment,

(2) determining the best way forward to resolve inherent data exchange problems,

(3) consolidating functionality by reducing the overall number of systems and thereby interfaces, which pass transactional data,

(4) evaluating if those systems/interfaces can be subsumed by the Target and/or ERP systems, and

(5) implementing the SLOA, represented in Attachment A, for the remaining interfaces.”

• Implementation Date

“The Plan should give priority to interfaces affecting auditability and provide SLOA implementation dates, targeted for completion by September 2014, subject to IRB review, centralized Department or Component schedule coordination, or funding. Legacy systems that are integral to auditability should be included in the Plan, on a case-by-case basis. “