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Siobhan TackBCF, C&NE Department Chair
Defense Acquisition University, Capital & Northeast Campus(703) 805-4449 (DSN 655)
E-mail: [email protected]
Funds Management UpdatesAnd
Planning, Programming, Budgeting and Execution
EPMC
#1 Identify the Requirement
#2 Develop A Cost Estimate
#3 Apply Appropriations and Funding Policies
#4 Budget using PPBE
#5 Congress Appropriates through the Enactment Process
#6 Get to Work during the Execution Process
Lesson Overview• Cost Estimating Process
• Breaches
• Appropriation Categories
• Funding Policies
- Incremental Funding
- Full Funding
• Congress
• New Starts
• Reprogramming Rules
• Execution Laws
• PPBE
- Building Blocks
- Planning
- Programming
- Budgeting
- Execution Review DoD 7000.14-R
FMR
Cost Estimates and Players
• Program Office - Program Office Estimate (POE)- Cost Analysis Requirements Description
(CARD)
• Service Cost Agencies- Component Cost Analysis (CCA)
• OSD Cost Analysis Improvement Group (CAIG)
- Independent Cost Estimate (ICE)
Budget to the ICE
MDAP Cost Review Process
Service Acquisition
DecisionPanel
AssistantSecretary
(FM)Reconciliation
Service CostAgency
DefenseAcquisition
BoardCost Analysis
Improvement Group
ProgramOffice
POE CCA
ICE
Svc Cost Position(ACAT ID)
OIPT+
Svc Cost Position
Svc Cost Position
(ACAT IC)
POECARD
DiscretionarySufficiency ReviewSensitivity AnalysisCPIPTACAT IC
ACAT IC
ASARCN/MC PDMAF IPT
ACAT IDICE
MAIS Cost Review Process
Service Acquisition
DecisionPanel
(ACAT IAC)
AssistantSecretary
(FM)Reconciliation
Service CostAgency
ProgramOffice
POE CCA
ITOIPT
POE + CCA(ACAT IAM)
POE+
CCA(ACAT IAC)
PA&EAnalysts
POEEconomic Analysis
CCA
ACAT IACCIO
ACAT IAM
Review Cost Analysis
ITABPOE
+ CCA
(ACAT IAM)
Breach Parameters
SAR APB Unit Cost Rpt (UCR)
Schedule Milestones 6 Month Slip From 6 Month Slip From N/APrevious SAR APB Objective
Cost 15% Program Acquisition 15% PAUC Growth 15% PAUC Cost Unit Cost (PAUC) 15% APUC Growth GrowthGrowth RDT&E Growth
Procurement Growth 15% Avg Procurement15% Avg Procurement MilCon or O&M Growth Unit Cost GrowthUnit Cost Growth(APUC)
Reports Required Quarterly SAR Program Deviation Rpt Quarterly/Exception DAES(PM notifies MDA) Component notifies Congress (>=15%)
SecDef Certification (>=25%)
PAUC = Program Acquisition Unit Cost
APUC = Average Procurement Unit Cost
Nunn - McCurdyTitle 10 US Code, Section 2433
• PAUC or PUC increases of 15% “reportable” to Congress
• PAUC or PUC increases of 25% require Sec Def certification to Congress:
- Essential to National Defense
- No alternatives - New estimates are
reasonable- Management structure
is adequate
Major Appropriation Categories
APPN CAT
FUNDING POLICY
OBLIGATION PERIOD
O&M
SCOPE OF WORK EFFORT
RDT&E Activities & Exp, AIS Equip & SW, R&D Facilities, Minor Const
Incremental
3 Years[ 5 for SCN ]
Replenishment Spares, Civilian Salaries, Minor Const < $750K, Travel, AIS Equip & SW < $250K, SW Dev/Mod/Purch/Lease
Annual 1 Year
1 Year
5 Years
2 Years
Annual
Full
Full
Military Pay & Allowances, PCS Moves, Retired Pay Accrual
Major Construction Projects >$750K
Production Labor/HW, Initial Spares, AIS Equip & SW, non-centrally managed items >= $250K
MILPERS
MILCON
RDT & E
PROC[SCN]
Inv
Exp
Exp
Inv
Inv/Exp
AIS=Automated Information Systems, SW=Software, HW=HardwareRDT&E=Research, Development, Test & Evaluation, PROC=Procurement, O&M=Operations and MaintenanceMILPERS=Military Personnel, MILCON=Military Construction
Service AppropriationsNumerical Codes
Appropriation Army Navy USMC Air Force
RDT&E 2040 1319 3600Procurement
Aircraft 2031 1506 3010Missiles 2032 3020Weapons 1507W & TCV 2033SCN 1611Ammunition 2034 1508 3011USMC 1109Other 2035 1810 3080
MILPERS 2010 1453 1105 3500O & M 2020 1804 1106 3400MILCON 2050 1205 3300
Incremental Funding Policy
• Research, Development, Test & Evaluation
• Annual budget request will be limited to budget authority necessary to cover all costs expected to be incurred during that fiscal year.
• Incremental Funding Policy provides flexibility to the government in the uncertain environment of RDT&E
RDT&E
• Procurement and Military Construction• Annual budget request must cover the total cost to
deliver a given quantity of complete, militarily usable end items in a 12 month funded delivery period.
• Governing Concepts
- Usable End Items - No piecemeal procurement of systems is permitted. - Funded Delivery Period - 12 month period
starting with delivery of first item.
Full Funding Policy
Procurement
MILCON
Usable End Items
Funded Delivery Period
FY1 FY 2 FY 3 FY 4 FY 5
PRODUCTION LEAD TIME
FUNDED DELIVERYSCHEDULE
12 MONTHSFROM 1STDELIVERY
(FUNDED DELIVERY PERIOD)
DEFER TO LATER FISCALYEARS
LOT 1
5 5 5 5
PRODUCTION LEAD TIME 12 MONTHSFROM 1STDELIVERY
LOT 2
8 10
PRODUCTION LEAD TIME
LOT 3
CONTRACT AWARD
2 2 3 3 5 5 5 5 8 10
108th Congress
HOUSE
435 MEMBERS
- 229 REPUBLICANS- 205 DEMOCRATS
• 1 Independent
SENATE
100 MEMBERS
- 51 REPUBLICANS
- 48 DEMOCRATS
Few with military experience
- 1 INDEPENDENT
www.house.gov www.senate.gov
AUTHORIZATIONS
BUDGET RESOLUTION
APPROPRIATIONS
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT
COMMITTEE
INPUTS
15 10
HOUSE
SENATE
HOUSE
SENATE
HOUSE
SENATE
HASC HRNGS MARK-UP FLOOR FLOOR
SASC HRNGS MARK-UP FLOOR FLOOR
Authorization
Bill
15 1 30
CBO
REPORT
PRES
BUDGET“TARGET”
FISCAL
YEAR
HAC HRNGS MARK-UP FLOOR FLOOR
SAC HRNGS MARK-UP FLOOR FLOOR
Conf
^
^
Congressional Enactment Timetable
HRNGS Marks FLOOR
HRNGS Marks FLOOR
Budget
Resolution ^
Conf
AppropriationsBill
Conf
New Starts
• What is it?- Any new program, project, modification, sub-
project, task that you haven’t told Congress about
• How do you determine a new start?- Budget submission R-Forms and P-Forms
• Why should you care?- Congress mad at Air Force about this- Congress now watching other services- Appn Law says you won’t get paid, if you don’t
follow the rules
New Starts Rules of Engagement:
DD 1415-1 Prior Approval Reprogramming Action required for:
• Any new RDT&E program, project or sub project estimated to cost $10M or more in three years.
•Any new Procurement program, subprogram or modification estimated to cost $20M or more within the first 3 years. Exceptions are safety programs and safety modifications costing less than $20M. • Programs under this dollar threshold must do a letter notification to Congress in advance of initiating.
•No New Starts under a Continuing Resolution (CR)
Reprogramming Actions• Process of redirecting funds for purposes other than those
contemplated at the time of appropriation.
• Reprogramming rules are based on agreements between DoD and Congress.
• DoD informs Congress of all Reprogramming actions via a semi-annual report. Must go through OMB( 10 days) for this administration
• Types of “Reprogramming” actions:
- Congressional Prior Approval - Internal DoD Reprogramming- Prior Notification to Congress- Below Threshold (BTR)
• Any movement of funds between appropriations or between legal sub-divisions requires legislative transfer authority (i.e., prior approval)
FY 04 Below Threshold Reprogramming
RDT & E PROGRAM ELEMENT 2 YEARS
LINE ITEM3 YEARS
( 5 YEARS SCN)
BUDGET ACTIVITY
1 YEAR
1 YEAR
5 YEARSPROJECT
PROC
MILPERS
MILCON
O & MBUDGET ACTIVITY
SOME BA 1 SUB-ACTIVITY LIMITATIONS ON DECREASES
(OPERATING FORCES)
Reference Source: DoD 7000.14R, Vol 3, Ch 6, dated Aug 2000 RDT&E & Proc thresholds increased from $4M & $10M to $10M & $20M per USD (C) Memo, 15 May 03 (valid for FY03 and FY04)
* MAX DECREASE for FY04 changed to “LESSER of threshold amt or 20% of appropriation amt” per USD (C) Memo, 4 Nov 03-- For FY03 and prior, MAX DECREASE is “GREATER of threshold amt or 20% of appropriation amt”
$10 M* Lesser of$10 M or
20%
$20 M* Lesser of$20 M or
20%
$15 MNo Limit, unless specified
$10 MNo
Congressional restriction
Lesser of$2 M or
25%
NoCongressional
restriction
APPRN MAX INCREASE
MAX DECREASE LEVEL OF CONTROL OBL AVAIL
FY 03 Below Threshold Reprogramming
RDT & E PROGRAM ELEMENT 2 YEARS
LINE ITEM3 YEARS
( 5 YEARS SCN)
BUDGET ACTIVITY
1 YEAR
1 YEAR
5 YEARSPROJECT
PROC
MILPERS
MILCON
O & MBUDGET ACTIVITY
SOME BA 1 SUB-ACTIVITY LIMITATIONS ON DECREASES
(OPERATING FORCES)
Reference Source: DoD 7000.14R, Vol 3, Ch 6, dated Aug 2000
RDT&E & Proc thresholds increased from $4M & $10M to $10M & $20M per USD (C) Memo, Subject: Below Threshold Reprogramming Authority Policy, 15 May 2003 (valid for FY03 and FY04)
$10 MGreater of$10 M or
20%
$20 MGreater of$20 M or
20%
$15 MNo Limit, unless specified
$10 MNo
Congressional restriction
Lesser of$2 M or
25%
NoCongressional
restriction
APPRN MAX INCREASE
MAX DECREASE LEVEL OF CONTROL OBL AVAIL
Fiscal Laws
Misappropriation Act [Title 31, U.S. Code, Sec 1301] • Requires funds to be used only for the purposes and programs for which the appropriation was made.• AKA “The Purpose Statute”
Anti-Deficiency Act [Title 31, U.S. Code, Sec 1341 & 1517 ] • Prohibits making or authorizing an obligation in excess of the amount available. • Forbids obligation to pay money from the US Treasury in advance of an appropriation. • Requires agency to fix responsibility for violations of the Act.
Bona Fide Need Rule• Requires funds to be used only for needs or services in the year of the appropriations obligation period.
Execution - OSD Goals
By End of First Year of Funds Availability
RDT&E Obligations 80%Expenditures 55%Focus: Expenditures
ProcurementObligations 80%Focus: Obligations
Impact Statements (AKA Reclamas)
• When to Reclama?
- Anytime there is a query on reducing program funds
• Why answer?
- A non answer = ambivalence = funding cut (maybe more than one)
• Who prepares the answer?
- Program Office best knows the impacts
- Sys Coord best equipped to shape language of response
- Well written responses from the Program Office results in fewer re-writes
up the chain
• “Quick and Dirty” Reclama Using Burn Rate
- Using actual data from CPR/CFSR/CSSR, show that the current level of
performance will not be maintained if funds are reduced
Reclama No Nos
• No response - Program seen as easy target• “#1 Program in the Navy!”
- If it were, it probably would not be targeted for a cut• Failure to know the audience• Claiming unexecutability
- If cut is small, no one will believe it- If cut is large, chance of cancellation grows
• Making statements not supported by facts- Overly optimistic EACs not supported by Earned Value data- Poorly performing contractors will not dramatically improve
• Chicken Little - The sky will not fall if your program has a little cut
• Whining - Especially when lengthy• Blaming DFAS – Everyone uses DFAS, everyone has same
problem
Reclama Must Haves
• Respond only to the question
• Be brief, just the facts,– no time for fluff
• Use non-technical language
• Spell out acronyms
• Operational Impact
- Ensure User agrees with your version of operational impacts
- Must be believable
– Small cut to a large program will not cause a large problem
- “Loss of funds will delay operational ability to <perform a task, counter a
threat> for <x number of> months/years”
- “Warfighter will lose xyz capability”
- “User’s #1 ECP for this system this fiscal year”
– Must be backed up by User that it really is their #1 ECP for the system
PPBE
Planning, Programming, Budgeting and Execution
Decision Support Systems
Planning, Programming & Budgeting System
Acquisition Management System
Requirements Generation System
Planning,Programming,Budgeting, &
Execution(PPBE)
NewDoDD 5000.1DoDI 5000.2
Joint Capabilities Integration & Development System
QDRQDRQDRQDR
PPBE Phases
• Planning - Assess capabilities / review threat- Develop guidance
• Programming - Turn guidance into achievable, affordable packages- Six-year program (Future Years Defense Program)
• Budgeting - Test for efficient funds execution - Scrub budget years- Prepare defensible budget
• Execution Review (concurrent with program/budget review)- Develop performance metrics- Assess actual output against planned performance- Adjust resources to achieve desired performance
goals
Future Years Defense Program (FYDP)
• Computer database maintained by D,PA&E
• Approved force structure and resources in SECDEF Defense Program
• Contains PY, CY, BY1, BY2 + 4 Out-Years + 3 additional years for force structure only
• Updated two times per PPBE Cycle:- Program/Budget Review – August / September
- President’s Budget – January / February
FY12
FY13
FY14
FY08
FY09
FY 10
FY 11
FY06
FY 07
Budget Years
OutYears
ForceStructure
Only
BY 1= FY 06BY 2= FY 07BY 2+1= FY 08...
FY 06-11
Management Initiative Decision (MID) 913
Major Initiatives:
• Quadrennial Defense Review (QDR) shifted to the second
year of a new administration
• Move to a two-year cycle
• Off-year SPG/JPG is optional (at the discretion of SECDEF);
will not introduce major changes in off-year
• Off-year review focus on execution and performance
• Create a single standardized programming and budgeting
system for data collection and management
JPG
PresidentNational Security CouncilCIA/DIA/JCS/OSD
JCSCOCOMsSERVICES
NMS JPD
NSS
CPR
SPG
APR/MAY
JCS, OSD,COCOMs,SVC HQs,ETC.
SEP DEC MAR
SECDEF
1st Year 2nd Year
1st year of a new administration
Planning Phase
COCOM – Combatant CommanderCPR – Chairman’s Pgm RecommendationJPD – Joint Planning DocumentJPG – Joint Programming GuidanceNSS – National Security StrategyNMS – National Military StrategyQDR – Quadrennial Defense ReviewSPG – Strategic Planning Guidance
Strategyalso reflected in QDR
Notes• SPG replaces Draft Defense Planning Guidance (DPG)• JPG replaces DPG
JAN
MID 913Changes to
Program/Budget/Execution Review:
• Transition to a true biennial process
• Incorporate metrics and cost models - Focus on outputs: what are we getting
for our money?
• Over time, metrics will become the analytical underpinning to ascertain whether the appropriate allocation of resources exists
PBDs
PDM
ServicesPEO/PM,SVC HQsCOCOMs
BESPBMBI
Adv Ques/Hearings
AUG JAN/FEBOCT
Issue Resolution
SECDEFSLRG
POM
OSD/OMB
CPA
DECNOV
Services / PEO / PM Answer / Reclama
JCS
OSD/OMB
BES – Budget Estimate SubmissionCOCOM – Combatant CommanderCPA – Chairman’s Pgm AssessmentMBI – Major Budget IssuesPB – President’s BudgetPBD – Program Budget DecisionPDM – Program Decision MemoPOM – Program Objectives MemoSLRG – Senior Leadership Review Group
Concurrent Program/Budget Review
UpdatesFYDP
UpdatesFYDP
3-Star Group
Notes• 3-Star Group replaces Program Review Group (PRG)• SLRG replaces Defense Resources Board (DRB)
Jun/July Summer Review
DEPSECDEF Direction forFY 2005 - 2009 Submission
• No DPG-05- Components comply with DPG-04 and PDM direction
• No FY05-09 Program Objective Memorandum (POM) or Budget Estimate Submission (BES) submittal to OSD
• Components instead submit Program Change Proposals (PCPs) or Budget Change Proposals (BCPs)- Both BCPs and PCPs will be cost neutral (offsets
required)- PCPs resolved thru Program Decision Memorandums
(PDMs) - BCPs resolved thru Program Budget Decisions (PBDs)
Program Change Proposals(PCPs)
• Identify areas to take additional risk (offsets)
• Limited to items that exceed $250 million across FYDP- Threshold at individual programmatic issue level- PCPs may accommodate smaller issues if serious
programmatic problem- If less than $250 million, may submit as BCP if budget
year is affected
• Must comply with PDM decisions
• Combatant Commanders may submit up to six prioritized PCPs regardless of dollar value
Budget Change Proposals(BCPs)
• Generally limited to fact-of-life changes:- Cost increases- Schedule delays- Management reform savings- Workload changes- Funding execution experience- Congressional action
• May involve FYDP years if total cost is less than $250 million and budget year is affected
• Backed up with appropriate budget exhibits
• Offsets required
PBDs
PDM
ServicesPEO/PM,SVC HQsCOCOMs
BCPsPBMBI
Adv Ques/Hearings
AUG JAN/FEBOCT
Accepted PCP Resolution
SECDEFSLRG
PCPs
OSD/OMB
CPA
DECNOV
Services / PEO / PM Answer / Reclama
JCS
OSD/OMB
BCP – Budget Change ProposalCOCOM – Combatant CommanderCPA – Chairman’s Pgm AssessmentMBI – Major Budget IssuesPB – President’s BudgetPBD – Program Budget DecisionPCP – Program Change ProposalPDM – Program Decision MemoSLRG – Senior Leadership Review Group
Off-Year Program/Budget Review
3-Star Group
UpdatesFYDP
Notes• 3-Star Group replaces Program Review Group (PRG)• SLRG replaces Defense Resources Board (DRB)
Year 1:Year 1: FY 07-11FY 07-11Early National Security Strategy (NSS)Early National Security Strategy (NSS)Off-year SPG/JPG as required (at discretion of SECDEF)Off-year SPG/JPG as required (at discretion of SECDEF)Limited Changes to Baseline ProgramLimited Changes to Baseline Program
Year 2:Year 2: FY 08-13FY 08-13Quadrennial Defense Review (QDR) – Aligned with PB submission in Quadrennial Defense Review (QDR) – Aligned with PB submission in second year of an administrationsecond year of an administrationFiscal Guidance IssuedFiscal Guidance IssuedOn-year SPG/JPG (implementing QDR)On-year SPG/JPG (implementing QDR)POM/BES SubmissionsPOM/BES Submissions
**Year 3:**Year 3: FY 05-09FY 05-09 (FY 09-13)(FY 09-13)Off-year SPG/JPG as required (at discretion of SECDEF)Off-year SPG/JPG as required (at discretion of SECDEF)Limited Changes to Baseline ProgramLimited Changes to Baseline Program
Year 4:Year 4: FY 06-11FY 06-11 (FY 10-15)(FY 10-15)Fiscal Guidance IssuedFiscal Guidance IssuedOn-year SPG/JPG (refining alignment of strategy and programs)On-year SPG/JPG (refining alignment of strategy and programs)POM/BES SubmissionsPOM/BES Submissions
Four Years in the Biennial Cycle Corresponding to Four-Year Presidential Terms
OSD Balanced/Coherent/Consistent Budget
Program Phasing
1. Contract award date-executable?- 4th quarter award? doable?- testing schedule on track?- Approvals-reviews/MS?
2. Deliveries- actuals vs planned (P-21)- funded delivery schedule: actuals, backlogs - impact of delays
3. R&D/Production relationship- Concurrency: degree?- MS status- testing complete?- LRIP: how funded, type of contract, risk?-Production ramp executable? reasonable?
4. Production Schedule- reasonable- 12 month delivery period - lead times? Same or different each yr?
OSD Balanced/Coherent/Consistent Budget
Program Pricing1. Does it make sense to by this item at the requested quantity?
- P-21: economic production rate- IOC date?- Mod installation schedule?
2. What other systems does it interface with?- Funding adjustment may affect another program
3. Budget to most likely cost!!!- Contracts: type?, current budget status?- Termination Liability
4. Unit Cost audit trail- P-5: learning curve-justify, compare to similar system- last negotiated unit cost?
5. Escalation-current indices used6. Does everything add? Consistent from one exhibit to another?7. Production rate changes
- overhead rate changes?- basis for cost estimate- contract savings?
8. ECP/ECO estimated-similar to other programs?
9. Metrics-What did we get for bucks spent-ROI?
OSD Balanced/Coherent/Consistent Budget
Budget Policy
1. Color of Money-correct? Soo, tasks, clearly defined.2. Current obligation/expenditures day of hearing3. R&D-
- Incrementally funded?- 12 month effort? (look at expenditures-tells the story)- forward financing?-unobligated balance, prior history- prior yr funding availability/expenditures
4. Procurement- Full funding policy- Funded delivery schedule
5. Fully funded across FYDP?- Compare to independent cost estimate
6. Management Reserve?- Why?- Degree of technical risk?- Compare to like program
7. Growth in effort from one year to next-unusual?
OSD Balanced/Coherent/Consistent Budget
Budget Execution
1. Current status-obligation/expenditures
- R&D: 80% ob, 55% expended -Expenditures better indicator than obligations
- Procurement: % Obs/Exp depends on type of Weapon System- focus on obligations
2. Past performance- indicator of future performance
3. What did you say last year?- Look at old exhibits several years back
How to Survive
• Acquaint yourself with key OSD staff• Prepare for hearing
• Focus on Advance Questions• Conduct an internal budget review• Ensure your submission answers all their questions• Understand Issues:Budget policy, programmatic
• Hearing• Focus on Advance Questions• Limit attendance at Hearing
• Follow-up Hearing Questions• Appeals - Address Specific PBD Rationale• Recognize that outside “macro” issues will impact acquisition programs
Good PPBE Websites
OSD Program Analysis & Evaluation (PA&E)• http://www.pae.osd.mil/
Air Force Programmers• http://www.xp.hq.af.mil/XPP/Panels/xppe_library.htm
Navy Programmers• http://www.hq.navy.mil/cno/n8/n80/ (requires password)
Army Programmers• http://www.paed.army.mil/
Army Staff Orientation Brief (includes Army Budget brief)• http://www.hqda.army.mil/stafforientation/homepage.htm
FM Knowledge Management• http://center.dau.mil/Topical_Sessions_templates/FM_Main/template.htm
FY04
DJJ F M A M J A S O NJJ F M A M J A S O N D JJ F M A M J A S O N D
FY03 Execution
FY03 and prior
FY04
Program/Budgeting Execution
FY05
FY05
FY06 Planning
CY03 CY04 CY05
Enactment Execution
FY04 and prior
Enactment
FY06
Plan?
2nd Yr
2nd Yr
2nd
Enactment
FY07
3rd Yr
3rd Yr
FY05 and prior
FY 06-11 SPG/JPG FY 06-11 POM
Exec
FY06+FY 06-11 BES
Planning
Program/Budgeting
Program/Budgeting
SPG/JPG – Strategic Planning Guidance PCP – Program Change Proposal BCP – Budget Change Proposal
Joint Programming Guidance
FY05-09
Resource Allocation Process
FY 07-11
FY 05-09 PCPFY 05-05 BCP
FY 07-11 PCPFY 07-11 BCP
I have a question
I think I know
this “stuff”
I don’t have a clue
Questions or Comments???
BACKUP SLIDES
Advance ProcurementLong Lead Items
• Finances Long Lead (Recurring) Components
- To protect production schedule - To maintain a critical skill in the workforce
• Exception to Full Funding Policy- Contained in Acquisition Strategy- Approved in Milestone Decision- Separate initial contract
• Generally, Budget Authority requested / granted one Fiscal Year in advance of the related end item contract
• Shown as a separate line item on the budget request
FY0 FY 1 FY 2 FY 3 FY 4
2 2 3 3LOT 110 Tanks
$400M
Less AdvanceProcurement: + $50M - $50M
$ 350 M
$ 50 M
Budget Request System:
Budget Request Adv Proc (AP):
Full Funding of $400 M
=
Advance Procurement (Example)
Multiyear Procurement (MYP)
• Under a multiyear contract, government agrees to buy multiple years’ requirements (usually up to 5 years) of usable end items without exercising contract options
- Annual procurement contracts may have a base year plus one or more option years exercised at government’s discretion (no penalty/cost for not exercising option)
• Full MYP contract amount not funded in year of contract award. Congress provides annual appropriations for each year covered by contract.
Multiyear Procurement (cont.)
• Reasons to use MYP: - Reduce program cost growth
– Provides assurance to Contractor of future years procurement– Facilitates economic order quantities (EOQ)– Encourages Contractor investment in productivity
improvements
- Provide program stability – Government liable for large payment (decreasing over time) for
early cancellation of contract (cancellation ceiling)– Reluctance to cancel MYP contract once it is in place
• Problem with MYP:- Reduces Service/OSD/Congressional flexibility
• Exception to Full Funding Policy- Due to EOQ buys
Multi-Year Procurement (cont.)
Units 13 35 36 36 27
$M $2,275 $5,600 $5,400 $5,300 $3,900
Budgeted the same wayas Full Funding
1 2 4 6 8 9 9 9 9 9 9 9 9 9 9 9 9 9 9
1 2 3 4
FY1 FY2 FY3 FY4 FY5 FY6 FY7
CAT#
01
02
03
04
05
06
#FYDP(CAPS)
ACTIVITY
Basic Research*/RESEARCH#
Appl Research/EXPLOR DEVEL
Adv Tech Devel/ADV DEVEL
Adv Comp Dev & Prototypes/DEM / VAL
Sys Dev & Demo/ENGR DEVEL
RDTE Mgmt Spt/MGMT & SPT
OperationalSystems Devel
PURPOSE
EXPAND KNOWLEDGE/STUDIES / EXPERIMENTS
DEVELOP & EVALUATETECHNICAL FEASIBILITY
PROOF OF CONCEPT/MODELS
SPECIFIC WEAPONSYSTEM
ENGR & MFG DEVEL/INTEGRATION/DEMO
TEST RANGES /CIVILIAN RANGES
IMPROVE PERFORMANCEOF PRODUCTION SYSTEM (R&M)
WHO
UNIV /LABS
UNIV / LABS /CONTRACTOR
LABS / FIELD /CONTRACTOR
LABS /CONTRACTOR
CONTRACTORS /FIELD ACTIVITY
TEST RANGES
CONTRACTOR/FIELD ACTIVITY
FUND MANAGED
RDT & E COMMANDS /SERVICES
RDT & E COMMANDS /SERVICES
RDT & E COMMANDS /SERVICES
PMO
PMO
RDT & E COMMANDS / HEADQUARTERS
PMO (FUNDING IS NOTALWAYS RDT&E, THE MFP IS NOT 6, R & D)
BA*
BA-1
BA-2
BA-3
BA-4
BA-5
BA-6
BA-7
*FMR(Title Case)
Major Force Program 6 - RDT&E
Note: FMR BA titles consistent with Summer 2002 DoD 7000.14-R Financial Management Regulation (FMR) update