Chapter 3. Resources
Resource levels affect virtually every aspect of the Army -- the number of quality people serving, the amount of training they receive, the maintenance of equipment and infrastructure, and the pace of modernization. The Army is making the most effective use of available resources and has succeeded thus far in remaining trained and ready. Financial stewardship is emphasized at every level; constrained resources must be used efficiently to ensure that America's Army retains the quality, capabilities, and size to deter potential adversaries and meet operational commitments.
The Army leads the way in achieving national objectives in places such as Bosnia, Haiti, the Sinai, and Macedonia while receiving less than a quarter of the defense budget. In today's complex global environment, the Army must remain trained and ready, versatile, engaged overseas with friends and allies, and capable of projecting America's power worldwide. It takes significant resources to maintain such a force. Since the end of the Cold War, however, the Army's buying power has declined 39 percent in constant dollars.
FY98 Budget Overview
The FY98 President's Budget totals $60.4 billion for the Army. After normalization for supplementals, transfers, and inflation, the Army's total obligation authority for FY98 is $59.7 billion in FY98 constant dollars. This figure represents a loss in buying power of $3.8 billion from FY97 and of $5.9 billion from FY96 actuals. The following chart reflects this year's Army budget by major spending categories.
|Army Total Obligation Authority|
|Operations & Maintenance||20.7|
|Research, Development, Test & Evaluation||4.5|
|Army Family Housing||1.3|
|Base Realignment and Closure (BRAC)||0.4|
In a time of constrained resources, tradeoffs must be make among
competing readiness and modernization priorities. This year's
Army Budget Estimate Submission reflects a program crafted to
support the national military strategy and carefully balanced
to capitalize on our efforts to build a more efficient Army by
reapplying those savings to ensure readiness now and in the future.
The following are the key elements of this year's budget:
The Army is making the best use of available resources; nevertheless,
constrained resources require tough decisions and the assumption
of risk in some programs. In order to balance Army priorities,
the FY98 budget includes the following provisions:
Force Protection and Antiterrorism Funding
Recent domestic and international terrorism incidents have highlighted the need to provide the best protection possible for Army soldiers, civilians, family members, and facilities both overseas and in the United States. The Secretary of Defense, in his Force Protection Report to the President, declared that new policies and practices must be implemented to protect deployed forces. The report emphasizes the need to provide commanders with increased resources and flexibility to respond to terrorist threats.
Force protection is essential to a power projection
force. It is one of Army's modernization objectives to which funds
are consistently allocated. We provide more than $1 billion per
year for force protection and antiterrorism programs. We consider
force protection a critical training task to be completed prior
to deployment and sustained continuously.
Impact of Contingency Operations
Unless directed by Congress, the armed services are not permitted to budget for contingency operations, which creates significant funding challenges when contingencies occur. Crisis response and contingency operations historically have been funded from Operations and Maintenance, Army, accounts. This practice strains readiness and quality of life programs by preventing the Army from fulfilling program requirements until additional funds are made available. In FY96, Congress reprogrammed $1.65 billion to support Operation Joint Endeavor and other contingencies, but the Army still absorbed approximately $611 million in costs.
Although the Army is now budgeting for ongoing operations,
unprogrammed missions -- whether in response to contingencies
or natural disasters -- continue to have an impact on the Army's
ability to maintain readiness and quality of life programs. We
will continue to work with Congress and the Defense Department
to find a better mechanism for funding these missions.
The Army continues to pursue innovative ideas to increase efficiency. We are streamlining operations, adopting suitable commercial practices, and reorganizing processes and programs to generate savings. These savings will help the Army maintain an endstrength commensurate with operational commitments, increase investment in essential modernization programs, and increase spending on vital quality of life programs.
The Army is working to instill the concept of efficiency
within the very fabric of the Army's enduring values. Through
the encouragement of better business practices, innovation and
empowerment of the work force, the Army is developing a culture
that will ensure it remains efficient in a rapidly changing political,
technical, and economic environment. Long-term readiness is linked
to the ability to make maximum use of resources. The Army has
major initiatives ongoing to divest itself of excess infrastructure
and achieve efficiencies. We will continue to transform infrastructure
by identifying additional efficiencies. However, policy changes
or legislative relief is required to fully leverage outsourcing
Motivated by the National Performance Review, the Army is implementing policies designed to make government work better and cost less. We are emphasizing results over rules, insisting on customer satisfaction, decentralizing authority, and focusing on core missions. All major Army commands are working on reengineering and redesign initiatives that will result in more cost-effective and efficient organizations. The Army's Reinvention Centers and laboratories, chartered under a provision of the National Performance Review, demonstrate the immediate benefits of freedom from red tape and provide incentives to operate more efficiently. For example, the Reinvention Centers expedite the reform process by allowing the immediate waiver of regulations that impede good business practices. The Army's newest Reinvention Center was chartered in October 1996 and will focus on redesigning the Department of the Army Headquarters. The newest laboratory, the Army XXI Acquisition Reform Reinvention Laboratory, was chartered in July 1996 and will expedite the development and fielding of equipment to support our 21st century force.
Regionalization of the Department of the Army's Civilian Personnel Offices directly responds to National Performance Review streamlining mandates. In response to a Defense Department directive to regionalize civilian personnel functions, the Army will establish 10 geographically based regions by the end of FY99. Regional centers will achieve economies of scale by coordinating the delivery of services that do not require face-to-face interaction.
The Army is aggressively implementing the Chief Financial Officers (CFO) Act of 1990 -- as amended by the Government Management Reform Act of 1994 -- which requires audited annual financial statements for revolving funds, trust funds, and substantial commercial functions. Fulfilling the requirements of the CFO Act has shown that sound financial management transcends any individual organization, function, or system. The Army is breaking down the traditional barriers between functional and financial managers and working to improve every aspect of financial management and stewardship. The result has been more accurate, timely, and reliable information on which to base financial decisions.
The Army supports Defense Department plans for early
implementation of the Government Performance and Results Act of
1993. This act builds on the Chief Financial Officers Act's legislative
mandate to measure performance and functional programs with accurate
financial data. The Army actively participated in the act's first
pilot project, Performance Measurement, which tested the costs
and benefits of strategic planning, performance-based planning,
and performance measurement. The project consisted of approximately
70 pilot sites, three of which were in the Army, and concluded
on September 30, 1996. Army recommendations resulting from the
project have been forwarded to the Defense Department for consideration
in its Goals and Performance Plan.
Efficiencies in Business Practices
Savings generated through better business practices can be applied to readiness, modernization, and quality of life programs. In the spirit of the National Performance Review, the Army is reinventing its business practices, and commanders are applying creative and innovative approaches to managing installations. Efforts to improve business practices include avoiding or reducing costs, streamlining and consolidating operations, and significantly increasing private sector participation in infrastructure improvements.
Numerous business efficiencies have been initiated Army-wide. The Lodging Success Program, for example, stretches limited travel funds by contracting with selected hotels, while the Resource Recovery and Recycling Program reduces the cost of refuse disposal, avoids future-year landfill operating costs, and generates revenue from the sale of recyclable material. The Sale and Outlease Program, meanwhile, generates revenue from the sale of excess and underutilized property.
The Army recently received Congressional approval to begin testing a Unified Funding Concept that combines appropriated and non-appropriated morale, welfare, and recreation funds to streamline accounting and expenditure.
Where they make good business sense, outsourcing and privatization also are powerful tools the Army is using to generate savings. Our current outsourcing focus is in the areas of depot maintenance, materiel management, housing, base commercial activities, education and training, and finance and accounting. Most outsourcing efforts entail conducting cost competitions for activities that may be performed more efficiently by the private sector. This year, 10 percent of Army jobs that can be performed by contractors -- approximately 10,000 positions -- will be competed.
Privatization is logical and cost-effective in an
era of work force reductions and constrained budgets. The privatization
of Army-owned utility systems provides a good example: the goal
is to privatize 75 percent of all feasible utility systems and
100 percent of Army-owned gas systems by 2005. This will result
in increased savings and quality improvements. To date, 12 utility
systems have been privatized. Those systems not programmed for
privatization will be upgraded to improve their efficiency and
The Army is making fundamental changes in the way it develops, acquires, and fields new capabilities. Acquisition reform makes possible significant savings needed to develop a 21st century force by ensuring that the latest technology, goods, and services are obtained on time and at the lowest cost. This will be accomplished through an empowered, professional acquisition work force that continuously improves processes. To date, the Army has trained more than 5,000 personnel at acquisition training seminars and is developing career-path training programs for Army acquisition personnel.
Significant successes have been achieved through streamlining and reengineering acquisition programs. By specifying how a system should perform instead of specifying how it should be manufactured, the Army has saved precious funds on weapons systems such as the Comanche helicopter. Additional savings are generated by procuring commercial items where practicable, as they generally cost much less than items made to unique military specifications. Working under the Federal Acquisition Streamlining Act, the Army is also removing many of the legal barriers that preclude numerous companies from selling to the Army.
The Army's acquisition reform initiatives save money and provide soldiers with new equipment more quickly. Some of the top reform initiatives are already generating savings, and an Investment of Cost Savings Initiative is in place to reprogram savings back into the Army's modernization priorities. Thus far, almost $9 billion in acquisition reform cost reductions has been identified in various modernization programs in the Army's future year plans. Through a Single Process Initiative, the Army is helping the Defense Logistics Agency streamline and standardize manufacturing processes at contractor plants. To date, agreements that improve efficiency and lower costs have been signed with Raytheon, United Defense Limited Partnership, and Texas Instruments, among others. The Force XXI Initiative allows the Army to capture emerging technology for immediate insertion into ongoing Force XXI developments without going through the complete, formal acquisition process. This initiative will place technologically enhanced equipment and weapons systems into the hands of soldiers more quickly while generating significant savings in time and money. We intend to expand this initiative to the rest of the Army.
Several other initiatives, such as the use of credit cards and electronic data exchange, are also creating savings. The Army saved nearly $120 million in FY96 by using credit cards in lieu of purchase orders for 1.6 million transactions valued at over $740 million. Major Army Commands are also instituting innovative reforms that are producing savings. The Army Materiel Command, for example, has instituted several programs to produce savings and reduce barriers. One, Direct Vendor Deliveries, allows vendors to deliver goods and services directly to the user which has produced significant cost savings. The Army Medical Command uses the Prime Vendor concept, which allows a single supplier to distribute a specified class of commercial supplies in a given geographical area, to improve their delivery of quality medical services at reduced cost.
These initiatives are but a few examples of the many
approaches the Army is taking to improve its acquisition processes.
Efficiencies in Logistics
The Army continues to search for additional ways to reduce costs in the area of logistics. The future Army will leverage advances in digital information technologies to gain a quantum leap in efficiency. Several promising new initiatives that will increase savings through inventory, demand, and cost reductions are being examined. Meanwhile, several programs instituted over the past several years are already producing benefits.
Total Asset Visibility (TAV) will enable the Army to continuously track the flow of equipment and supplies. TAV, currently being used in Bosnia and Europe, tracks on-hand inventory in depots, contractor facilities, and units, and as it is moved between various locations. This capability is continually being expanded to cover more units and items and to connect with emerging Defense Department systems. TAV will allow the Army to get the right item to the right location at the right time, to redistribute assets to meet needs, to divert in-transit assets when required, and to avoid buying and repairing unnecessary items. Total Asset Visibility will allow managers to conserve scarce resources, provide stewardship of Army assets, and improve command and control decisions.
Integrated Sustainment Maintenance streamlines maintenance and repair activities by providing regional management of all Army sustainment maintenance work. This integration of efforts ensures the best use of maintenance skills and reduces costs by eliminating redundant repair programs while achieving economies of scale. Integrated Sustainment Maintenance provides a focused logistics effort and permits better workload distribution, resulting in a more efficient use of the Army's total maintenance capability.
The Army is also modernizing its logistics automation
in order to better support force projection while increasing savings.
Modernized Standard Army Management Information Systems (STAMIS)
will replace multiple systems. Most of the new systems will be
off-the-shelf commercial systems and will replace current tactical
combat computers; some decentralized, automated logistical systems;
and manual systems.
Headquarters, Department of the Army Redesign
The Army is committed to a comprehensive redesign and restructuring of its institutional organizations. This effort encompasses an in-depth examination of Army Title 10 responsibilities, a major Army command restructuring, and a Department of the Army Headquarters redesign. At the same time, comprehensive reviews are being conducted of all headquarters field operating and staff support agencies.
The Army expects to reduce significantly the number of headquarters agencies. Every opportunity to privatize or outsource administrative support functions will be explored. Current redesign recommendations include a reduction in the size of the Department of the Army Headquarters. This reduction will be achieved primarily through the elimination or merger of several of the Army's 13 staff support agencies and the divestiture, elimination, or merger of a number of the 56 field operating agencies.
In support of the redesign effort, the Secretary
of the Army has designated the Department of the Army Headquarters
a Reinvention Center. This center will focus on reengineering
the processes through which the Army accomplishes its Title 10
responsibilities. Its objective is to develop recommendations
that will increase the efficiency and effectiveness of the Department
of the Army Headquarters.
Constrained resources require the Army to become more efficient as well as make tough decisions and trade-offs. Thus far, we have succeeded in maintaining near-term readiness, but we have sacrificed modernization, one of the keys to long-term readiness. The Army is making the best use of available resources and continuing to search for ways to alleviate funding shortfalls. The challenge is to become more efficient and generate savings by streamlining operations, adopting suitable commercial practices, and reorganizing processes and programs. Savings gained from the cost-cutting programs and initiatives implemented over the past several years will be reinvested into critical readiness, modernization, and quality of life programs.