Lt. Gen. Spoehr's remarks delivered during the Association of the United States Army's (AUSA) Institute of Land Warfare (ILW) Breakfast, 28 May 2014.
Good morning Ladies and Gentlemen. General Sullivan, General Swan, thank you for the invitation to talk with you today.
These are challenging times and the Army welcomes your feedback on how we are doing. Today I am going to talk to you about Army business operations, both our successes and our areas for emphasis, and then will be happy to take any questions you might have.
So if you have not heard of the Office of Business Transformation or OBT you can be forgiven, for it's not well known. The OBT is a group of about 60 well qualified military and civilian operations research analysts, IT professionals, strategic planners and functional and operational experts who support senior Army leaders, principally the Under Secretary of the Army, Mr. Brad Carson, who by direction of Congress serves as the Chief Management Officer for the Army.
Simply, OBT assists Army leaders in addressing enterprise level challenges relating to the execution of our Title 10 functions to help them identify costs and inefficiencies, and drive them out.
I'm the third director of OBT; the previous were Bob Durbin and Bill Grisoli, Bill now here as the Director of the Army staff.
So, before we go further, maybe it would be useful to answer the question of whether or not the Army is a "Business?" Many of you probably have an opinion on the subject.
We certainly have some of the characteristics of a business; we have capital assets, a multitude of functions, a diverse workforce, we have upstream and downstream supply chains, a yearly flow of cash, and now we are going to be audited on an annual basis. And in exchange for this budget, we are expected to produce a product: a globally responsive and regionally engaged force.
As you know, the Army is a big enterprise: if our budget were revenue we would be in the Fortune Top 20, we maintain the largest single education enterprise, with more students than the five largest U.S. university systems combined; we have over 108 thousand family housing units; 13.5 million acres of land--just smaller than the state of West Virginia; 144 thousand buildings; 2,252 track miles of railroad, and even 606 dams. The energy we produce for our installations equals that produced by the city of Tampa and our fleet of vehicles is larger than those of FedEx and UPS combined.
But are we a business? After due consideration, I think in the end, the answer to that question must be "no," that the Army's sacred role to protect the nation's interests and the unique nature of the profession of arms transcends what we would consider typical of a "business." But if we are not a business per se, clearly, if we are to continue to produce the best Army in the world, we must have world-class business operations.
Because the funding we are receiving is at best staying constant, and at worst, under sequestration, going down, if we tolerate inefficient business practices, we risk sending America's sons and daughters into combat ill-prepared--and you would all agree that is unacceptable.
As we seek to improve our business operations, the Army has some inherent advantages: we have a proven reputation for accomplishing the mission, no matter the difficulty; we have a great leader education program; and we have a strong set of values and ethics.
But we also have some challenges too: the funding we receive in our budget has little flexibility; it's sub-divided into multiple appropriations which aren't interchangeable and expires if not used quickly, and in recent years, has arrived later than needed. We're constrained by a ton of rules, including those for personnel management and acquisition; and finally, based on centuries of success; I am sure you would be astounded to learn that sometimes we can be resistant to change.
But rather than dwell on these challenges and wring our hands and say that change is too hard or largely out of our control, we choose instead to look for the opportunities that reside in this great Army enterprise and to find ways to make a difference.
So I would like to take a moment to discuss with you our current areas of effort, and our successes, because the transformation of the Army business is saving us hundreds of millions of dollars a year and improving Army readiness.
First and foremost, we are engaged in responsibly sizing our force to meet the strategic needs of the Nation. You have heard the Secretary and Chief of Staff testify that under full sequestration, the Army must drop to a Total Force military end strength of 920 thousand Soldiers, while under a Bipartisan Budget Act level of funding, we think we can keep 980 thousand. Because of those constraints, the Secretary and the Chief have had the entire Headquarters engaged in ensuring that within those end strengths and those for the civilian workforce, that we maximize our capabilities to support the Combatant Commanders.
So they have committed to going beyond what was required by the Secretary of Defense and are reducing the size of every one of our headquarters commanded by a two star general and above by an average of 25% including the Department of the Army headquarters. This is tough government work-- but as the Chief puts it, he believes he has a moral responsibility to reduce non-warfighting organizations and functions to the greatest degree possible before we cut another infantry squad, armor platoon or truck company. We anticipate that the headquarters reductions alone will result in 13 thousand spaces being reallocated or eliminated and these are savings that are being applied elsewhere.
That is the change in our organizations, next I'd like to highlight our success in modernizing our portfolio of Business Information Technology or IT systems. We spend a lot of money in our business IT systems; in FY14 alone we will spend over $2 billion dollars on over 700 business IT systems.
Although it's in currently vogue to say that the Federal Government and DOD can't successfully field Enterprise Resourcing Programs or ERPs, the reality is quite different. We have fielded the General Fund Enterprise Business System (GFEBS) and the Logistics Modernization Program (LMP) and our other two ERPs: Global Combat Support System-Army (G-Army) and the Integrated Personnel and Pay System -- Army (IPPS-A) are on track and meeting their milestones.
Why are we fielding these four ERPs? One, because it will help us achieve auditability, but more importantly, they will directly help us achieve greater efficiency and effectiveness. By FY19, by retiring outdated legacy systems and folding capability into our new ERPs, we anticipate driving down our annual IT costs by $600 million dollars to $1.4 billion and shedding 180 systems down to 520. And we are working every day to accelerate system reductions and drive down costs even more.
And along with these cost savings we will see dramatic improvements in performance and effectiveness. Data bases that used to reside in dispersed locations with limited access are now living in the cloud, providing never-before transparency, and we generating terabytes of data every day that when analyzed we use to make improved business decisions.
Along with optimizing our organizations and our IT portfolios, the Army is making tremendous improvements in driving inefficiencies out of our Title 10 functions. Primarily, but not solely, using a technique known as Lean and Six Sigma, Army organizations are saving millions of dollars each year. On the process side, we garnered almost a billion dollars in benefits in cost avoidances and hard savings. The acquisition community's Better Buying Power efforts, informed by Lean and Six Sigma, saved the Army even more.
In FY13, some of the projects we completed improved the Disability Evaluation System, optimized warehouse operations, improved theater sustainment activities, and reduced travel costs.
Finally, in a category we refer to as business initiatives, Army leaders continue to find ways to get the most out of the resources we have been provided. Let me mention three.
Our CIO/G-6, LTG Ferrell is achieving huge economies of scale for enterprise IT services such as email, software licenses, and cloud hosting that saved the Army over $100 million--with even more savings in the future years; the Surgeon General, LTG Horoho has developed several new systems which closely measure performance versus funding, the results of which has caused Army medicine to become the leader in DoD in efficiency, saving millions while delivering first class care. And in something as small as the move of the recruiting & retention school from Fort Jackson to Fort Knox, MG Batchelet, the CG of Recruiting Command, will save the Army $10 million a year in off post lodging costs.
So Ladies and Gentlemen, I've talked about some of our successes, what are some of our challenges and where do we plan to place our emphasis?
First, we have an entire generation of Army leaders who have known nothing but war, where risk mandated that we value effectiveness over all other considerations, we must now change the culture to ensure we consider efficiency. An example is in the mix of contracted versus organic maintenance. Because of necessity we were required to contract for much of our maintenance, but now we can move the pendulum back towards organic capability.
It will require concerted effort to make this culture change and we have begun. And culture as you know is hard thing to change.
I am not referring to making company commanders worry about how many chem lights they afford, but instead instilling the universal mindset that every dollar they save, can add to their readiness and those of other units in our formations. And we need our leaders to look broadly across the Army and identify areas for change outside their individual stovepipe.
Turbulence in funding has also sent the wrong message to our mid and junior grade leaders. In FY13 we spent the first six months of the year destitute and everyone was directed to curtail spending, and then later in the year, after receiving additional funds, we were challenged to execute what we were given. Junior leaders see this and have trouble reconciling the conflicting messages. So we must work to provide better predictability and to lead the culture change to promote efficiency.
Second, we must strive to understand true cost of our core processes. The Chief of Staff, General Odierno has recently challenged us to understand the true cost of readiness, for example he asked "what is the total burdened cost to bring a brigade combat team to full readiness?" The headquarters has arrived at that answer but it was not easy, and similar questions exist in other areas.
For example, you could just as easily ask what is our total burdened cost to get a Soldier to basic training, including recruiter salaries, transportation, recruiting station leases, compensation incentives, IT overhead and other costs. Or what is the total burdened cost to re-station a battalion? Many of these costs are controlled by different organizations and while the individual elements are well managed, if we truly seek optimum efficiency we must consider our costs holistically. Fortunately, our new enterprise resourcing program GFEBS gives us that capability and we are making great use of it.
And our third and final element of emphasis in centers around making better strategic planning and performance assessment an enterprise-wide competency. We have several organizations that do this extraordinarily well, among them: the Army Medical Command in their delivery of care, the Installation Management Command in the delivery of garrison services, and many of our Army Materiel Command Depots and Arsenals in the delivery of products and services.
But, to fully accomplish our objectives in this area, we must broaden the practice of arriving at a meaningful strategy; setting tangible organizational goals, including establishing financial targets; fixing accountability; and then routinely assessing our progress in order to get the maximum benefit and performance.
Ladies and Gentlemen, Army leaders are committed to this endeavor and we are seeing great results. Leaders like you know results like these only come from the efforts of committed and focused teams-in our case the dedicated military and civilians--who realize the importance of both efficiency and effectiveness.
Due to our diminishing budget, the business operations of the Army require the same intense focus as do our Warfighting functions and we are applying that commensurate level of effort.
I especially want to thank the leaders in this group for your great assistance in these efforts.
Your personal advice and counsel, as well as the products and services your organizations provide the Army are helping us remain Army Strong, and are deeply appreciated.
I would ask that if you ever see an opportunity for us to do better, you continue to let us know.
Thank you General Sullivan and AUSA for this opportunity; Ladies and Gentlemen, thank you for your attention, and I look forward to any questions you might have.
--Lt. Gen. Thomas W. Spoehr (Director, Office of Business Transformation)
For more information about the U.S. Army's Office of Business Transformation (OBT) go to http://www.army.mil/obt