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Page 98
C
Developing Output Measures
Step 1—Segment the Infrastructure
into Discrete Functions
Starting within each region and with each program manager,
define discrete nonoverlapping and mutually exclusive functions at
each facility or base that has a single person who is both
responsible and accountable. This function (e.g., security) should
have definable boundaries and be easily recognized. The sum of all
functions should comprise the universe of all goods and services to
be provided by the region.
Step 2—Identify the Users of the
Function
The users not only should be customers but also should have the
ability to “vote” on the performance of the function
and agree to the ranges and limits of the function to be performed.
For example, in port operations the individual ship's commanding
officers are the proximate users of the function, but only the type
commanders can agree to the range and limits of port operations
services to be provided and potential restriction on ships
operations.
Step 3—Develop a Performance Work
Statement for the Function
Although there may be no intention of privatizing this function,
assume that some other entity will perform it and that one has to
describe in detail what must be performed, including attributes of
timeliness, quality, and scope. This initial description should be
made by the person who is currently responsible and ac-
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countable for the function and should be assisted by those
performing the function. The performance work statement (PWS) of
objectives should be formulated at three levels:
1. Threshold. This is the minimum level of performance
and may require some restrictions and/or assistance from the user.
For example, air operations at an outlying field may be restricted
to certain hours of operations or a contingent from ship's force
may be required to assist in security patrols. The specific
restrictions and/or assistance should be spelled out in detail.
2. Objective. This is the expected or normal level of
performance. It should be specific in terms of scope of services,
timeliness, and so on, that define the goods or service provided.
For example, berthing will be provided for up to six Aegis cruisers
without nesting; 4,000 amperes of electrical power will be provided
within 15 minutes of berthing; 25,000 gallons of fresh water will
be provided per day at 30 pounds per square inch constant pressure;
and so on.
3. Enhanced. This is a level of performance over and
above the objective that may be required for special situations.
For example, special security during special weapons handling or
transportation might be provided.
Step 4—Performance Work Statement
Cost
With an agreed-to statement of work and performance, it is now
possible to determine the cost of the goods or service. This
statement is broken down into three substeps:
1. Activity-based spending (ABS). This is often looked at
as activity-based costing, but it is only the first step. Here a
survey is made of what the institution is spending on a
function. This establishes the differences in spending between
various activities doing similar work and determines what the
activity is spending resources on and what it is not spending money
on. This is the first check on the performance work statement to
establish that it is complete (i.e., one is spending resources on
all of the elements within the PWS) and has not overlooked a
necessary performance within the PWS (i.e., spending resources on
something that is not in the PWS rather than something that one
should be spending on). This leads to a possible revision of the
PWS.
2. Capitalization. After it has been determined what an
activity is currently spending on a function, an analysis should be
conducted to determine if an additional investment in capital
(e.g., a new information system, additional training) would result
in a net lower cost of operations.
3. Activity-based costing (ABC). This takes ABS to the
next step, which is determining what a function
“should” cost. It can be accomplished in a number of
ways:
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• In situations where there is an industry standard or best
practice, it can be interpolated to the current function.
• In situations where the same or similar function has been
contracted to another claimancy or base, that contract can be
interpolated to the current function.
Step 5—Performance Work Statement
Review
Once the PWS “draft” has been completed, the users
and major claimant should review it to determine if it meets their
needs. In particular they should agree to or modify the PWS as
follows:
• The threshold PWS is acceptable, and they are willing to
accept the restrictions and/or assistance that is required if
necessary.
• The objective PWS is what they expect in normal
situations and what they are willing to support for funding.
• The enhanced PWS meets their requirements for special
situations and what they are willing to pay for additional
funding.
One of the principal benefits of this step is that the user and
the major claimant “buy in” to the process.
Step 6—Prioritization and
Reconciliation with the Budget
Together with the users, major claimant, regional commander, and
program managers, all of the functions are prioritized by function
and level of service (threshold, objective, enhanced) and compared
with the budget or program across the Future Years Defense Plan
(FYDP). Where there is a shortfall, either the priorities can be
changed or, by going back to step 3, the PWS can be restructured.
There is also the opportunity for the user to agree to shift
resources from his or her budget to the region to procure required
services.
Although this may seem to be a long and laborious process, it
provides a clear definition of what goods and services will be
provided, what they will cost, and what the real opportunities for
savings are. There is also a clear definition of what capability is
lost when the “requirement” exceeds the budget.
Step 7—Execution
Once a budget and level of service have been agreed to by all
concerned, the person responsible for providing the service must be
given the incentive to produce the service at the agreed-to cost.
This may include personal performance reviews, opportunity for
promotion and/or advancement, or sharing in any additional cost
savings.
Representative terms from entire chapter:
performance work