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Page 98 C Developing Output Measures Step 1Segment 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 2Identify 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 3Develop 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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Page 99 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 4Performance 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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Page 100 • 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 5Performance 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 6Prioritization 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 7Execution 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.
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