1

Initial Plan for Reforming the Business Operations of the 

Department of Defense for Efficiency and Effectiveness 

Office of the Chief Management Officer 

March 2019John S. McCain National Defense Authorization Act 

for FY 2019, Public Law 115-232

The estimated cost of this report or study for the Department of Defense is approximately $16,010 

for the 2019 Fiscal Year. This includes $10 in expenses and $16,000 in DoD labor.

Generated on 2019Mar06 RefID: 0-838204E

Reference: 0-838204E 
2

[This page intentionally left blank]
3

Table of Contents

Highlighted Excerpts from Section 921 5-9

Plan Requirement, Executive Summary and Background 11-14

Plans, Schedules, and Cost Estimates for Section 921 Covered Activities

Human Resources Reform Team 16-21

Supply Chain and Logistics Reform Team 12-27

Category Management Reform Team 28-31

Overview of Tracking and Reporting Mechanism for Section 921 Covered Activities 33-34

Plans, Schedules, and Cost Estimates for Fourth Estate Reform 35-42
4

[This page intentionally left blank]
5

HIGHLIGHTED 

EXCERPTS FROM 

SECTION 921 
6

Boxed text indicates which portion of the 2019 NDAA is covered in this Section 921 report.

Information Referenced in the reporting requirement

SEC. 921. AUTHORITIES AND RESPONSIBILITIES OF THE CHIEF MANAGEMENT 

OFFICER OF THE DEPARTMENT OF DEFENSE.

(a) AUTHORITIES AND RESPONSIBILITIES.—

(1) IN GENERAL.—Subsection (b) of section 132a of title 10, United States Code, is

amended by adding at the end the following new paragraph:

“(7) Serving as the official with principal responsibility in the Department for minimizing 

the duplication of efforts, maximizing efficiency and effectiveness, and establishing metrics for 

performance among and for all organizations and elements of the Department.”

(2) BUDGET AUTHORITY.—

(A) IN GENERAL.—Such section is further amended—

(i) by redesignating subsections (c) and (d) as subsections (d) and (e), respectively; and

(ii) by inserting after subsection (b) the following new subsection (c):

“(c) BUDGET AUTHORITY.— (1) (A) Beginning in fiscal year 2020, the Secretary of 

Defense, acting through the Under Secretary of Defense (Comptroller), shall require the head of 

each Defense Agency and Department of Defense Field Activity specified by the Secretary for 

purposes of this subsection to transmit the proposed budget of such Agency or Activity for 

enterprise business operations for a fiscal year, and for the period covered by the future-years 

defense program submitted to Congress under section 221 of this title for that fiscal year, to the 

Chief Management Officer for review under subparagraph (B) at the same time the proposed 

budget is submitted to the Under Secretary of Defense (Comptroller).

“(B) The Chief Management Officer shall review each proposed budget transmitted under 

subparagraph (A) and, not later than January 31 of the year preceding the fiscal year for which 

the budget is proposed, shall submit to the Secretary a report containing the comments of the 

Chief Management Officer with respect to all such proposed budgets, together with the 

certification of the Chief Management Officer regarding whether each such proposed budget 

achieves the required level of efficiency and effectiveness for enterprise business operations, 

consistent with guidance for budget review established by the Chief Management Officer.
7

“(C) Not later than March 31 each year, the Secretary shall submit to Congress a report that 

includes the following:

“(i) Each proposed budget for the enterprise business operations of a Defense Agency or 

Department of Defense Field Activity that was transmitted to the Chief Management Officer 

under subparagraph (A).

“(ii) Identification of each proposed budget contained in the most recent report submitted 

under subparagraph (B) that the Chief Management Officer did not certify as achieving the 

required level of efficiency and effectiveness for enterprise business operations.

“(iii) A discussion of the actions that the Secretary proposes to take, together with any 

recommended legislation that the Secretary considers appropriate, to address inadequate levels of 

efficiency and effectiveness for enterprise business operations achieved by the proposed budgets 

identified in the report.

“(iv) Any additional comments that the Secretary considers appropriate regarding 

inadequate levels of efficiency and effectiveness for enterprise business operations achieved by 

the proposed budgets.

“(2) Nothing in this subsection shall be construed to modify or interfere with the budgetrelated responsibilities of the Director of National Intelligence.”

(B) EXECUTION OF AUTHORITY.—In order to execute the authority in subsection (c) of 

section 132a of title 10, United States Code (as amended by subparagraph (A)), the Chief 

Management Officer of the Department of Defense shall do the following:

(i) By April 1, 2019, develop an assessment of cost and expertise requirements to execute 

such authority.

(ii) By September 1, 2019, develop guidance for Defense Agencies and Department of 

Defense Field Activities to delineate spending on enterprise business operations and develop a 

process to determine the adequacy of their budgets for such operations.

(b) REFORM OF BUSINESS ENTERPRISE OPERATIONS IN SUPPORT OF CERTAIN 

ACTIVITIES ACROSS DEPARTMENT OF DEFENSE.—

(1) PERIODIC REFORM.—

(A) IN GENERAL.—Not later than January 1, 2020, and not less frequently than once 

every five years thereafter, the Secretary of Defense shall, acting through the Chief Management 

Officer of the Department of Defense, reform enterprise business operations of the Department 

of Defense, through reductions, eliminations, or improvements, across all organizations and 

elements of the Department with respect to covered activities in order to increase effectiveness 

and efficiency of mission execution.
8

(B) CMO REPORTS.—Not later than January 1 of every fifth calendar year beginning with 

January 1, 2025, the Chief Management Officer shall submit to the congressional defense 

committees a report that describes the activities carried out by the Chief Management Officer 

under this subsection during the preceding five years, including an estimate of any cost savings 

achieved as a result of such activities.

(2) COVERED ACTIVITIES DEFINED.—In this subsection, the term “covered activities” 

means any activity relating to civilian resources management, logistics management, services 

contracting, or real estate management.

(3) REPORTING FRAMEWORK.—Not later than January 1, 2020, the Chief Management 

Officer shall establish a consistent reporting framework to establish a baseline for the costs to 

perform all covered activities, and shall submit to Congress a report that, for each individual 

covered activity performed in fiscal year 2019, identifies the following:

(A) The component or components of the Department responsible for performing such 

activity, and a business process map of such activity, in fiscal year 2019.

(B) The number of the military, civilian, and contractor personnel of the component or 

components of the Department who performed such activity in that fiscal year.

(C) The manpower requirements for such activity as of that fiscal year.

(D) The systems and other resources associated with such activity as of that fiscal year.

(E) The cost in dollars of performing such activity in fiscal year 2019.

(4) INITIAL PLAN.—Not later than February 1, 2019, the Chief Management Officer shall 

submit to the congressional defense committees a plan, schedule, and cost estimate for 

conducting the reforms required under paragraph (1)(A).

(5) CERTIFICATION OF COST SAVINGS.—Not later than January 1, 2020, the Chief 

Management Officer shall certify to the congressional defense committees that the savings and 

costs incurred as a result of activities carried out under paragraph (1) will achieve savings in 

fiscal year 2020 against the total amount obligated and expended for covered activities in fiscal 

year 2019 of—

(A) not less than 25 percent of the cost in dollars of performing covered activities in fiscal 

year 2019 as specified pursuant to paragraph (3)(E); or

(B) if the Chief Management Officer determines that achievement of savings of 25 percent 

or more will create overall inefficiencies for the Department, notice and justification will be 

submitted to the congressional defense committees specifying a lesser percentage of savings that 

the Chief Management Officer determines to be necessary to achieve efficiencies in the delivery 

of covered activities, which notice and justification shall be submitted by not later than October 

1, 2019, together with a description of the efficiencies to be achieved.
9

(6) COMPTROLLER GENERAL REPORTS.—The Comptroller General of the United

States shall submit to the congressional defense committees the following:

(A) Not later than 90 days after the submittal of the plan under paragraph (4), a report that 

verifies whether the plan is feasible.

(B) Not later than 270 days after the date of enactment of this Act, a report setting forth an 

assessment of the actions taken under paragraph (1)(A) since the date of the enactment of this 

Act.

(C) Not later than 270 days after the submittal of the reporting framework under paragraph 

(3), a report that verifies whether the baseline established in the framework is accurate.

(D) Not later than 270 days after the submittal of the report under paragraph (5), a report 

that verifies—

(i) whether the activities described in the report were carried out; and

(ii) whether any cost savings estimated in the report are accurate.
10

[This page intentionally left blank]
11

PLAN REQUIREMENT, 

EXECUTIVE SUMMARY, 

AND BACKGROUND
12

PLAN REQUIREMENT

Pursuant to section 921 of the John S. McCain National Defense Authorization Act 

(NDAA) for FY 2019, Public Law 115-232, this report provides an initial plan, schedule, and 

cost estimate for conducting reforms within the enterprise business operations of the DoD. 

These reforms will include reductions, eliminations, or improvements, across all organizations 

and elements of the Department, with respect to covered activities, in order to increase 

effectiveness and efficiency of mission execution. 

As required by statute, we will provide a final report on January 1, 2020, and not less frequently 

than once every five years thereafter, which will report on all the enterprise business operations 

reforms that the CMO has accomplished. The January 2020 report will include a certification of 

cost savings, which is required to be not less than 25 percent of the cost in dollars of performing 

covered activities in fiscal year 2019. If the CMO determines that the achievement of savings of 

25 percent or more will create overall inefficiencies for the Department, the CMO will provide 

written notice and justification to the Congressional Defense Committees by October 1, 2019. 

This justification will specify a lesser percentage of savings that the CMO determines to be 

necessary to achieve efficiencies in the delivery of covered activities together with a description 

of the efficiencies to be achieved. 

EXECUTIVE SUMMARY

Reforming the business operations of the Department is a significant undertaking which requires 

extensive analysis, planning, and collaboration throughout the enterprise to ensure

implementation of the most impactful reforms. Business reform goes beyond efficiencies and 

reductions; it includes improving business processes, systems, or policies, to improve innovation 

or processes for weapon system acquisition; and better alignment of resources to support the 

National Defense Strategy. Current defense enterprise business reform efforts in the Department 

are led by the Office of the Chief Management Officer (OCMO).

The OCMO established reform teams that are leading efforts to improve enterprise business 

operations throughout the Department and establish a culture of continuous improvement 

focused on results and accountability. The four activities covered in Section 921 of the FY2019 

NDAA (civilian resources management, logistics management, services contracting, and real 

estate management) are being overseen by three reform teams – Human Resources, Supply 

Chain and Logistics, and Category Management. Further, the Office of the CMO is conducting 

efficiency and effectiveness reviews of the Defense Agencies and DoD Field Activities (DAFAs) 

to identify common, shared services that are similar and/or duplicative in an effort to reform the 

Fourth Estate. Highlights from these covered activities are:

 Human Resources Reform Team (Sec 921 - Civilian Resources Management):

Supports force readiness and lethality through strategic workforce planning and 

management. The team is pursuing enterprise human resources management solutions 

throughout the Department. Three key civilian resources management reform initiatives 

are 1) Regulatory Reform, 2) Civilian Hiring Improvement, and 3) Human Resources 

Service Delivery.
13

 Supply Chain and Logistics Reform Team (Sec 921 - Logistics Management): The 

goals of this team are to 1) increase materiel visibility, 2) strengthen sustainment, and 3) 

maximize buying power. Its vision is to deliver cost-effective readiness to improve 

lethality, while constantly innovating to outpace our adversaries. The top three supply 

chain and logistics reform initiatives, in coordination with the Defense Logistics Agency,

address the following: 1) Strategic Sourcing of Sustainment/Commodity Procurement, 2) 

Maintenance Work Packages and Bills of Material, and 3) Munitions Readiness.

 Category Management Reform Team (Sec 921 - Services Contracting, Real Estate 

Management): The team is developing a cross-agency contract and category 

management procurement methodology aimed at driving efficiencies and savings 

throughout the DoD. These efforts grew out of the successful Services Requirements 

Review Board (SRRB) reviews conducted by the Office of the Secretary of Defense 

(OSD) and the DAFAs that resulted in millions of dollars in programmed savings for the 

Department. The contract and category management effort will also help the Department 

achieve enterprise business operations consistent with guidance for budget review as it 

moves from a budget-spend centric acquisition process to a strategic-spend centric 

acquisition process. The Department’s real property reform initiatives (including: lease 

process standardization, footprint consolidation, space utilization, contract optimization, 

etc.) are now being addressed as part of the category management effort.

To track and manage all reform activities, a reform initiative framework has been implemented 

to track and report progress of initiatives; the financial savings will be monitored by a validation 

process supported by the Under Secretary of Defense (Comptroller & CAPE). The Department’s 

comprehensive plan to support all reform initiatives is detailed in this report.

BACKGROUND

The Department of Defense (DoD) is the largest federal agency, with an annual budget of 

more than $500 billion and a workforce that includes uniformed service members, civilian

federal employees, and defense contractor employees. Reforming the business operations of

the Department is a significant undertaking which requires extensive analysis, planning, and 

collaboration throughout the enterprise to ensure the most impactful reforms are 

implemented.

Business reform goes beyond efficiencies and reductions. It includes improving business 

processes, systems, or policies, improving innovation or processes for weapon system 

acquisition; and better alignment of resources to support the National Defense Strategy.

Reforming business operations to improve the lethality of the Department is one of the three 

pillars of the National Defense Strategy: 1) Build a More Lethal Force; 2) Strengthen 

alliances and Attract New Partners; and 3) Reform the Department for Greater Performance 

and Affordability. Current defense enterprise business reform efforts in the Department are 

being led by the Office of the Chief Management Officer (OCMO).

The OCMO is charged with establishing policies for, and directing, all enterprise business 

operations of the Department, including planning and processes, business transformation,

performance management, and business information technology management. This office is 

leading reform efforts to improve enterprise business operations throughout the Department
14

and establish a culture of continuous improvement focused on results and accountability.

The OCMO established reform teams to improve the quality and productivity of the 

business operations of the Department while reducing the cost of those operations in order 

to be better able to reallocate resources from business operations to readiness. The covered 

activities included in Section 921 of the FY2019 NDAA are being addressed by three of 

those reform teams: Human Resources, Supply Chain and Logistics, and Category 

Management.

The OCMO is also charged with conducting efficiency and effectiveness reviews of the 

DAFAs in order to identify duplicative activities in an effort to reform the Fourth Estate.

The results of DAFA reviews will provide information that will be critical to improving 

enterprise business operations and shifting the Department toward the use of more enterprise 

services to conduct business operations.

This document provides plans, schedules, and cost estimates for executing efforts to reform 

enterprise business operations in the DoD in the four covered areas requested to be 

addressed: civilian resources management, logistics management, services contracting, and 

real estate management.
15

PLANS, SCHEDULES, AND COST ESTIMATES

FOR THE SECTION 921 COVERED ACTIVITIES
16

HUMAN RESOURCES REFORM TEAM

Sec 921 Activity: Civilians Resources Management

The Department has more than 700,000 civilian federal employees serving in the contiguous 

United States and deployed around the world alongside our military, doing every kind of work 

from manufacturing and construction to advanced scientific research. Achieving our national 

defense strategy depends on having people with the right leadership, direction, and resources to 

accomplish the mission. Reforming our business processes to include: simplifying hiring; 

improving employee performance management and engagement; and creating an agile 

workforce, will enable the Department to allocate resources to increase effectiveness and 

improve military readiness.

The Human Resources (HR) Reform Team supports force readiness and lethality through 

strategic workforce planning and management, including pursuing enterprise human resources 

management solutions throughout the Department. Three key civilian resources management 

reform initiatives are: 

1) Civilian Hiring Improvement

2) Regulatory Reform

3) Human Resources Service Delivery

The following table shows a consolidated schedule of all reform team actions. Details for each 

initiative are outlined below.

Civilian Hiring Improvement Regulatory Reform Human Resource

Service Delivery

FY19 Q1 Turn on Hiring Manager 

Survey tool in OPM 

USASTAFFING system

Submit FY20 Legislative 

Proposal

Review GAO reports and other 

requirements resources

FY19 Q2 Kick-off Business Process 

Reengineering (BPR) project

Conduct annual review of 

Component TTH Action Plans

Draft HR Reform Framework 

Test framework; Begin drafting 

implementation, 

communication and change 

management plans

Draft project charter

FY19 Q3 Establish common DoD 

process and metrics for civilian 

hiring

Prepare drafts of updated DoD 

policies and FY20-21 Talent 

Management Guidance

Approve project charter

Collect and compare Service 

Level Agreements for HR 

service providers

Collect and map HR Service 

Delivery models

Collect federal government and 

private industry benchmarks
17

FY19 Q4 Establish baselines / goals for 

manager / customer satisfaction 

quality metrics

Document adoption of DoD 

process & metrics

Conduct a comprehensive 

review of HR line of business 

management costs

Conduct a comprehensive 

review of HR service delivery 

costing models, including 

overhead costs 

Conduct a comprehensive 

review of HR service provider 

organizational structures, 

including Full Time 

Equivalents (FTE) and contract 

support

Identify key performance and 

efficiency measures among HR 

service providers

Assess against benchmarks

FY20 Q1 Begin quarterly assessment of 

survey data using baseline 

quality metrics

(If enacted in the NDAA) 

Execute implementation plan, 

communication and change 

management plan, and updated 

DoD policies, per FY20 

legislation

Develop recommended 

Courses of Action (CoA)

1) Civilian Hiring Improvement

Problem Statement and Overview: The civilian hiring process is complicated, time-consuming, 

and disjointed throughout the Department. For example, the average time to hire a civilian is 100 

days. Hiring delays adversely impact program/project progress and can lead to managers 

substituting more expensive military or contractor personnel in place of less costly civilian 

federal employees. 

Objective: The objectives are shortened time to hire (TTH), an improved match of enterprise 

needs to employee competencies in support of mission readiness, and an established enterprisewide standard metrics/measurements and reports on performance of improved hiring process. 

Benefits:

 TTH: Target DoD-wide average time to hire of 85 days or less

 Reduce staffing gaps which lead to under-execution of budget

 Increase manager/customer satisfaction

Strategic Approach:

 TTH: Implement and track Component TTH Action Plans

 Quality Measure: Establish baselines and goals for manager/customer satisfaction

 Business Process Review (BPR): Establish shared business process for civilian hiring
18

Example Accomplishments:

 In the spring of 2018, DoD Components developed TTH Action Plans to identify ways to 

decrease time to hire and increase candidate quality. The Department began hosting 

quarterly meetings to discuss best practices and lessons learned.

 Beginning October 1, 2018, the Department began using the Hiring Manager Survey tool 

in the OPM USA Staffing system to systematically collect customer satisfaction data. 

Initial results were reviewed in February 2019. 

Plan & Schedule:

1 Turn on Hiring Manager Survey tool in OPM USASTAFFING system

2 Kick-off Business Process Review (BPR) project

3 Conduct annual review of Component TTH Action Plans

4 Establish common DoD process & metrics; Initiate manager survey pilot to baseline quality metrics

5 Establish baselines / goals for manager / customer satisfaction quality metrics

6 Document adoption of DoD process & metrics

7 Begin quarterly assessment of survey data using baseline quality metrics

Cost Estimate: To date, project has been executed using existing internal resources, including 

OCMO Reform Team support. We do not anticipate a need for additional investment as 

improved hiring practices will be incorporated into standard HR processes.

2) Regulatory Reform

Problem Statement and Overview: The federal government operates under a rigid, monolithic 

1978-vintage personnel system, to which hundreds of limited, tailor-made exceptions have been 

added over the years. According to the Government Accountability Office (GAO) and other 

reviewers, agencies use only a small number of the scores of personnel authorities and 

flexibilities that have been granted to them. The GAO stated in 2017 testimony (GAO-17-627T, 

page 11) that the hiring process could be improved by refining, consolidating, or eliminating less 

effective authorities. The Department’s internal reviews confirm that HR practitioners and hiring 

managers find the array of available authorities confusing, impractical, uncoordinated, and in 

some cases inconsistent.

Objective: The objective of this initiative is to develop a new proposed legal authority allowing 

the Department to simplify, streamline, and standardize civilian personnel policies and processes 

to effectively recruit, appoint, compensate, incentivize, reward, retain, and manage a qualified 

and agile civilian workforce, allowing for a strategic, enterprise-wide approach to support the 

Department’s missions.

Benefits:

 Simple, streamlined, standardized processes

 Increased mission readiness through quality performance measures

 Focus on results-oriented management of human resources

1 2 3 5 7

6

4 6
19

Strategic Approach:

 Legislative change to grant broad civilian hiring authority for DoD 

 Legislative change to grant Secretary of Defense authority to develop a modern civilian 

compensation and classification system

 Simplified DoD policies and processes

Example Accomplishments:

 The HR Reform Team has coordinated and led efforts to develop a conceptual design for 

a new system. This will help communicate the type of changes the Department seeks and

prepare the Department to begin implementation.

 Over several months, the HR Reform Team drafted an HR Reform Framework to depict a 

conceptual structure in support of the legislative reforms. The team worked with policy 

makers and operators and senior DoD civilian HR leadership to develop this framework. 

The HR Reform Team will use the Framework to draft a Roadmap for implementation, 

including alternative approaches depending on the outcome of legislative proposals.

Plan & Schedule:

1 Submit FY20 Legislative Proposal

2 Draft HR Reform Framework 

3 Test framework; Begin drafting implementation, communication and change management plans

4 Prepare drafts of updated DoD policies and FY20-21 Talent Management Guidance

5 (If enacted in NDAA) Execute implementation plan, communication and change management plan, updated DoD policies, per FY20 

legislation

Cost Estimate: To date, project has been executed using existing internal resources, including 

OCMO Reform Team support. Future (FY19-20) costs may include approximately $500 

thousand for research and studies. To the extent possible, we will make use of USD(P&R) 

budgeted funds for FFRDC studies.

3) Human Resources Service Delivery

Problem Statement and Overview: The Department currently does not regulate or oversee, from 

an enterprise perspective, the activities of various HR providers that offer a range of services and 

products to other DoD Agencies/Components. HR providers operate independently, and offer 

various types of services, terms, and fees for various customers throughout the Department. As 

such, the Department has no standard way to evaluate the performance of HR providers in terms 

of costs, quality, or other metrics. 

Objective: The objectives for this initiative are to establish a common DoD HR business/service 

delivery model, a standard set of performance measures, and cost accountability structure that 

will be applied to all HR service providers, with a focus on certain DAFAs. This effort will also 

provide information for the Secretary of Defense and the Chief Management Officer to reform 

civilian resource management to increase effectiveness and efficiency of mission execution. It 

will ident an enterprise-wide HR Service Delivery model based on generally accepted business 

1 2 3 4 5
20

practices within government that can be used by service providers to optimize their 

organizational structure and costing methods. This reform initiative will also identify an 

enterprise-wide oversight and governance structure and processes to monitor and evaluate key 

performance and efficiency measures among HR service providers. Outcomes for this initiative 

include enabling the Department to:

 Exercise oversight to evaluate effectiveness of efficiency initiatives to make better 

investment decisions and reduce risk of overspending on non-essential support programs

 Identify and remedy fragmentation, overlap, and duplication of HR service delivery 

within the DAFAs

 Increase quality of services through the optimization of HR business practices

Scope: At least six organizations within the Department provide a range of specialized human 

resources services to other defense agencies or organizations. These specialized HR services 

include technical HR assistance and HR business operations (or “back room” operations). This 

project focuses on the three HR service providers that are DAFAs: the Defense Logistics Agency 

(DLA), the Defense Finance and Accounting Service (DFAS), and the Washington Headquarters 

Service (WHS). Note: Personnel matters handled in individual units by supervisors, managers, 

and administrative support personnel are not included in this definition of HR services. 

Benefits: Enable DoD to evaluate effectiveness of efficiency initiatives, make better investment

decisions, and reduce risk of overspending on non-essential support programs; identify and 

remedy fragmentation, overlap, and duplication of HR service delivery within the DAFAs; and 

increase quality of services through the optimization of HR business practices

Strategic Approach:

 Improve HR Service Delivery in and from the Fourth Estate (DFAS, DLA, WHS)

 Compare reliable data from MilDeps and other federal providers 

 Standardize HR Services

 Use HR LOB cost and performance data

Plan & Schedule:

1 Review GAO reports and other requirements resources

2 Draft project charter

3 Approve project charter

4 Collect data and information

a. Collect and compare Service Level Agreements for HR service providers

b. Collect and map HR Service Delivery models

c. Collect federal government and private industry benchmarks

5 Analyze data and information

a. Conduct a comprehensive review of HR line of business management costs

b. Conduct a comprehensive review of HR service delivery costing models, including overhead costs 

c. Conduct a comprehensive review of HR service provider organizational structures, including Full Time Equivalents (FTE) 

and contract support

d. Identify key performance and efficiency measures among HR service providers

6 Assess against benchmarks

7 Develop recommended Courses of Action (CoA)

1 2 3 5 7

6

4 6
21

Cost Estimate: This project will be incorporated into OCMO’s new Office of Fourth Estate 

Management. Reviews of WHS, DLA, and DFAS (HR service providers in Fourth Estate) will 

include information about HR service delivery along with other covered activities. The costs of 

DAFA reviews are addressed in the DAFA section of this report. In the initial stand-up of the 

Fourth Estate Management office, we anticipate a need in FY19-20 for approximately $2 million 

to $2.5 million in contract services to assist with developing business case analyses, researching 

internal and external benchmarks, conducting data analytics, evaluating processes and 

performance of providers, and developing reports and related communications. (Note that these 

initial Fourth Estate Management stand-up costs are not limited to HR but will include oversight 

of other covered activities.)
22

SUPPLY CHAIN AND LOGISTICS REFORM TEAM

Sec 921 Activity: Logistics Management

The Supply Chain and Logistics Reform Team is a cross-functional team that directly supports 

the first and third lines of effort identified in the 2018 National Defense Strategy. The team seeks 

to provide a resilient and agile, best-in-class logistics force. The team is commissioned to deliver 

enterprise level cost-effective readiness reforms, increase the department's lethality, and harvest 

innovation to outpace our adversaries. The team's approach to standardizing processes, reducing

duplication of efforts, and adopting well-aligned authoritative performance measures will 

increase weapon system readiness and decrease sustainment costs throughout the Department. 

The Supply Chain and Logistics Reform Team is working to increase materiel visibility, 

strengthen sustainment, and maximize buying power. The goal is to deliver cost-effective 

readiness to improve lethality, while constantly innovating to outpace our adversaries. The top 

three supply chain and logistics reform initiatives, in coordination with the Defense Logistics 

Agency, are in the following areas:

1) Strategic Sourcing of Sustainment/Commodity Procurement

2) Maintenance Work Packages and Bills of Material

3) Munitions Readiness 

The following table shows a consolidated schedule of all reform team actions. Details for each 

initiative are outlined below.

Strategic Sourcing of 

Sustainment/Commodity 

Procurement

Maintenance Work Packages 

and Bills of Material

Munitions Readiness

FY19 Q1 Elect a weapon systems to 

assess depot maintenance work 

package and BOM accuracy 

Phase I: Develop tool 

prototype (Subset of 

munitions/capability)

FY19 Q2 Align CoE reform efforts with 

OSD Category Management 

initiative

Obtain work packages/BOMs 

& gain access to relevant data

FY19 Q3 Develop business 

intelligence/analytics to 

capture data to Categorize DoD 

Spend, identify redundancies, 

price gap analysis, and data 

driven decisions

Compare planned scope and 

forecasted spares demand 

against actual scope and 

demand to assess accuracy of 

BOM

Identify opportunities to 

improve processes, make 

recommendations to address 

deficiencies, improve 

efficiency, improve material 

availability (MA), and identify 

any necessary changes in 

guidance and directives 

Phase II: Expanding tool 

(Subset of 7 munitions to 50 

munitions)
23

FY19 Q4 Collaborate with the Services 

and DHA to establish highest 

priority items, Analyze market 

segmentation to select best in 

class process owner, select 

candidate items, and 

implement

Develop implementation plan 

for the recommendations, 

quantify the projected cost 

avoidance, and develop metrics 

and a process for monitoring 

future performance of the 

recommendations

The proof of concept final 

report will document and 

highlight the stakeholder 

interviews, discovery of future

requirements, anticipated 

challenges, as well as include 

an implementation plan for 

recommendations, future phase 

development, user 

experience/user interface, data 

ingestion, maintenance, 

updating and sustainment

FY20 Q1

FY20 Q2 The Munitions Readiness 

initiative is expected to deliver 

a Department-wide initial COP 

for munitions, as well as 

advanced analytics capabilities 

that directly links resourcing to 

industrial base capacity, 

procurement planning and 

operational health and 

readiness to better enable and 

drive informed decision 

making

FY20 Q3 Phase III: Full 

implementation/live

FY20 Q4 Based on lessons learned refine 

business process for selection 

and implementation of future 

items

Establish DLR procurement 

interface / system with the Air 

Force and Navy using 

procurement data standards

1) Strategic Sourcing of Sustainment/Commodity Procurement

Problem Statement and Overview: Procurement is fragmented and redundant across the Services 

with an inability to leverage the Department’s economies of scale. There are opportunities to 

achieve process efficiencies and savings by centralizing commodity procurement throughout the 

Department. On the whole, the Department can increase its negotiating power with suppliers by 

consolidating contracts to leverage economies of scale. Contract consolidation provides 

enterprise-wide visibility that enables the Department to reduce price variability and more 

efficiently manage supply demand. 

Objective: The objective of this initiative is to improve buying power of the Department, 

increase data transparency throughout the enterprise related to sustainment/commodity 

procurement, and apply best-in-class cost and contract management practices with suppliers to 
24

drive higher performance and lower cost. The approach is to: 

 Capture enterprise data and develop business intelligence/analytics that will drive 

consolidation decisions across Services and agencies, improve buying power, and reduce 

overhead

 Establish interface/system integration with the Services using procurement data 

standards, and compare prices throughout the DoD and with industry to match terms to 

the Department’s scale and buying power

 Use demand management to right-size requirements based on Service and agency needs

 Collaborate between the Services and DLA to analyze spend and prioritize the categories 

of items based on the greatest potential to generate the benefits of consolidation

 Identify opportunities to leverage DLA automation, and prioritize categories for strategic 

sourcing.

Benefits:

 Use economies of scale to save Services upwards of 10% in next two years

 For consolidated items, expedite buying (>78% w/in 12 days) 

 Increased buying transparency and governance throughout the enterprise

Strategic Approach:

 Benchmark against industry

 Collaborate with the Services and DHA to identify and prioritize redundancies

 Analyze and select best-in-class owner

Plan & Schedule:

`

1 Align CoE reform efforts with OSD Category Management initiative

2 Develop business intelligence/analytics to capture data to Categorize DoD Spend, identify redundancies, price gap analysis, and data 

driven decisions

3 Collaborate with the Services and DHA to establish highest priority items; Analyze market segmentation to select best in class process 

owner; Select candidate items and implement

4 Based on lessons learned refine business process for selection and implementation of future items

5 Establish DLR procurement interface/system with the Air Force and Navy using procurement data standards

Cost Estimate: The cost estimate is under review.

1 3 4

6

2 5
25

2) Maintenance Work Packages and Bills of Material

Problem Statement and Overview: This initiative is focused on improving the accuracy of depot 

maintenance work packages and related Bills of Material (BOMs) and developing 

recommendations for process improvements. Work packages and BOMs are the foundation for 

depot-level repair because they define both the content and scope of the maintenance to be 

undertaken. Inaccuracies can produce significant differences between planned and actual content 

and scope, increase repair turnaround times, delay required spares, and increase the non-mission 

capable time of the weapon systems while they are in depot-level maintenance. 

Objective: The objective of this initiative is to improve the accuracy of the maintenance work 

packages resulting in shorter depot repair time for weapon systems readiness. 

Benefits:

 On-time delivery of weapon systems to customers (>90%)

 Reduce projected depot repair cost by 3-5%

Strategic Approach:

 Compare forecast demand against actual demand to assess accuracy

 Quantify efficiency opportunities

 Identify any changes in guidance and directives required to integrate results into existing 

maintenance processes 

 Deliver an implementation plan to monitor results and institutionalize improvements

Plan & Schedule: 

`

1 Elect a weapon systems to assess depot maintenance work package and BOM accuracy 

2 Obtain work packages/BOMs & gain access to relevant data

3 Compare planned scope and forecasted spares demand against actual scope and demand to assess accuracy of BOM 

4 Identify opportunities to improve processes, make recommendations to address deficiencies, improve efficiency, improve material 

availability (MA), and identify any necessary changes in guidance and directives 

5 Develop implementation plan for the recommendations, quantify the projected cost avoidance, and develop metrics and a process for 

monitoring future performance of the recommendations

Cost Estimate: The proof of concept development cost $800,000 and was funded with FY18 

execution year funds.

2 3

3

5

6

1 4
26

3) Munitions Readiness

Problem Statement and Overview: The Department lacks an integrated tool capable of providing 

senior leaders with an effective assessment of all the variables associated with the health and 

readiness of the munitions inventory and assessing options for correcting negative trends.

Effectively capturing and utilizing the Department’s munitions information presents the 

Department with a data problem requiring an advanced analytics solution that would integrate 

disparate datasets into a comprehensive set of data. This initiative will provide a decision-support 

tool to assist decision makers at all levels in understanding the multi-order effects on 

inventory/stockpile health, sufficiency, and the resulting impact on readiness. 

The Department seeks to understand the potential for applying advanced analytics, machine 

learning, and cognitive computing capabilities to address long-standing challenges with 

measuring and managing the readiness of munitions throughout the enterprise. Challenges 

include but are not limited to: 

 A limited end-to-end sight picture of munitions availability

 Fragmented and compartmentalized data sets that are unstructured and incomplete

 Rudimentary planning information; access, restrictions and management of third party 

proprietary information

 Fragmented decision-making and reliance on human abilities limiting key insights

 Inadequate analysis capabilities that are unable to consider all the relevant variables

 A highly manual and over-simplified effort to assess sufficiency and identify courses of 

actions to remedy insufficient situations

Objective: The objective is to use cross-functional information to implement a munitions 

enterprise advanced analytics solution through a proof of concept, and then expanded 

development of a decision support tool to reach full capability of data integration and course of 

action resolution and accuracy.

Benefits:

 Robust decision support tool for all users

 Authority to operate on NIPR/SIPR

 Advanced analytics incorporating artificial intelligence and machine learning to 

synthesize decisions and timely quantify risk-informed COAs

 Suite of enterprise metrics to monitor munitions health & readiness 

Strategic Approach:

 Leverage CMO-approved DoD Repository for Common Enterprise Data

 Ingest structured and unstructured data

 Develop user interface for decision support

Example Accomplishments: A proof of concept is examining the Department’s ability to 

securely incorporate commercially available advanced analytics applications; discover and 

leverage relevant machine learning and artificial intelligence algorithms; and better understand 

the art of the possible when a big data approach is utilized and requisite data is made available.

 By decomposing the functional business rules, data systems, and elements necessary to 

code and compile fact-based solutions, a “Use Case” approach is being used to examine 
27

the modeling of a few of the most important recurring analytical questions for several 

preferred munitions types, 

 The current proof of concept is working to produce a functional demonstration of a 

prototype tool in a secure environment, hosted on a secure DoD platform, with a working 

SIPR user interface. It will feature various multi-level user readiness and health 

dashboards, provide a munitions Common Operating Picture (COP), and provide menu 

driven options for tailoring user-defined analysis.

Plan and Schedule: 

`

1 Phase I: Develop tool prototype (Subset of munitions/capability)

2 Phase II: Expanding tool (Subset of 7 munitions to 50 munitions)

3 The proof of concept final report will document and highlight the stakeholder interviews, discovery of future requirements, anticipated 

challenges, as well as include an implementation plan for recommendations, future phase development, user experience/user interface, 

data ingestion, maintenance, updating and sustainment

4 The Munitions Readiness initiative is expected to deliver a Department-wide initial COP for munitions, as well as advanced analytics 

capabilities that directly links resourcing to industrial base capacity, procurement planning and operational health and readiness to better 

enable and drive informed decision making

5 Phase III: Full implementation/live

Cost Estimate: The proof of concept development cost $3 million and was funded with FY18 execution 

year funds.

2 5

3

3

6

1 4
28

CATEGORY MANAGEMENT REFORM TEAM

Sec 921 Activity: Services Contracting, Real Estate Management

In an effort to fulfill the reform requirements of Section 921 of the FY19 NDAA, and to support 

the President’s Management Agenda and the National Security Strategy, the Category 

Management team is reviewing the $200 billion the Department spends to purchase goods and 

service. The team includes representatives from Military Departments and the DAFAs. To enable 

the team to fully analyze this spend, the CMO has engaged the services of two consulting firms 

who are nationally recognized as experts in Category management. The two specific areas of 

focus are:

1) Service Requirements Review Board (SRRB)

2) Category Management 

The following table shows a consolidated schedule of all reform team actions. Details for each 

initiative are outlined below.

Service Requirements Review Board (SRRB) Category Management 

FY19 Q1 SRRB-19: Conduct engagement meeting Category management sprint 1

FY19 Q2 SRRB-19: Conduct SRRB Senior Review 

Panels (SRPs)

Category management sprint 2

FY19 Q3 SRRB-19: Conduct SRPs

SRRB-20: Identify new focus areas / new 

approaches

Category management sprint 3

FY19 Q4 SRRB-19: SRRB-19 reporting results

SRRB-20: SRRB-20 policy development

Category management sprint 4

FY20 Q1 SRRB-20: Conduct engagement meetings Category management sprint 5

FY20 Q2 SRRB-20: Conduct SRRB Senior Review 

Panels (SRPs)

Category management sprint 6

FY20 Q3 Category management sprint 7

FY20 Q4 Category management sprint 8

1) Service Requirements Review Board (SRRB)

Problem Statement and Overview: The Department conducts contracting activities in more than 

60 organizations throughout the enterprise. In 2016, the Deputy Secretary of Defense directed an 

annual review of all service requirement contracts for components of the Office of the Secretary 

of Defense (OSD) and the DAFAs. This effort resulted in millions of dollars in savings for the 

Department since it first began and is an ongoing initiative within the Department. Because of 

the success of the SRRBs, the Department has expanded this effort and is reviewing other 

categories of spending throughout the enterprise. The SRRBs are timed to inform budgets for the 

following fiscal year. 
29

Objective: The objective is for each organization to establish an SRRB, which is a board that 

reviews, validates, prioritizes, and approves services requirements to accurately inform the 

budget and acquisition processes. Requirements development, validation, prioritization and 

approval are critical to ensuring we buy only the services we need, and at the levels required. 

The goal of the service contracts effort is to support the execution of the Department’s mission 

faster, better, and cheaper while enabling the best possible DoD workforce mix of service 

providers. The Department will become a better buyer by leveraging market research, 

institutionalizing better negotiating techniques, and leveraging comparative pricing.

Benefits:

 FY17-FY19 savings to date = $932 million (validated by comptroller)

 Within each organization, an established, standardized, objective, internal review process 

for contracted services requirements that are analyzed, at a minimum, annually

Strategic Approach:

 Currently in its fourth iteration, the establishment of the SRRB in FY16 first incorporated 

the DoD Fourth Estate Organizations including all Staff Orgs and the DAFAs

 In SRRB 2.0, the Joint Staff and Combatant Commands as well as Working Capital 

Funded Organizations were included in the review cycle

 In SRRB-19, the Military Departments will be included in the review cycle

Accomplishments to Date:

 SRRBs have already identified over two billion dollars in savings, with $447 million of 

programmed savings already achieved in the Fourth Estate alone in FY17 and 18. 

Plan and Schedule: SRRBs are an ongoing process to help the Department achieve enterprise 

business operations consistent with guidance for budget review as it moves from a budget-spend 

centric acquisition process to a strategic-spend centric acquisition process. Below is the timeline 

for two years of activity.

SRRB-19

1 Conduct engagement meeting

2 Conduct SRRB Senior Review Panels (SRPs)

3 Conduct SRPs

4 SRRB-19 reporting results

SRRB-20

1 Identify new focus areas / new approaches

2 SRRB-20 policy development

3 Conduct engagement meetings

4 Conduct SRRB Senior Review Panels (SRPs)

Cost Estimate: There are no major costs associated with the SRRB initiative.

1 2 3 1 4 2 3 4

SRRB-19 SRRB-20
30

2) Category Management

Problem Statement and Overview: The Department’s real property reform initiatives are now 

part of the category management effort and will be integrated into the overall Category 

Management strategy. Figure 1 outlines the three top areas of CMO reform necessary to 

implement category management throughout the Department. Most importantly, in order to 

continue to realize savings, the team continues its review of spend throughout the enterprise as 

specified in Figure 1. The Department is currently developing plans and timelines for each of the 

areas. 

Figure 1. Category Management Approach and Objectives

Objective: The approach to the Category Management effort is to implement best practices, such 

as consolidating requirements where possible to achieve volume discounts while also developing 

data and business tools aimed at increasing spend on contracts that meet defined criteria for 

management maturity and data sharing. Category Management aims to reduce contracts while 

also increasing savings, where the government is paying less for goods and services over time (or 

receiving more goods and services for the same expenditure). Finally, reducing the total number 

of unique contracts and increasing small businesses share of Federal spend continues to shape 

this reform initiative. The team will use agency-wide and government-wide data and spend 

analysis to evaluate and identify current acquisition, procurement and program management 

levers leading to contract cost inefficiencies. 

Benefits: Inclusive of all stakeholders to find inefficiencies resulting in identifying savings that 

can be reinvested back into the program and to ultimately drive future common goods spend to 

buy smarter, eliminate redundancies, increase efficiency, and deliver more value and savings 

from the government’s acquisition program. 

Strategic Approach: Working with procurement and program management team members to 

identify, measure, and prioritize contract efficiency reviews as well as establish a category plan 

that encompasses the products or categories in a designated agency.
31

Example Accomplishments:

 In sprint one for Category Management, $80 million in savings on $300 million in spend 

at the Defense Information Systems Agency (DISA). Leveraging business intelligence 

expertise from our consulting partners, we analyzed maintenance and procurement 

records to identify unnecessary spending which can be avoided in the future. Based on an 

initial diagnostics of $16 billion in spend throughout the Department, findings revealed 

the necessity to realign and refocus operations, procurement, and financial efforts.

Plan & Schedule: The Department is going to use multiple levers to drive savings opportunities 

across demand management and price/contract renegotiation. 

 Optimally match supply-demand and requirements

 Eliminate unused inventory or under-utilized assets

 Capture value from labor productivity unlocks

 Improve contract incentives and negotiations

 Achieve lowest defensible price based on cost benchmarks

 Reduce price variability for commodity goods and services

Category Management kicked off in August 2018. To review the $200 billion in spend on goods 

and services, the team, with the expert assistance of the consulting firms, is reviewing $20 billion 

of spend per quarter over a period of 33 months. These quarterly reviews, known as sprints, 

analyze contract and/or categories to find better ways to buy goods and services of the right 

quality, at the right time, and for the right price. Each sprint is estimated to cost $11 million. The 

team plans to do a sprint per quarter through FY21 Q2.

`

1 Category management sprint 1

2 Category management sprint 2

3 Category management sprint 3

4 Category management sprint 4

5 Category management sprint 5

6 Category management sprint 6

7 Category management sprint 7

8 Category management sprint 8

In order to realize savings and contract improvements immediately, while also continuing to 

develop procurement savings levers, the team continues its review of spend throughout the DoD 

with the support of professional business industry analysts providing business intelligence and 

insightful acquisition intelligence to form future agency-wide acquisition strategies, eventually 

supporting multi-agency collaboration through the implementation of category management. 

Cost Estimates: Each sprint is estimated to cost $11 million. The team plans to do a sprint per 

quarter through FY21 Q2.

3 7

3

4

6

1 2 6

3

5 8
32

[This page intentionally left blank]
33

OVERVIEW OF TRACKING AND REPORTING MECHANISM

FOR SECTION 921 COVERED ACTIVITIES
34

Reform progress is governed and tracked by the Reform Management Group (RMG). The RMG 

is responsible for the delivery of the Secretary of Defense’s third line of effort, which is to 

reform the business functions of the Department, as documented in the 2018 National Defense 

Strategy (NDS). The RMG efforts to reform business processes of the Department will support 

responsible use of federal resources by allowing organizations to reallocate savings to increase 

lethality and improve readiness. The RMG is a deliberative body with the seniority and authority 

to make decisions affecting the business of the Department.

Under direction from the RMG, the enterprise business operations reform efforts will reduce, 

eliminate, and improve covered activities to increase efficiency and effectiveness of mission 

execution. The benefits of tracking and reporting include a clear demonstration to Congress and 

the public of the types of reforms implemented as well as the quantity of savings to be

reallocated in support of readiness, lethality, or any other Departmental priority as directed by 

the Secretary or Deputy Secretary of Defense. Reform savings are tracked in two ways: 1) the 

Department will use a clear methodology to track progress, providing updates to the RMG as 

directed; and, 2) reforms are tracked and reported at two levels, the line of business level and the 

initiative level. The covered activities in this plan can span multiple lines of business, but any 

savings will only be noted in association with one line of business. The line of business level is 

an overall summary of activity from the individual supporting initiatives.

A reform initiative framework has been implemented to track and report progress of reform 

initiatives. The Reform Initiative Framework (Figure 2) provides structure for a disciplined and 

repeatable, result-oriented process. 

Figure 2: Reform Initiative Framework

The framework establishes decision points at two tollgates. The decision points are supported by 

charters that define the initiative, coupled with a balanced scorecard set of key performance 

indicators (KPIs) to ensure success. The balanced scorecard KPIs measure the improvement 

from four perspectives: internal process, customer or stakeholder, financial and organizational 

capacity. The financial savings will be monitored through a validation process supported by the 

Under Secretary of Defense (Comptroller) (USD(C)). Progress is managed quarterly and tracked 

through established review sessions that include senior leadership from the OCMO and 

OUSD(C), with the outcomes presented to the RMG for final ratification.
35

PLANS, SCHEDULES AND COST ESTIMATES

FOR FOURTH ESTATE REFORM:

THE DEFENSE AGENCIES AND DOD FIELD ACTIVITIES REVIEWS
36

Problem Statement and Overview: The Defense Agencies and DoD Field Activities (DAFAs) 

of the Department play a critical role in supporting business operations and are intended to 

perform common supply and service functions for at least two DoD organizations. As such, the 

Office of the Chief Management Officer (OCMO) will independently approach the DAFA 

efficiency and effectiveness reviews to identify similar and/or duplicative activities among them.

The results of the DAFA reviews will provide information critical to improving enterprise 

business operations and shifting the Department toward the use of more shared enterprise 

services to conduct business operations. Using this data, OCMO will identify the DAFAs that are 

operating effectively and efficiently overall and others with functions that require further 

rationalization, to include the potential transfer of functions from one DAFA to another 

component within the Department for better management and execution. Focusing on the 

delivery of shared enterprise services ensures cohesive planning and execution of business 

operations while reducing the cost of those operations.

The DAFA review outputs will identify opportunities for improvements to service delivery and 

inform business enterprise performance metrics throughout the DAFAs, to include establishing 

or modifying existing performance metrics for each DAFA surrounding products and/or services 

provided. Ultimately, ensuring the DAFAs to deliver high-impact, efficient services will better 

support the warfighter and position the Department to meet future challenges.

The OCMO has begun conducting the DAFA efficiency and effectiveness reviews using a 

segmented approach. Reviews will be consistent for each of the three segments with a 

standardized method used to identify early wins that can be captured immediately. OCMO will 

focus on a diagnostic phase during DAFA reviews, and the detailed planning and value capture 

at scale phases will subsequently follow.

Of the 19 Defense Agencies and 8 DoD Field Activities, OCMO is starting by conducting 

diagnostic reviews on 15 Defense Agencies and 8 DoD Field Activities. At this time, four 

Defense Agencies under the Under Secretary of Defense for Intelligence (USD(I)) are being 

excluded from reviews, including: Defense Intelligence Agency (DIA); National GeospatialIntelligence Agency (NGA); National Reconnaissance Office (NRO); and National Security 

Agency/Central Security Service (NSA/CSS). Reviews began in the first quarter of FY19 with 

Washington Headquarters Services and the Defense Logistics Agency.

Objectives: The DAFA reviews have three main objectives:

1) Identify Productivity Improvement and Savings Realization: Reduce DoD spend on 

enterprise business operations through the consolidation of duplicative functions, automation

of effective business processes, elimination of non-value added activities, and improved 

contract management.

2) Improve Performance and Readiness: Increase the quality and timeliness of services and 

outputs with end-to-end process redesign, balanced score cards, and increased accountability 

for results.

3) Improve Customer Experience: Make DAFAs more responsive and easier to do business with 

by prioritizing customer journeys and increasing transparency with customers.
37

Approach: Informed leadership input is vital to DAFA review efforts. As such, the OCMO will 

work with oversight officials at all levels as the review efforts proceed – the OSD Principal Staff 

Assistants that exercise authority, direction, and control over the DAFAs, and individual DAFA 

Directors and leadership teams.

The OCMO team will interview and survey customers to understand the current state, true needs, 

and challenge areas. The standardized reviews will provide important data on each DAFA, 

identify opportunities for improvement to delivery of services, inform business enterprise 

performance metrics, and support the establishment or modification of the performance metrics 

of each DAFA with regard to the support provided to the Department.

The DAFA diagnostic reviews will start with an initial sprint to identify and execute quick wins 

while building a portfolio of initiatives that will increase productivity and capture value.

Following the sprint, the DAFAs will conduct pilots and move to implementation and scaling of 

initiatives throughout the DAFA to realize improvements and savings.

Segmented Methodology for DAFA Reviews

The segmented methodology chosen by OCMO for efficiency and effectiveness reviews groups 

of the 23 DAFAs under one of three segments, including: the DAFAs that are primarily working 

capital funded; the DAFAs that are appropriation funded; and one DAFA in particular for 

healthcare in consideration of its annual budget and opportunities for reform.

1) DAFAs that are Primarily Working Capital Funded

Five of the DAFAs are primarily funded by working capital funds. Budgets for these DAFAs 

rely primarily on revenue generated from the sale of products and services as opposed to 

receiving full Congressional appropriations for the financing of operations. A focus on core 

business management processes will be the foundation for efficiency and effectiveness reviews 

for these DAFAs, which include:

 Defense Commissary Agency (DeCA);

 Defense Finance and Accounting Service (DFAS);

 Defense Information Systems Agency (DISA);

 Defense Logistics Agency (DLA); and

 Pentagon Force Protection Agency (PFPA).

2) DAFAs Funded by Appropriations

There are an additional 18 DAFAs funded by Congressional appropriations. During the 

diagnostic reviews, DAFAs will undergo cross-cutting, end-to-end functional process reviews to 

evaluate cross-cutting processes. Diagnostic reviews will follow a scalable approach. These 

DAFAs include the four for which USD(I) is the PSA but are not currently being reviewed:

 Defense Advanced Research Projects Agency (DARPA);

 Defense Contract Audit Agency (DCAA);

 Defense Contract Management Agency (DCMA);

 Defense Human Resources Activity (DHRA);

 Defense Legal Services Agency (DLSA);

 Defense Media Activity (DMA);

 Defense POW/MIA Accounting Agency (DPAA);
38

 Defense Security Cooperation Agency (DSCA);

 Defense Security Service (DSS);

 Defense Technical Information Center (DTIC);

 Defense Technology Security Administration (DTSA);

 Defense Threat Reduction Agency (DTRA);

 DoD Education Activity (DOD EA);

 DoD Test Resource Management Center (DOD TRMC);

 Missile Defense Agency (MDA);

 Office of Economic Adjustment (OEA);

 Space Development Agency (SDA); and

 Washington Headquarters Services (WHS).

3) Healthcare DAFA

Because the Defense Health Agency (DHA) is a unique Defense Agency with broad reform 

efforts underway, Healthcare was singled out as an individual segment. DHA is consolidating 

healthcare within this Defense Agency to increase the quality of healthcare and ensure 

warfighters are medically ready to deploy.

With manpower planning and centralization underway, DHA will raise standards, strengthen 

accountability, and lift the administrative burden off doctors, thus, enabling them to spend 

valuable time treating warfighters instead of on administrative activities. A management 

framework was implemented to accelerate consolidation of DoD medical care into DHA, and 

guidance was published that will standardize patient primary and specialty care, and a single 

contract was implemented for the procurement of professional medical services. Finally, DHA 

will transition from four healthcare systems to one, which will eliminate stove-piped healthcare 

management systems enhancing and accelerating savings opportunities.

Establishment of the Fourth Estate Management Office

The Fourth Estate Management Office consists of both the Fourth Estate Management Group 

and Fourth Estate Information Technology Optimization Group. The office is working to drive 

reform of enterprise business operations throughout the DAFAs with a focus on shared services 

to improve mission execution (Figure 3). The Director of the Fourth Estate Management Office 

leads planning and transformation initiatives and provides executive leadership and guidance to 

seven full-time equivalent staff. The Management Office will review the DAFAs for consistency 

with revised business processes and internal functional consistency. The office seeks to 

maximize business optimization through centralized and optimized Fourth Estate business 

operations and stakeholder engagement. Ultimately, there will be a simpler governance structure 

which will be a core group of decision makers with extreme role clarity and decision authority.
39

Figure 3: Fourth Estate Management Office Organizational Chart

Approaches to DAFA Reform

OCMO will oversee both individual DAFA reviews and end-to-end functional process reviews 

for the 23 DAFAs specified. However, depth and breadth of efficiency reviews will vary 

according to DAFA complexity and mission function. Three reform approaches are being taken 

throughout DAFAs, to include: Category Management, End-to-End Functional Process Reviews, 

and Individual DAFA Reviews.

1) Category Management

Category Management and contract clean sheeting best practices are being applied and 

implemented at scale throughout the DAFAs. Teams execute 90 day sprints for the purpose of 

identifying saving opportunities in specific categories of spend or contracts, which pertain to 

both goods and services. Each of the 90 day sprints assess approximately 30 categories with the 

average category being between $500 million and $1 billion is size. Each sprint will cost 

approximately $11 million. 

2) End-to-End Functional Process Reviews

End-to-end (E2E) functional process reviews and redesigns will be conducted to evaluate crosscutting processes. An E2E process can be a business flow that spans the organization identifying 

opportunities for consolidation and lean redesign within specific reform areas: Human 

Resources, Financial Management, Information Technology, Procurement, Logistics, and 

Facilities/Real Property. Through these review we will establish and implement the use of 

balanced score cards for each function is critical to establishing accountability.

3) Individual DAFA Reviews

The DAFAs will be reviewed individually with the intent of reforming opportunities across 

productivity/cost, quality, and responsiveness/ customer experience. It will enable the DAFAs to 

rethink how work is accomplished and be accountable through balanced score cards. Depth and 

breadth of reviews will vary according to DAFA complexity, mission function, and NDAA 

requirements.
40

DAFA Review Phases

The DAFA optimization and transformation reviews focus on the diagnostic phase covering 

approximately 60-120 days. After this phase, outputs for the DAFAs will include a baseline from 

which to highlight successes, identify opportunities, and draw comparisons with other 

organizations. Other outputs include detailed identification of reform opportunities and early 

actions and wins; prioritization of reform opportunities and implementation plan; and a balanced 

score card with target metrics and Key Performance Indicators (KPIs).

During this phase, the Department expects “early wins” based on an assessment of ease of 

implementation and payoff in terms of cost reduction and productivity improvements. Early wins 

will be captured immediately for the purpose of generating savings and improving performance 

and productivity, allowing the Department to begin organization improvements.

In these early win areas, the team leaders will complete initial business process re-engineering 

and initial enterprise standards.

The OCMO will remain engaged with stakeholders throughout all phases to fully comprehend 

the current state, true needs, and challenges to develop a plan for transitioning to the future state.

The OCMO will work side-by-side with each DAFA to co-create the solution by taking 

advantage of existing knowledge and capabilities. The three phases for DAFA reviews include 

the following:

1) Diagnostic Phase (60-120 days)

The Diagnostic Phase considers DAFA guiding missions, functions and services, and outputs 

generated for customers while considering both performance and productivity. During this phase 

it will be determined whether work processes are efficient in relation to outputs in terms of cost, 

manpower, and time. It is essential to gauge whether the DAFA outputs are satisfying their 

customers and helping fulfill their mission before moving the next phase:

 Quickly establish baseline of spend, outputs, and process flows

 Consolidate transformation efforts and analyses already underway

 Size and prioritize opportunities

 Determine potential for cross-cutting shared services

 Build actionable plans to capture value

2) Detailed Planning Phase (60-120 days) 

This phase will determine the end-state and how the value at stake can be rapidly captured:

 Identify and immediately implement quick wins

 Deploy pilots for key initiatives requiring validation

 Stand up shared service models when applicable

3) Value Capture at Scale (12-18 months)

This phase will consider how value capture can be accelerated, as well as how the targets and 

milestones will be met:

 Expand key initiatives throughout the Fourth Estate 

 Set up accountability structures for initiative execution
41

DAFA Review Performance Metrics

Meaningful performance metrics are imperative for DAFA efficiency and effectiveness reviews

as they enable reform leads to baseline performance, set targets and monitor progress, assess 

performance over time, identify drivers of success or failure, and demonstrate intermediate 

progress for multi-year initiatives. The OCMO will develop performance metrics for the DAFA 

reviews that focus on fewer, simpler, common outcome metrics that will show actual results.

Reform teams will be held accountable with the establishment and implementation of balanced 

score cards. Some key attributes of the performance metrics to be developed include the 

following:

 Fewer, simpler, common outcome metrics, focused on measureable results

 Clearly defined plans and timelines with milestones and points of accountability for each 

step in the process

 Central point (CMO) for tracking and integration – even when execution is distributed

 Establish timeline with milestones for each high-priority initiative (within 30 days)

 Jointly align on traceability for value capture 

DAFA Review Schedule

The OCMO initiated DAFA efficiency and effectiveness reviews under three primary functional 

review areas that will build upon one another, including HR, finance, and IT. Other functions 

being reviewed include procurement, real property, and logistics. These functional areas enable 

DAFA reviews to be conducted in parallel over next eleven months (Figure 4). The sequence of 

Fourth Estate sprints is designed to systematically enable quick wins and sustainable change.

Functional reviews of DLA and WHS began during the first quarter of FY19 with the HR 

functional review of DLA stretching into the second quarter of FY19. DLA was selected for 

review during the first quarter, due to its broad geographic area and comprehensive mission set. 

The WHS review set the foundation to enable Fourth Estate reform, especially shared services 

consolidation. DLA enables broadening of impact throughout the Department considering the 

Military Services and other DAFAs.

Building on the foundation developed during the DLA and WHS reviews, the OCMO will 

review of DHRA and DISA. The DISA review will provide the analytical backbone for decisionmaking while DHRA will enable the HR functional review. Both of the DAFAs provide human 

resources services for the Department.

The DHRA review will provide a comprehensive look at the HR enterprise business function 

throughout the Fourth Estate with the intent to implement a common shared service model.

Given DHRA’s budget of nearly $900 million and billet count around 1,230 people, the OCMO 

plans to complete a review of DHRA within ten weeks consisting of two weeks of preparation 

and one sprint over an eight week period.

The third wave of functional reviews will evaluate DCAA, DCMA, and DFAS. In accordance 

with Section 925 of the FY 2019 NDAA, the OCMO will work with the two contracting defense 

agencies simultaneously to conduct a joint review of DCAA and DCMA functions with a focus 

on validating specific missions and functions of the defense agency. With USD(C) being the 

PSA for DCAA and DFAS and USD (A&S) the PSA for DCMA, the OCMO will work with 
42

both during the DAFA reviews.

Figure 4. Sequencing for Diagnostic Reviews

DAFA Review Cost Estimates

As the PSA over WHS, the OCMO funded the WHS diagnostic review at a cost of $1,226,079.

DLA (or A&S) covered the cost of their review through a DLA contract vehicle. A conservative 

estimate established for conducting DAFA diagnostic reviews was approximately $1.6 million

per deep dive. Each future DAFA review will require the use of a competitive contract among 

blanket purchase agreement holders.