TABLE OF CONTENTS DIRECTOR S MESSAGE... 2 MISSION, VISION, AND VALUES... 3 CORE PROCESSES STATISTICS... 5 Scope of Work... 5 Resources...

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1 STATE OF THE AGENCY FISCAL YEAR 2012

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3 TABLE OF CONTENTS DIRECTOR S MESSAGE... 2 MISSION, VISION, AND VALUES... 3 CORE PROCESSES... 4 STATISTICS... 5 Scope of Work... 5 Resources... 5 GLOBAL ENGAGEMENT ACQUISITION ENTERPRISE Serving Our Customers... 8 Providing Decision-Quality Acquisition Insight... 8 Improving Core Competencies Initiatives Process Improvements and Results Realignments Contingency Operations POLICIES AND PROCESSES Improving Our Internal Practices Policy Infrastructure Process Improvements Tools HUMAN CAPITAL Growing and Sustaining Our Workforce Building Our Workforce Developing Skills Providing Timely and Actionable Management Advice to Customers STEWARDSHIP Managing Our Resources Challenging Times Allocating Resources More Efficiently Strengthening Financial Management Improving Financial Results MOVING FORWARD ACRONYMS AND ABBREVIATIONS TABLE OF CONTENTS 1

4 DIRECTOR S MESSAGE January 2013 All, The close of the fiscal year gives us the opportunity to look at our accomplishments over the past 12 months, evaluate our progress, and assess our need for course corrections. September 30, 2012, marks the fourth year of the implementation of DCMA s Strategic Plan for FY09 FY13, and now we are starting to outline our Strategic Plan for FY14 FY18. As we begin this process, we must seriously consider the myriad of internal and external influences affecting our future. The Agency adapted to personnel changes at senior levels within Department of Defense (DOD) and DCMA; during the past 12 months four new members joined the Agency s Senior Leadership Team. Employee retirements and departures throughout the year were bittersweet events, but no loss hit the Agency harder than the death of Mr. Tony Acerra. Tony, a longtime DCMA employee, was killed in Afghanistan while performing vital work in support of the warfighter. To honor his memory, DCMA renamed its Afghanistan headquarters building the Anthony Acerra Building on June 15, Tony s sacrifice drove home the message that our people are our most valuable resource and how they exhibit the values of Integrity, Service, and Excellence daily. We used our balanced scorecard to structure this report because it provides a framework for focusing on four key business areas: Acquisition Enterprise (customers), Policies and Processes (internal processes), Human Capital (employees), and Stewardship (resource management). As we reviewed the strategic initiatives supporting each of these areas, we discovered that while we have made great strides in some, other areas still require work. This report highlights our accomplishments and identifies our continuing efforts for fiscal year Every member of the DCMA team military, civilian, and contractor has participated in accomplishing our mission and contributed to a successful fiscal year. We delivered the best acquisition services available to our customers, and we will continue to do so while we stay on the path from Good to Great. Sincerely, 2 DIRECTOR S MESSAGE Charlie E. Williams, Jr. Director

5 MISSION Provide Contract Administration Services to the Department of Defense Acquisition Enterprise and its partners to ensure delivery of quality products and services to the warfighter; on time and on cost. VISION DOD s leading experts in Quality Assurance; Cost, Schedule, and Supply Chain Predictability; and Contract Administration; enabling our partners to achieve contract objectives. VALUES Integrity Committed to the highest standards of ethical and moral behavior at all times. Service Working for the benefit of our nation and putting professional responsibilities before self-interests. Excellence Committed to exceptional performance in everything we do. MISSION, VISION, AND VALUES 3

6 CORE PROCESSES DCMA s 14 core processes comprise the essential elements of our daily business and encompass the majority of Agency personnel and costs. While some of these processes consume few resources, and fit under the larger umbrella of contract administration services, they are no less critical to the Agency s overall mission. In addition to these 14 core processes, several business support processes provide a stable foundation for Agency operations. These elements Corporate Support, Finance and Business, General Counsel, Human Capital, Independent Assessment, and Information Technology (IT) make up three quarters of our balanced scorecard (Policies and Processes, Human Capital, and Stewardship). 14 Core Processes 1. Aircraft Operations 2. Contract Safety 3. Contracting 4. Contractor Business Systems 5. Cost and Pricing 6. Earned Value Management 7. Engineering 8. Manufacturing and Supply Chain Predictability 9. Property and Plant Clearance 10. Quality Assurance 11. Small Business 12. Software Engineering and Acquisition Management 13. Terminations Total DCMA Civilians On-board: 10,478 Acquisition Professionals: 8,592* 14. Transportation Procurement (1106) 3% Property (1103) 3% General Business (1101) 3% Software/IT (2210) 4% Industrial Specialist (1150) 6% Quality Assurance (1910) 30% Engineering (08XX) 11% Contracting & Pricing (1102) 23% *Acquisition professionals comprise 82 percent of our civilian workforce of 10, CORE PROCESSES

7 STATISTICS SCOPE OF WORK Beginning of FY12 End of FY12 Face Value of Contracts $3,709B $5,006B Obligated $1,613B $1,742B Contractors 19,256 20,296 Contracts 330K 344K Unliquidated Obligations $223B $233B ACAT I (IAC, IC, ID) and II Programs Aircraft per Year 2,062 2,083 Flying Hours 21,557 21,370 Government Property in Plant (CONUS) $179.8B $152B Progress Payments $11B $12.7B Performance-based Payments $27B $22.5B RESOURCES Beginning of FY12 End of FY12 Civilians 10,383 10,478 Military Active Duty Reserve Operational Directorates 3 3 Locations Contract Management Offices Budget Authority $1.4B $1.4B Reimbursable Target $121M $122M STATISTICS 5

8 GLOBAL ENGAGEMENT With more than 10,000 employees in over 740 locations throughout the world, DCMA plays a critical role in the acquisition process and provides valuable insight to its customers. SPECIAL PROGRAMS Special Programs East Special Programs South Special Programs West DCMA Headquarters Fort Lee, Va. Western Region Headquarters Carson, Calif. Boeing - Huntington Beach Denver Lathrop Lockheed Martin - Denver Lockheed Martin - Sunnyvale Los Angeles Palmdale Phoenix Raytheon - Tucson Santa Ana NASA Product Operations (NPO) Central Region Headquarters Chicago, Ill. Bell Helicopter - Fort Worth Boeing - St. Louis Chicago Dallas Dayton Detroit Huntsville Lockheed Martin - Fort Worth Twin Cities Aircraft Integrated Maintenance Operations (AIMO) Eastern Region Headquarters Boston, Mass. Atlanta Baltimore Boeing - Philadelphia Boston Garden City Hartford Lockheed Martin - Marietta Lockheed Martin - Moorestown Lockheed Martin - Orlando Manassas Orlando Philadelphia Sikorsky Aircraft Springfield Aircraft Propulsion Operations (APO) Naval Special Emphasis Operations (NSEO) KEY DCMA Headquarters DCMA Regional Headquarters DCMA International CMO 6 GLOBAL ENGAGEMENT

9 DCMA International Contract Management Offices (CMOs) DCMA Americas Ottawa, Canada DCMA Northern Europe Loudwater, United Kingdom *DCMA Southern Europe Wiesbaden, Germany *DCMA Middle East Kuwait City, Kuwait *DCMA Afghanistan Camp Phoenix, Kabul, Afghanistan DCMA Pacific Naval Air Facility, Atsugi, Japan *Includes Contingency Contract Administration Services (CCAS) Operations GLOBAL ENGAGEMENT 7

10 ACQUISITION ENTERPRISE Serving Our Customers Strategic End State DCMA s acquisition customers receive excellent Contract Administration Services and the management information needed to make sound business decisions. Agency Strategic Priority Deliver predictive/decision-quality information to buying activities and the Acquisition Enterprise through robust financial, industrial, and supply chain analysis. Also done by exploiting DCMA specialized expertise in Earned Value Management, the defense supplier base, and cost monitoring and containment. Our tagline, Acquisition Insight; Global Engagement, is more than simply a catch phrase for our business cards. It is at the heart of why we do what we do each day, and it reminds us of the value we bring to the Department, warfighters, and taxpayers. The information DCMA provides assists the Acquisition Community s decisions and directly affects America s national defense posture, but DCMA s influence doesn t stop there. Our engagements with defense contractors and industry representatives potentially affect economies great and small. As we team with entities outside the Department, we help reduce costs, improve quality, and exceed contract requirements. PROVIDING DECISION-QUALITY ACQUISITION INSIGHT Portfolio Management and Integration (PM&I) became fully operational in 2012 and increased customer engagements with acquisition organizations in the military services and in the Office of the Assistant Secretary of Defense for Acquisition. These efforts positioned the Agency to better understand and support the Office of the Secretary of Defense (OSD) and service-level priorities. We also refined our Training, Outreach, and Education strategies to raise customer awareness of DCMA s capabilities and our etools. Acquisition Insight; Global Engagement is at the heart of why we do what we do each day. It reminds us of the value we bring to the Department, warfighters, and taxpayers. to drive DCMA s strategic engagement with the Defense Acquisition Executive Summary (DAES). The Under Secretary of Defense for Acquisition, Technology & Logistics (USD(AT&L)) chartered this Integrated Product Team (IPT) to update the DAES guidance and redefine assessment categories. The PM&I Service Portfolio Divisions, in collaboration with DCMA Operations and Headquarters (HQ) Functional Directorates, embarked on a path with the OSD Acquisition Resources and Analysis and Performance Assessment and Root Cause Analysis staff 8 ACQUISITION ENTERPRISE

11 The IPT s effort lasted seven months and culminated with three new, focused DAES Assessments: Contract Performance, Management, and Production. These assessments allow DCMA to provide an independent analysis of program health based on our boots-on-theground contract administration mission spanning primeand sub-contractors across the defense industrial base. DCMA implemented the new assessments in September 2012 for the October DAES cycle. DCMA supported USD(AT&L) s development of the Annual Industrial Capabilities Report to Congress published in September PM&I documented nine Industrial Capabilities Assessment Reports to Congress that assessed industrial capability risk associated with numerous weapon system programs across multiple sectors. The Agency also proactively supported USD(AT&L) with the Sector-by-Sector, Tier-by-Tier Assessment of the Industrial Base that began in DCMA s interaction and collaboration with USD(AT&L) included establishing protocols to support information sharing between DCMA and USD(AT&L) so that a baseline of data across industry could be collected and analyzed to help the Department map and better understand the entire defense industrial base. Explore, Develop, and Implement. This approach is implemented when a current process is not well understood or documented. It will help the Agency identify and focus to meet the project s objectives. The project aims to provide insight to the Agency s customers with predictive insight and to minimize supply chain disruptions. Recognizing the value-added impact our Corporate and Divisional Administrative Contracting Officers (CACO/ DACO) have on rate negotiations, Contract Administration Service issue settlement, and ensuring soundness of contractor business systems in producing responsible contract practices by our suppliers, DCMA re-established the Cost and Pricing Center as a core component of the DCMA enterprise. Functional realignment of all CACO/DACOs into teams aligned with major industry corporations improved timeliness and consistency of decision-making and produced impressive results. The Cost and Pricing Center conducted Overhead Should Cost Reviews in direct support of the Under Secretary of Defense s affordability initiative with recommended cost reductions approaching $3.8 billion. FPRA and FPRR Growth Comparison 2010 and 2012 In keeping with its efforts to support our partners in industry, PM&I developed, coordinated, and published the Industrial Analysis Instruction. This instruction enables the employees who execute the Industrial Base mission to accomplish their assigned tasks more readily by providing the policy, training, and tools required to furnish quality industrial-capability information in a timely manner. Supply Chain Management (SCM) and the ability to anticipate challenges in the supply chain are critical to the service we provide to our customers. Our job is not merely to react to interruptions in the supply chain faster, but to use credible measures to help predict interruptions before they happen. The need to assess effects on second- and third-tier contractors is great as we try to save program costs. Clearly, we need to drive results. In May 2012, the Director kicked off an enterprisewide Lean Six Sigma (LSS) project and subsequently commissioned a team of cross-functional and LSS experts. He named the Executive Director of Engineering and Analysis as the project champion. The team is using a modified LSS process called DMEDI Define, Measure, FPRA 2010 FPRR 2012 The number of Forward Pricing Rate Agreements (FPRA) and Forward Pricing Rate Recommendations (FPRR) at major contractor locations grew by more than 200 percent as a result of the following process improvements: 1. Effective Boards of Review 2. Re-introduction of cost monitoring 3. Establishment of corporate and functionally aligned teams 4. Introduction of peer reviews to expedite the process 5. Exceptional turnaround on pension impacts by the Contractor Insurance Pension Review team 6. Enhanced collaboration with the Defense Contract Audit Agency (DCAA) ACQUISITION ENTERPRISE 9

12 PROCESS IMPROVEMENTS AND RESULTS Implementation of the Contractor Business System Policy required coordination among the functional directorates to develop appropriate tools and training. To provide the latest information on executive challenges and concerns, we engaged with customers and participated in inter-agency discussions and various industry panels. The HQ Business Systems Review Panel was established as a mechanism to ensure consistent Agency-wide application. IMPROVING CORE COMPETENCIES Within DCMA s three broad functional areas quality assurance, engineering, and contracting a variety of initiatives, process improvements, and realignments provided the Agency with enhanced capabilities designed to ensure that we exceed customer expectations and Department of Defense mandates. INITIATIVES The Agency also established an IPT to assess our current capabilities and develop clear instructions that identify how we will integrate data into actionable supply chain information. The IPT will provide risk assessments as a predictive means for bolstering surveillance across all functions. Closely linked to SCM is the establishment of the Supplier Rating System (SRS). This system allows the Quality Assurance (QA) community to report on individual suppliers examining quality, cost, and timing of product delivery. As the use of SRS increases, DCMA will increase its ability to provide acquisition insight to DOD. As DCMA fine-tuned its role as the Department s executive agent for Earned Value Management (EVM), the need for a significant reorganization became apparent. The Agency reorganized EVM functions both at the strategic (headquarters) and the operational levels to improve functional oversight and streamline execution efforts. Release of the Earned Value Management System Standard Surveillance Instruction and Program Analysis Pamphlet both significant tools for the EVM community supported the overall process. Continued comprehensive training will ensure EVM community members understand the changes in the Business Systems Rule and know how to apply it consistently. 10 The second year of the Cost Recovery Initiative for accounting changes and Cost Accounting Standards non-compliances yielded significant dividends including 139 audit resolutions for a total amount of over $177 million. In April, DCMA and DCAA identified approximately 840 final indirect rate audit reports needing resolution. By September 30, 2012, the initiative for incurred costs questioned resolved a total of 402 audit reports for a recovery value of $1.4 billion. REALIGNMENTS In March of this year, the Director established Integrated Cost Analysis Teams or ICATs within Contract Management Offices at eight major defense contractor locations. The ICATs help fulfill the Director of Defense Pricing s vision and will be enhanced by cost and pricing teams characterized by: combined business and technical personnel dedicated exclusively to proposal analysis; supporting customers proposal negotiations; and performing continuous evaluation of the elements that comprise the contractors proposal pricing system. Improving affordability is critical in today s procurement and acquisition business. The rebuilding of DCMA s pricing capability is at the heart of our support to this important initiative. The stand up of these ICATs ensures expert pricing assistance is available to support the Department s major defense programs. Existing data from this initiative point to positive results. ICATs have already saved in excess of $6 million. Defense Contract Management Agency Baltimore s Contracts Section Supervisor Al Szekretar reviews a document with Administrative Contracting Officers Aundre Holmes and Kelly Gustafson and Procurement Technician Veneta Magwood. ACQUISITION ENTERPRISE

13 CONTINGENCY OPERATIONS In fiscal year 2012, the Agency maintained a 98 percent fill rate for over 500 positions by working closely with the Services, which augmented 33 percent of DCMA s CCAS operations. The first quarter was consumed by an intense effort to reduce and balance the mission requirements in Iraq by 66 percent, while simultaneously increasing Afghanistan s requirements by 18 percent. Throughout the remainder of the year, Iraq s mission shifted to support the Department of State and Office of Security Cooperation-Iraq, while DCMA Afghanistan continued its support of U.S. Forces-Afghanistan. Following what was the largest contractor and equipment drawdown since World War II, DCMA today maintains a CCAS presence of 278 members military and civilian engaged in contingency operations. DCMA Afghanistan maintains the largest assembly of approximately 200 deployed members overseeing both Civilian Augmentation Programs Logistics Civil Augmentation Program and Air Force Contract Augmentation Program and theater-wide contracts in excess of $16 billion. ACQUISITION ENTERPRISE 11

14 POLICIES AND PROCESSES Improving Our Internal Practices Strategic End State Effective policies and process standards are in place to support delivery of consistent and cost-effective Contract Administration Services. Agency Strategic Priority Establish policy infrastructure, define policy structure, promulgate policy, and process guidance. POLICY INFRASTRUCTURE Establishing a foundation of effective policy was an Agency challenge leading up to fiscal year In May, the Director introduced the Agency s Concept of Operations (CONOPS), which symbolized the culmination of DCMA s realignment process and the passing of another milestone. Initially developed to guide the realignment effort, this document now serves the critical purpose of codifying and formalizing the Agency s organization, missions, and functions in both normal and contingency operating environments. A new policy program, which complements the CONOPS, benefits both policy creators and users. With more user-friendly formats that mirror DOD formats, each policy links to an intranet-based resource page. This page provides users with a one-stop shop for training, tools, and other resources. A fullystaffed Policy Program Office and a Policy Advisory Board (PAB) provide headquarters policy writers with timely professional guidance and assistance. The PAB coordinates and notifies policy writers of organizational challenges, overlaps, or conflicting policies throughout the process. 12 POLICIES AND PROCESSES The CONOPS now serves the critical purpose of codifying and formalizing the Agency s organization, missions, and functions in both normal and contingency operating environments. PROCESS IMPROVEMENTS One of the initiatives our FY09 13 Strategic Plan included was the establishment of a DCMA Lean Six Sigma office. During fiscal year 2012, its contribution to process improvement increased dramatically. Functioning with guidance from the Operations Integration Panel, the LSS team now guides four Agency-wide projects whose goals include identifying unnecessary workload, accelerating contract processing, and reducing the amount of nonconforming material in the acquisition process. Since establishing this office, DCMA has grown to 440 trained Green Belts, 55 Black Belts, and achieved savings by organizing in-house training capability at both belt levels. DCMA LSS Black Belts led a continuous process improvement project to improve Agency performance across the planning and programming of the Future Years Defense Program. The project increased Agency component participation, employee knowledge, and produced a list of more than 100 program change requests. The newly-established Program Review Working Group, the Resource Management Panel, and the Agency Council reviewed the requests and the Director approved 52 program changes. The development of DCMA s first Integrated Priority List, a prioritization model for resource decision-making, and a program change request format facilitated the process. These efforts resulted in: 1) USD(AT&L) agreement to fund the Agency s overguidance issues in an austere financial environment; 2) more accurate integration with the Agency manpower system through more thoroughly documented program change requests; and 3) posting of out-year planning data in the Agency s Enterprise Planner System. The Aircraft Operations Directorate implemented Aircraft Operations Inspections (AOI) element guides to improve AOI execution, repeatability, standardization, and to create a more effective process. The improvement reduced overall risk from 29 percent in fiscal year 2011 to 22 percent in fiscal year In addition, the Contract Management Office Commanders Risk Advisory Board achieved a record high 96.7 percent mitigation rate on all identified discrepancies with elevated risk.

15 DCMA CONTINUED TO ROLL-OUT THE MANAGER S INTERNAL CONTROL PROGRAM STRATEGY Conducted initial program training Documented and verified process ownership (187 with narratives and 72 with process flows) Developed material and inherent-risk matrix worksheets Created annual certification of Agency Assessable Units Reported on the Agency s Annual Statement of Assurance Streamlining the Agency s funding distribution process represented another significant accomplishment in fiscal year The new process will reduce the number of Funding Allowance Documents changes issued from 207 in fiscal year 2012 to 25 in fiscal year The overarching goal is to integrate changes and processes with the Defense Agencies Initiative and Enterprise Funds Distribution. DCMA invested in Virtual Desktop Infrastructure (VDI) to provide benefits to the Agency in two key areas. The first benefit supports workforce mobility. VDI replaces traditional desktop computers with a basic terminal called a zero client. This virtual desktop computer can be accessed from anywhere in the world without special configurations, and its look and feel is the same regardless of the access point. The second benefit is the lower-cost reduction of downtime associated with common workstation problems. The zero client has no moving parts and is much less prone to failure than a traditional desktop computer. A new zero client can be up and running in minutes with no need to recover or transfer data. In fiscal year 2012, DCMA invested in the back-end to support 4,000 virtual desktop computers and will deploy the additional zero clients throughout fiscal year TOOLS The Contractor Business Analysis Repository (CBAR) etool is a secure system designed to share timely and comprehensive contractor information between the DOD Procurement Community and DCMA. It supports effective price negotiations of contract awards and provides greater acquisition insight within the Department. To support the vision, DCMA used an integrated rapid application development approach. IT partnered with OSD, DCMA Executive Directors, and the Cost and Pricing Center to identify, analyze, develop, and deploy the tool. During fiscal year 2012, the Agency deployed two versions of CBAR (1.2 and 1.5) to our external DOD communities. The user base of CBAR grew from 200 to 2,400. Successful IT implementation required close coordination within all IT Directorates. IT will continue refining the integration model during fiscal year 2013 for use with additional IT programs. One of the Agency s newer management instruments is the Training Competency Assessment Tool (TCAT). This tool ensures that functional specialists in quality assurance, contracting, and engineering are properly trained and certified. TCAT allows first-line supervisors to evaluate workforce competency and focus training resources on filling any identified gaps. As we move forward, TCAT capability will be integrated into the new Learning Management System to ensure essential and efficient use of training dollars. The QA group also created additional tools to facilitate quality assurance operations and enhance process visibility. POLICIES AND PROCESSES 13

16 HUMAN CAPITAL Growing and Sustaining Our Workforce Strategic End State A diverse, agile, high-performing workforce equipped with the competencies needed to execute current and future missions. Agency Strategic Priority Grow and retool our Agency workforce through a robust intern program and increased emphasis on external recruitment and internal development. Develop and assess functional skills requirements needed to renew workforce competence in core processes, starting with contracting, quality, and engineering. Enhance leadership skills across the Agency and ensure that the DCMA workforce, at all levels, has access to and fully understands available opportunities to develop and improve these skills. BUILDING OUR WORKFORCE By improving our recruiting strategies and tactics, the Agency increased the number of interns and journeymen hired during the year. The Keystone intern program grew from 50 participants to a robust, well structured, and effective program of more than 700 participants. Our diversity demographics improved as the result of targeted recruiting, outreach, and expansion into social networking. These obvious successes were mitigated by sluggishness in a hiring process that needs retooling Total Keystones and Journeymen Hired by Year FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Journeymen Keystones Total *On-board Numbers: 509 Journeymen; 469 Keystones *On-board numbers for FY12. In fiscal year 2012, and in collaboration with the Operations Directorate, DCMA Human Capital conducted a thorough and intensive recruiting requirements identification process and developed a targeted recruiting event strategy for filling over 500 Defense Acquistition Workforce Development Fund (DAWDF) positions. By coordinating recruiting events with the creative use of open and continuous job announcements in the spring/ summer of 2012, DCMA Human Capital successfully filled the hiring pipeline for all DAWDF-funded positions for fiscal year 2013 before the start of the year. Being mindful of Defense Department needs, DCMA conducted a Bottom-Up Review of all military billets within the Agency. This review helped to ensure that the Agency is staffed with enough military personnel and that they are properly assigned. Keystone Karina Kirkpatrick, DCMA Boeing, Seattle 14 HUMAN CAPITAL

17 Strengthening the Workforce Initiatives 1. Establish the College of Contract Management 2. Strengthen the Learning Management System 3. Identify, validate, and prioritize Agency training requirements 4. Develop future leaders 5. Promote and assess functional competency 6. Mentor current employees Despite these successes, dealing with the aftermath of Base Realignment and Closure (BRAC) and the bow wave of retirement eligible personnel, workforce competency remained an ongoing concern and continued to be a priority this year. The Agency made great strides by establishing standard position descriptions, identifying required certifications, and creating training templates that support key functional specialties such as pricing, earned value management, and quality assurance. DEVELOPING SKILLS In October 2011, a Memorandum of Understanding with the Defense Acquisition University (DAU), created the College of Contract Management (CCM). DAU co-located personnel, including its first dean, within the DCMA Headquarters. The CCM s mission is to create and provide DCMA-specific courses that will equip employees with the skills necessary to provide acquisition insight on a global scale. This partnership flourished during the year, and in September 2012 the Director of DCMA was designated as the competency lead to ensure the CCM curricula are optimally aligned to workforce competencies. In April 2012, the Director announced that the next twelve months would be dedicated to Strengthening the Workforce. DCMA would focus efforts on building a platform to improve workforce competency. The first phase of Strengthening the Workforce started with several of the Executive Directors taking on the role of champion for six initiatives. See the chart at left. Because it is part of DAU, CCM can help DCMA find ways to professionalize and strengthen the workforce by designing standardized accredited curricula and certifications that will prepare employees for success. DCMA s Deputy Director is the champion for the CCM and has facilitated its stand up with a sense of urgency. Recognizing that it will take some time to get the CCM to full operational capability, the DCMA Chief Operations Officer championed a focus area designed to establish an Agency framework to facilitate identification, validation, and prioritization of training requirements. This will allow the Agency to keep its sights on immediate and ongoing training obligations. These efforts will also help ensure protocols are in place to improve stewardship of training resources. The Executive Director of Contracts championed the focus area designed to further refine and synergize the efforts across the functional communities and assess the health and competency of the workforce. These endeavors will encourage appropriate advocacy for that respective functional community within the corporate structure. By necessity, the effort requires close coordination with several other focus area champions to synchronize all efforts. In addition to the need to constantly address training in the hard competencies, DCMA can t forget about the need for well-honed soft skills. All too often organizations take capable individuals and ask them to supervise, manage, or lead without providing the necessary coaching DCMA Director Charlie E. Williams, Jr. and Assistant Secretary of Defense (Acquisition) Katrina G. McFarland signed a Memorandum of Understanding on Oct. 28, This event marked the first step in establishing the College of Contract Management. HUMAN CAPITAL 15

18 and support. The Agency needs formal strategies to strengthen current supervisors and managers as well as ways to develop future leaders. To address these soft skills, the Executive Director of Financial and Business Operations was appointed to champion the leadership development focus area. The effort will provide recommendations intended to solidify the leadership development architecture to include competencies, training opportunities, and skills assessments. The Executive Director of Engineering and Analysis championed a focus area on mentoring. Recommendations to help codify Agency policy and guidance on formal and informal mentoring strategies and opportunities will result through the identification of training and goals for mentors and protégés. In addition to these areas, the Director established a focus area which targeted the tools necessary to support all aspects of training including workforce assessment, training plans, resource allocation, and course delivery. The Deputy Director, working closely with all components and the IT community, championed this area. The goal is for the Agency to fully integrate the tools into a comprehensive learning management system. At the close of the fiscal year, two of the most complex initiatives were ready for release: the leadership development model and the system for identifying, validating, and prioritizing training. The Agency anticipates these two initiatives will be approved by the DCMA Council. With shrinking budgets and fewer resources, it is absolutely critical for us to make smart choices about how we invest in educating and training our workforce. We must strengthen and streamline programs and opportunities so DCMA will continue to be a first-class organization trained and wellprepared for future challenges and successes. PROVIDING TIMELY AND ACTIONABLE MANAGEMENT ADVICE TO CUSTOMERS The primary purpose for establishing the Human Capital Field Service Center (FSC) was to provide quality human resources advice and assistance to DCMA customers. This objective has not only been met, but has surpassed its goals. Customer feedback indicates that Executive Directors, Region Commanders, and the CMO Commanders, along with supervisors and other employees, have come to rely on their FSC Business Partners for a broad range of human resource topics that cover both day-to-day and long-range matters. The Business Partners provide advice and assistance on a daily basis on issues such as recruitment strategies, hiring authorities, incentive options, Return Rights, Permanent Change of Station, and DAWDF Program eligibility. Agency leaders recognize them as integral to their management team, and they are actively involved in all facets of resource planning and human capital management. The introduction and operation of the FSC Business Partner concept is a success story upon which we will continue to build. Industrial Property Management Specialist Estell Watson of the Defense Contract Management Agency Business Operations Center reviews the Contract Property Administration System Version 1.0 user manual. 16 HUMAN CAPITAL

19 STEWARDSHIP Managing Our Resources Strategic End State An ethical organization with well-defined roles, responsibilities, infrastructure, and management controls fully aligned to effectively and efficiently manage public resources. Agency Strategic Priority Ensure the efficient use of Agency resources through disciplined planning and execution of obligations and expenditures. CHALLENGING TIMES As our nation continues to experience challenging financial times, DCMA will be called upon to do more. We will need to build better business systems, strengthen our financial management systems, and manage resources as tightly as possible. During the last fiscal year, Deputy Secretary of Defense, Dr. Ashton Carter, stressed the importance of stewardship when he characterized a more disciplined approach to the use of taxpayer resources as our national duty. The Secretary of Defense s Efficiency Initiatives, though issued in fiscal year 2011, continued to drive many DCMA decisions in fiscal year The Agency eliminated 50 non-acquisition positions, and reduced travel and conference expenses and support contracts as part of our commitment to continued efficiency and cost effectiveness. The Resource and Workload Modeling (RWM) pilot effort was completed in fiscal year The project s purpose included developing an objective, consistent, and repeatable approach to determining manpower requirements and meets the Department s need for a validated resource requirement process. The model determines requirements based on mission functions, level of workload, and estimated activity time. The Phase 1 pilot at DCMA Raytheon Tucson validated the approach and provided the foundation for expanding model development efforts in fiscal year Phase 2 of the RWM will continue in fiscal year A valid model will assist the Agency in properly staffing CMOs under a variety of circumstances ensuring we spend labor dollars wisely. DCMA Media Center at Fort Lee, Va., allows for webcast presentations and virtual All Hands meetings to reduce travel costs. ALLOCATING RESOURCES MORE EFFICIENTLY Mission Review Teams, the Agency s independent audit arm, performed 24 mission reviews during the year, providing senior leaders with information regarding the health of audited organizations, sharing HQ policy interpretations with those organizations, and identifying policy gaps that could prohibit effective mission accomplishment. The reports published as a result of the mission reviews assist all DCMA leaders in evaluating the health of their own organizations and help them consider the adoption of best practices identified elsewhere. In addition to the traditional core mission focus of these reviews, they have been expanded to include Human Capital Accountability and some Cost and Pricing Center special focus items. The IT Directorate completed the Position Based Distribution of Assets (PBDA) in September The PBDA gives DCMA employees specific and appropriate IT equipment to perform their jobs. In most cases IT issued single assets based on job requirements. This initiative significantly reduced redundant assets and decreased IT s budget for equipment and software licenses by 16 percent. The Agency issued laptops to employees who traveled frequently, while employees who were primarily office-based received desktops. Deployment of other peripheral devices depended upon the unique characteristics of an individual s job responsibilities. In 2012, the Agency completed implementation of a printer-reduction program. The program mandated eliminating desktop printers and replacing them with multi-function network printers. The desired ratio of printers per employees is 20:1 for black and white printers and 30:1 for color laser printers. This change resulted in a 42 percent decrease in printing expenditures for the fiscal year. STEWARDSHIP 17

20 Additionally, the Agency determined considerable cost savings could be achieved by maximizing use of government air versus commercial carriers. The CCAS Team, led by the Combat Support Center, developed the Freedom Flight Policy. This policy directs all DCMA CCAS personnel to use Military Air transport for CCAS missions entering deployment and redeployment. In the first year since the inception of the policy, the Agency saved an estimated $1 million. The Agency continues to leverage the use of these non-commercial flights where feasible to closely adhere to fiscal stewardship and cost savings. STRENGTHENING FINANCIAL MANAGEMENT The Agency made significant strides forward in Financial Improvement and Audit Readiness (FIAR). This initiative, whereby the DOD seeks to obtain a favorable audit opinion from an Independent Public Accounting firm, is one of the Secretary of Defense s top goals. DCMA met the interim deadlines for this fiscal year, and was selected as one of three defense agencies to assert auditability in fiscal year The interim deadlines were to submit assertion documentation for DCMA s Appropriations Received, and to submit discovery packages for the Statement of Budgetary Resources. The discovery packages consist of descriptions and flowcharts that summarize our key internal controls; a Risk Control Matrix that describes how our internal controls manage risk; and test results of our internal controls. Our Financial Liaison Center took a lead role in the Civilian Pay area, which makes up 84 percent of DCMA s expenditures. They performed much of the testing of controls, and also developed a package of focused training for 2,000 timekeepers and certifiers. DCMA s Internal Review Team tackled some significant audits during the year and continued assisting the audited organizations with improvements. Subjects such as inventory and travel management were examined and some of the findings will save the Agency money as they are corrected. which we are a Contract Pay service provider to support their financial statement audit process. Obtaining and maintaining a state of audit readiness not only involves our direct mission-related processes for contract payment, but also our internal controls over the IT systems that are used for execution and document repositories as well. DCMA met the interim deadlines for this fiscal year and was selected as one of three defense agencies to assert auditability in fiscal year IMPROVING FINANCIAL RESULTS DCMA s Office of General Counsel played a key role in the Cost Recovery Initiative efforts over the last two years by assisting with the closure of 494 audits totaling over $630 million. Additionally, they successfully managed $3.6 billion in contract litigation before the Armed Services Board of Contract Appeals and the Court of Federal Claims and helped to recoup $66 million. July 2, 2012, marked the first anniversary of DCMA s occupation of its new headquarters at Fort Lee, Va. The timing of the required BRAC move created a liability for the monthly lease costs for the former building in Springfield, Va., even though DCMA no longer occupied the space. The General Services Administration found another tenant for the Springfield space, and DCMA was relieved of a $4 million annual rent bill. The resolution of this situation allowed DCMA to use those funds in other facility improvement projects around the country. At different times throughout the year and through a variety of channels, the Director communicated the importance of stewardship in everything we do. He issued written OnPoints, discussed stewardship at All Hands meetings at headquarters and various CMOs, and released a video to the workforce to promote and amplify the message. DCMA administers contracts with an obligated value in excess of $1.6 trillion and payments to contractors in excess of $200 billion. Consequently, DCMA provides a number of contract management services to the Armed Services and other defense organizations relative to the FIAR Contract Pay Assessable Unit. Key to our audit readiness efforts is our assurance that adequate controls are in place, documented, and tested, leading to an affirmative Statement on Standards for Attestation Engagement (SSAE 16) examination. This will be provided to all entities for 18 STEWARDSHIP

21 MOVING FORWARD >>>>>>>>>>>>>>>>> Fiscal year 2012, which began on October 1, 2011, started as most years do with the Department operating under Continuing Resolution Authority without an approved budget. Even with severe fiscal constraints and numerous challenges, DCMA continued to accomplish its mission. In order to provide the highest level of service to our customers, and give them acquisition insight, we must collect, analyze, and understand our performance metrics. An entirely new staff in our Strategic Effects Office has been tasked with reinventing the Agency s performance We delivered the best management architecture. The foundation of this acquisition services architecture involves available to our customers, asking two questions: and we will continue 1) How are we doing? to do so while we stay and 2) How do we know? The challenge is to focus on the path from on actionable information. Good to Great. At the writing of this report, DCMA leaders and employees are developing a variety of tools and measures for gathering actionable information. The tools will collect data and measure results so that we can provide valuable insight to our customers and the Department. In the future, we will deploy etools for surveillance planning, learning management, competency assessments, and more. THE AGENCY WILL FOCUS ON SEVERAL HIGH- INTENSITY INITIATIVES IN THE COMING YEAR. Become an Employer of Choice DCMA will continue efforts to become an employer of choice by creating a more inclusive work environment through communications, recruiting, and training. The Agency is finalizing a strategic plan for recruitment that will include succession planning and will be incorporated with the overall hiring strategy. Additionally, work is being done to shorten the hiring-cycle time and reduce the backlog of hiring actions. Strengthening the Workforce In partnership with DCMA, the College of Contract Management will continue to design curricula and hire instructors. The College intends to launch its first courses for DCMA employees in the third quarter of Financial Improvement and Audit Readiness DCMA will complete the assertion by July 2013 and engage a public auditor to provide an attestation. As a reporting entity, the Agency will assert the statement of budgetary resources by the end of September Supply Chain Predictability The Agency will work draft instructions through the Policy Advisory Board and conduct a supply chain surveillance pilot to test Supply Chain Management process implementation. This enhanced automation depends on a skilled and intelligent workforce capable of interpreting and leveraging data to drive our responses. By further strengthening the workforce with training and rigorous performance management we will ensure future successes. Integrated Workflow Management System (IWMS) Developing and deploying the IWMS presents a real opportunity to increase workforce productivity, implement business processes, and reengineer and leverage new capabilities in situational awareness and records management. DCMA will configure and deploy the system to begin a more streamlined approach to data collection and information management. MOVING FORWARD 19

22 JANUARY FEBRUARY MARCH APRIL MAY JUNE 20 As we leave the fiscal year, we confront the still unknown implications of budget sequestration. The effects of this situation may create an even more challenging operating environment for us next year. DCMA will meet future challenges and continue working with customers and industry partners to guarantee only superior products are delivered to our nation s warfighters while maintaining the best value for the American taxpayer. JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER

23 ACRONYMS AND ABBREVIATIONS ACAT AOI AT&L BRAC CACO CBAR CCAS CCM CMO CONOPS CONUS DACO DAES DAU DAWDF DCAA DCMA DOD EVM FIAR FSC FPRA FPRR FY HQ ICAT IPT IT IWMS LSS OSD PAB PBDA PM&I QA RWM SCM SRS TCAT USD VDI Acquisition Category Aircraft Operations Inspections Acquisition Technology and Logistics Base Realignment and Closure Corporate Administrative Contracting Officer Contractor Business Analysis Repository Contingency Contract Administration Services College of Contract Management Contract Management Office Concept of Operations Continental United States Divisional Administrative Contracting Officer Defense Acquisition Executive Summary Defense Acquisition University Defense Acquisition Workforce Development Fund Defense Contract Audit Agency Defense Contract Management Agency Department of Defense Earned Value Management Financial Improvement and Audit Readiness Field Service Center Forward Pricing Rate Agreement Forward Pricing Rate Recommendation Fiscal Year Headquarters Integrated Cost Analysis Team Integrated Product Team Information Technology Integrated Workflow Management System Lean Six Sigma Office of the Secretary of Defense Policy Advisory Board Position Based Distribution of Assets Portfolio Management and Integration Quality Assurance Resource and Workload Modeling Supply Chain Management Supplier Rating System Training Competency Assessment Tool Under Secretary of Defense Virtual Desktop Infrastructure ACRONYMS AND ABBREVIATIONS 21

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