Cost & economics - Column

Air Force Comptroller, July, 2003 by Joseph T. Kammerer

As I prepare to retire from Federal Service and leave the Air Force, I want to leave you with some of my departing thoughts. The five years I spent in this position unfortunately were not enough to accomplish what was needed. There was not enough time nor the right circumstances to regain the stature that cost and economics once held in the Air Force. Cost and economic analysis, as an integral component of financial analysis in the Air Force, was deliberately cut back to almost extinction before I arrived in my present position. The rationale was if a 40% cut had to be taken, it should be made in cost and economic analysis in order to preserve budget positions.

In my view, this was not a wise choice, especially since most of FMs work in budget tasks do not consist of budget analysis, but is more closely associated with processing transactions, preparing budget documentation, and associated work. This is work that can be reduced through technology, but analysis demands a thought process of logical reasoning, often establishing a baseline from which costs and benefits can be determined. Frequently, there is no prescribed method to accomplish the analysis. One case may involve lease vs. buy for Air Force tankers. Another case may involve comparing the costs of privatized military housing with military housing purchased in the traditional way with MILCON funds. Still another case could require the comparison of program life cycle costs of an F/A-22 force to the F-15 force.

Although it is not universally recognized, the most important part of financial management in the Air Force is financial analysis. Only we in FM are uniquely qualified to perform this function. We have the education, training, and experience to perform this important role. Yet, we often defer and allow other functional components to perform this function. When others do perform this function, we often see the results of their ineptitude leading to serious problems for the Air Force. FMs analytic capabilities need to be strengthened. FM should be performing the financial analysis for all the Air Force. We should have policy procedures outlined in AFIs and other policy documents that state clearly that this is FMs function. If a functional office other than FM performs a financial analysis, the analysis should have to be approved by FM before being released by the Air Force.

In cost estimating for major weapon systems a similar condition exists. The Air Force at one time stood head and shoulders above all the Services in their capabilities, organization, and processes for developing cost estimates for major weapon systems. Unfortunately, the OSD CAIG does not currently view the Air Force favorably in comparison to the other Services. The cost estimates created by our various program offices are viewed as overly optimistic, driven down by Program Managers who are too aggressive in keeping their programs within a budget that was set perhaps years before a realistic program could be defined. The Air Force Cost Analysis Agency (AFCAA) often finds itself in contention with the Program Offices. In reconciling the program office estimate with their independent estimate to reach a Service Cost Position (SCP), AFCAA often yields to a compromised position that may still contain program office optimism. The solution may lie in removing cost estimating for major weapon systems from the control of the program office. There are several ways this could be implemented and could result in an improved process.

I am pleased in the accomplishments of our FMC team as I leave the Air Force. This team at the AFCAA and in our Business Management and Economics Directorate are the brightest analytical staff in the Air Force. We have been fortunate to participate in most of the important decisions requiring analytical support over the last five years. Often this required inserting ourselves into the process--a push rather than a pull. Although sometimes late inserting ourselves into the process, we successfully corrected some faulty analysis. The Air Force should lean on our financial analysis expertise more heavily, and allow us to properly staff our function to support analytical financial analysis across the Air Force.

I thank the Air Force for the opportunity to lead this wonderful organization of enormously bright and talented people. It has been a pleasure to work with a fine group of General Officers and Senior Executives whom I so admire. I have enjoyed this job immensely, and it has been very satisfying professionally. I wish all of you in our FM organization Godspeed in your future endeavors.