WASHINGTON — The Army is rolling out a new policy Friday projected to shake up how the service spends its money.
The policy — which will be officially implemented July 1 — sounds simple in principle, but will take the handcuffs off of Army officials who control the purse strings and takes aim to eliminate widely accepted spending processes that result in wasteful, last minute decisions.
Crafted by the Army's Office of Business Transformation — little-known to Pentagon outsiders — and made official Friday by the signature of acting Army Secretary Patrick Murphy, the new policy called "Every Dollar Counts" is a "bold" approach to how the Army manages its resources, Lt. Gen. Thomas Spoehr, the OBT director, told Defense News in an interview at the Pentagon.
The OBT was created by Congress in 2009 due to a perceived lack of management in the Defense Department. Each service has one of these offices but the Army's is the biggest. The idea behind its formation is to take best business practices and apply them to how the department functions.
The office has led the effort to shrink Army headquarters by 25 percent by 2018 and is on track to accomplish that goal. It also is streamlining the entire Army's business, personnel and pay systems, which, when complete, will be the most comprehensive suite of business IT software in the federal government, according to Spoehr.
While the Army is not a business, Spoehr said, it still needs to be "businesslike." With a fiscal 2017 budget request on the order of $126 billion, wasting 1 percent of that budget is still wasting a billion dollars, he noted.
The part of the policy change most likely appreciated by that will be music to the ears of those in charge of managing Army budgets is the elimination of the "use it or lose it" mentality of spending funds by the end of a fiscal year in order to keep the same budget level the next year.
The pressure to frantically spend remaining cash by 11:59 p.m. on September 30 before it turns to pixie dust is damaging, and it's not just an Army problem — it's a whole federal government problem, Spoehr said.
"There are studies that show that federal spending in the last week of the fiscal year goes up five fold, and if you look in the federal procurement database, you'll see this spike in the last week and month of the year," Spoehr said. "There's been studies that the quality of those purchasing decisions ... are between two- and five-times worse than the quality of the decisions made any other time of the year. So we are spending faster and we're spending worse in those last months."
The new policy says that if a command does not spend all of its money, its headquarters cannot reduce its future year budget unless there is a major, substantiating, permanent change, such as a reduction of companies in a battalion, that would warrant a budget cut, according to Spoehr.
Another aspect of the policy will require all headquarters — two-star and above — to show tangible performance measures of what they are supposed to be doing.
"We know that you don't get anywhere unless you are moving the football down the field," Spoehr said. For example, a training command would be required to report how many people have been successfully trained as a measure of performance, he added, or a maintenance organization would have to show how many vehicles have been repaired.
"To be clear, many parts of the Army are doing these things already," Spoehr said. "This will kind of make it a universal standard."
The policy also directs resource managers to define how money is being obligated rather than just reporting how much is obligated, according to Spoehr. The reason it's important is a manager could have 90 percent of funds "obligated" but that doesn't always translate to tangible accomplishments. "It needs to be associated with an output," he added.
The policy was also crafted to encourage the Army to be good stewards of taxpayer dollars and to be innovative, Spoehr said, which would reward commands that find ways to save money.
If someone in an office comes up with a good idea and it results in savings, the office can keep the money, Spoehr explained. Headquarters cannot take the money from that office in that year to use elsewhere, he said.
However, the office has to spend the money on requirements and not something superfluous, he noted.
The savings need to come from a deliberately made, good idea, not an act of Mother Nature like an abnormally warm winter that saved on heating bills, Spoehr stressed. "That's not a good idea you had, you just got lucky."
"Everybody wants to do the right thing, but if your organizational attitude is, 'We are going to penalize people that find savings, we're going to take the money that you found and use it for something we want,' human nature is that you're either not going to save money or you're going to hide it," Spoehr reasoned.
He acknowledged the Army would lose a bit of flexibility because headquarters can't shift money generated from that kind of savings as easily as it had in the past, "but it is worth it in the long run."
Spoehr said he expects some in the Army to squirm over not being able to shift funds around as much as they're used to, but "we want to institutionalize this culture of savings and good ideas. What better way to do it than to create some incentive?"