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Financial Management

Types of Funds

 

Appropriated funds are divided into two (2) basic types; (1) investment funds and (2) expense funds. The defining of an acquisition as either investment or expense, or even a combination of the two, is not always simple. Generally, however, the following definitions apply. [1]

Investment:

Includes the cost of real property and capital assets which expand or add to DoD’s current capability. This includes, but is not limited to, the following examples:

  • Items of equipment or systems costing more than $250,000 (as of fiscal year 2009)
  • Centrally managed items regardless of cost
  • Certain categories of civilian labor associated with the acquisition or modification of investment funded items
  • The initial outfitting of a system procured with investment funds, even if the individual items themselves would normally be expense items
  • Site preparation and the installation of investment funded equipment
  • The training of an initial cadre of operators and maintenance personnel for an investment funded training system
  • Items defined or designated as investment

Expenses:

Includes the cost of assets consumed in the operation and maintenance of DoD facilities and equipment. This includes, but is not limited to, the following examples:

  • Most labor of civilian and military personnel
  • Non-centrally managed equipment items or systems costing $250,000 or less (as of FY 2010)
  • Contractual services supporting expense type efforts
  • Rental/lease of equipment and facilities
  • The repair/maintenance/rework/overhaul of capital equipment and facilities
  • Modifications to investment equipment that are mainly for reliability, maintainability, or safety purposes
  • Expendable supplies and materials
  • The replacement of initially outfitted materials
  • Licenses and subscriptions

See Appropriation Categories for more details on specific appropriation funds.

AcqLinks and References:

Updated: 6/8/2018

Systems Engineering

Trade Study

 

A Trade Study is a study that identifies a preferred solution among a list of qualified solutions. The trade study will examine these solutions against criteria such as; cost, schedule, performance, weight, system configuration, complexity, the use of Commercial off-the-Shelf (COTS),  and many others. Trade Studies are performed throughout an acquisition program from concept development thru system design. In systems engineering, they’re primarily used to determine operational and system-level requirements.

 

Trade studies are used in support of decision making throughout the life cycle of a program. Trade studies are conducted among operational capabilities, functional, and performance requirements, design alternatives, and their related manufacturing, testing, and support processes; program schedule; and life-cycle cost to systematically examine alternatives. Once alternatives have been identified, a trade study team applies a set of decision criteria to analyze the alternatives. These criteria are ‘traded’ to determine which alternative is optimal and to be recommended.

 

Most trade studies are not strictly formal or informal; usually they fall somewhere in between these two extremes. As a general rule, formal trade studies are indicated for high-value, high-risk or other high-impact decisions. Not all trade studies should follow the full rigor of a formal process but should be tailored to the specific circumstances of the program such as: [1]

  • Likelihood or severity of programmatic risk,
  • Objectivity and quantitative data used,
  • Details in available data, and
  • Time, effort and money needed to conduct the trade study.

 

Trade Studies support the following activities:

 

AcqLinks and References:

Updated: 8/01/2018

Logistics & Supply Management

Total Quality Management (TQM)

 

Total Quality Management (TQM) in the Department of Defense is a strategy for continuously improving performance at every level, and in all areas of responsibility. It combines fundamental management techniques, existing improvement efforts, and specialized technical tools under a disciplined structure focused on continuously improving all processes. Improved performance is directed at satisfying such broad goals as cost, quality, schedule, and mission need and suitability. Increasing user satisfaction is the overriding objective. The TQM effort builds on the pioneering work of Dr. W. E. Deming, Dr. J. H. Juran, and others, and benefits from both private and public sector experience with continuous process improvement. [1]

 

TQM employs a rigorous, structure methodology to achieve the goal of continuous improvement. The first step is to develop broad organizational goals and ensure those goals are reflected in and supported by subordinate goals and objectives.  Measuring progress towards defined goals is the basis for evaluating the success of TQM efforts. [1]

 

TQM can be summarized as a management system for a customer-focused organization that involves all employees in continual improvement. It uses strategy, data, and effective communications to integrate the quality discipline into the culture and activities of the organization. [3]

  • Customer-focused: The customer ultimately determines the level of quality. No matter what an organization does to foster quality improvement—training employees, integrating quality into the design process, upgrading computers or software, or buying new measuring tools—the customer determines whether the efforts were worthwhile.
  • Total employee involvement: All employees participate in working toward common goals. Total employee commitment can only be obtained after fear has been driven from the workplace, when empowerment has occurred, and management has provided the proper environment. High-performance work systems integrate continuous improvement efforts with normal business operations. Self-managed work teams are one form of empowerment.
  • Process-centered: A fundamental part of TQM is a focus on process thinking. A process is a series of steps that take inputs from suppliers (internal or external) and transforms them into outputs that are delivered to customers (again, either internal or external). The steps required to carry out the process are defined, and performance measures are continuously monitored in order to detect unexpected variation.
  • Integrated system: Although an organization may consist of many different functional specialties often organized into vertically structured departments, it is the horizontal processes interconnecting these functions that are the focus of TQM.
  • Strategic and systematic approach  A critical part of the management of quality is the strategic and systematic approach to achieving an organization’s vision, mission, and goals. This process, called strategic planning or strategic management, includes the formulation of a strategic plan that integrates quality as a core component.
  • Continual improvement: A major thrust of TQM is continual process improvement. Continual improvement drives an organization to be both analytical and creative in finding ways to become more competitive and more effective at meeting stakeholder expectations.
  • Fact-based decision making:  In order to know how well an organization is performing, data on performance measures are necessary. TQM requires that an organization continually collect and analyze data in order to improve decision making accuracy, achieve consensus, and allow prediction based on past history.
  • Communications: During times of organizational change, as well as part of day-to-day operation, effective communications plays a large part in maintaining morale and in motivating employees at all levels. Communications involve strategies, method, and timeliness.

 

These elements are considered so essential to TQM that many organizations define them, in some format, as a set of core values and principles on which the organization is to operate.

 

TQM received recognition and adaption in the late 1980’s because of the increase need for firms to complete on the basis of quality.  By the late 1980’s and early 1990’s publications were writing about the reasons why TQM had succeeded or failed in many organizations.  The reviews were mixed but generally were in favor of a comprehensive quality management system. Most quality experts agree that the reasons for failure of TQM are usually poor management related. [2]

 

AcqLinks and References:

Updated: 7/17/2017

PPBE Process

Budget Authority (BA)

 

Budget Authority (BA) is authority provided by law to enter into obligations that will result in immediate or future outlays. It may be classified by the period of availability, by the timing of congressional action, or by the manner of determining the amount available.  Most Defense BA is provided by Congress in the form of enacted appropriations. See National Defense Budget (Green Book)

 

Deferral of Budget Authority
A temporary withholding/delaying the obligation or expenditure of BA or any type of executive action that effectively precludes the obligation or expenditure of BA. BA may be deferred to provide for contingencies, to achieve savings or greater efficiency in operations of government, or as otherwise specified by law. BA may not be deferred in order to effect a policy in lieu of one established by law or for any other reason. Deferrals must be communicated to Congress by the President in a special message.

 

Topics that address BA include:

  • Advance Funding
  • Advance Procurement
  • Appropriations
  • Continuing Resolution
  • Contract Authority
  • Forward Funding
  • Impounded Resolution
  • Obligated Balance
  • Obligation Authority
  • Recession
  • Reprogramming
  • Total Obligation Authority
  • Unexpended Balance
  • Unobligated Balance

 

Total Obligational Authority
Total Obligation Authority (TOA) is the sum of:

  1. All budget authority (BA) granted (or requested) from the Congress in a given year,
  2. Amounts authorized to be credited to a specific fund,
  3. BA transferred from another appropriation, and
  4. Unobligated balances of BA from previous years remain available for obligation.

 

TOA may differ from BA due to obligations not being incurred before the budget authority expires, transfers of unobligated balances, transfers of budget authority, other Congressional action, or offsetting receipts from the public, such as might occur from admissions fees for an event.

 

While DoD analysts distinguish between BA and TOA, BA is what the general public recognizes as the amount of funding appropriated to the DoD by Congress (in most cases). It is authority provided to the Federal government to incur legally binding obligations (signing contracts and placing orders), which will result in current year and future outlays. On the other hand, TOA is a DoD financial term expressing the value of the direct Defense program for a fiscal year, exclusive of the obligation authority from other sources such as reimbursable orders accepted. [1]

 

AcqLinks and References:

Updated: 8/03/2017

Earned Value Management

Total Allocated Budget (TAB)

 

The Total Allocated Budget (TAB) is the sum of all budgets allocated to a contract for authorized work but doesn’t include profit or fee. The TAB consists of the Performance Measurement Baseline (PMB) and all Management Reserve (MR). The TAB reconciles directly to the Contract Budget Base (CBB). If the TAB is greater than the CBB, the difference is attributable to an Over Target Baseline (OTB).

 

A contract price has two elements. The first element is profit or fee (Fixed Price Contracts include profit,  Cost Reimbursement contracts include fee). The second element is the total allocated budget which represents the contract cost. It’s important to understand the difference between cost and price. Price includes profit or fee while cost does not. Earned Value Management (EVM) is always at the cost level. At the beginning of the contract, the total allocated budget is equal to the negotiated contract cost and the contract budget baseline.

 

From the TAB, most contractors first set aside a small percentage for management reserve to cover unknown unknowns. This can range from 5% – 20% but the average is. The remaining budget becomes the Performance Measurement Baseline (PMB). For most contract changes the contracting officer may issue an undefinitized change order or Authorized Unpriced Work (AUW). This allows the contractor to start the work while a proposal and contract modification are being negotiated. At this point in time the TAB is equal to the contract budget baseline which is now equal to the negotiated contract cost plus the AUW. Once the modification is negotiated, the NCC, CBB and TAB will all once again be equal. On some contracts, cost growth or cost overruns can reach a point where the negotiated contract cost becomes meaningless. At this point in time, an over target baseline, or OTB, may be established. The TAB is now equal to the over-target baseline. The establishment of an OTB does not change the negotiated contract cost or contract budget baseline.

 

AcqLinks and References:

Updated: 6/15/2018

Program Management

Time Management

 

Time Management is the act or process of exercising conscious control over the amount of time spent on specific activities, especially to increase efficiency or productivity. Time management may be aided by a range of skills, tools, and techniques used to manage time when accomplishing specific tasks, projects and goals. This set encompasses a wide scope of activities, and these include planning, allocating, setting goals, delegation, analysis of time spent, monitoring, organizing, scheduling, and prioritizing. [1]

 

Time management initially referred to just business or work activities, but eventually, the term broadened to include personal activities as well. A time management system is a designed combination of processes, tools, techniques, and methods. Usually, time management is a necessity in any project development as it determines the project completion time and scope. [1]

 

A list of tasks that could be used to improve time management:

  • List all the tasks that have to be done
  • Prioritize these tasks on level of importance
  • Identify resources to help you
  • Block specific time to accomplish your highest priority tasks
  • Low priority tasks are time wasters and should be avoided

Updated: 7/16/2017

Contracts & Legal

Time and Materials Contract

 

A Time-and-Materials (FAR Subpart 16.6) contract provides for acquiring supplies or services on the basis of: [1]

  1. Direct labor hours at specified fixed hourly rates that include wages, overhead, general and administrative expenses, and profit; and
  2. Actual cost for materials (except as provided for in 31.205-26(e) and (f)).

Website: FAR Subpart 16.6 “Time and Material Contract

Website: DFARS 216.6 “Time and Material Contract”

 

Application:
Time accurately the extent or duration of the work or to anticipate costs with any reasonable degree of confidence. See FAR 12.207(b) for the use of time-and-material contracts for certain commercial services.

 

Limitations:
A Time-and-Materials contract may be used only if:

  1. The contracting officer prepares a determination and findings that no other contract type is suitable. The determination and finding shall be:
    •  Signed by the contracting officer prior to the execution of the base period or any option periods of the contracts; and
    •  Approved by the head of the contracting activity prior to the execution of the base period when the base period plus any option periods exceeds three years; and
  2. The contract includes a ceiling price that the contractor exceeds at its own risk. The contracting officer shall document the contract file to justify the reasons for and amount of any subsequent change in the ceiling price. Also see 12.207(b) for further limitations on use of Time-and-Materials or Labor Hour contracts for the acquisition of commercial items.

 

Definitions: [1]
“Direct materials” means those materials that enter directly into the end product, or that are used or consumed directly in connection with the furnishing of the end product or service.

“Hourly rate” means the rate(s) prescribed in the contract for payment for labor that meets the labor category qualifications of a labor category specified in the contract that are:

  • Performed by the contractor;
  • Performed by the subcontractors; or
  • Transferred between divisions, subsidiaries, or affiliates of the contractor under a common control.

– See Firm-Fixed Price Contract
– See Cost-Reimbursement Contract
– See Indefinite Delivery Contract
– See Incentive Contract

 

AcqLinks and References:

Updated: 3/29/2019

Intelligence & Security

Threat-Assessment-Center-Report

 

The Defense Intelligence Agency (DIA) Threat Assessment Reports provide specific and timely threat characterization of an identified suppliers to the Program Manager (PM) and Program Management Office (PMO). They are used to assist in selecting the supplier and/or architecture alternatives and developing appropriate mitigations for supply chain risks. [1]

 

Website: Defense Intelligence Agency (DIA)

 

Supplier threat assessment requests are submitted to DIA and developed based on a criticality analysis. An annotated Work Breakdown Structure (WBS) that identifies the suppliers of the critical functions components may be used to assist with the creation of the TAC requests. Supplier threat assessment requests may be submitted as soon as sources of critical capability are identifiable. Near the end of the Materiel Solution Analysis (MSA) Phase, as some threat information is available from the Capstone Threat Assessment (CTA), identified technologies and potential suppliers, Supply Chain Risk Management (SCRM) Threat Assessments may be used to assist in defining lowest risk architectures, based on suppliers for particular architecture alternatives. [1]

 

Early in the system life-cycle the threat requests may be more focused on suppliers in general technology areas to inform architecture choices  Later in the system life-cycle they may be more focused on critical components defined in the criticality analysis. [1]

 

DoD Instruction
For the policy and procedures regarding the request, receipts, and handling of TAC reports, refer to DoD Instruction O-5240.24 (Controlled Document).

 

AcqLinks and References:

Updated: 6/21/2018

Test & Evaluation

Testing for Anti-Tamper

 

Anti-Tamper (AT) is tested and verified during Developmental Test and Evaluation (DT&E) and Operational Test and Evaluation (OT&E). The Program Manager (PM) develops the validation plan and provides the necessary funding for the AT Verification and Validation (V&V) on actual or representative system components. The V&V plan, which is developed to support Milestone C, is reviewed and approved by the AT Executive Agent, or any DoD Component-appointed AT Agent, prior to the milestone decision. The Program Management Office (PMO) conducts the V&V of the implemented AT plan. The AT Executive Agent witnesses these activities and verifies that the AT plan is implemented into the system and works according to the AT plan. The PM and the AT Executive Agent may negotiate for parts of the system that have undergone anti-tamper measures to be tested at the AT Executive Agent’s laboratories for further analysis. The validation results are reported to the Milestone Decision Authority (MDA). [1]

 

– See Anti-Tamper (AT) for more information.

Updated: 7/18/2017

Test & Evaluation

Test Resource Management Center

 

The National Defense Authorization Act of 2003 directed the DoD to establish a DoD Test Resource Management Center (DTRMC).  The DTRMC provides oversight for T&E strategic planning and budgets for the Department’s T&E activities including:

  1. Major Range and Test Facility Base (MRTFB)
  2. Central Test and Evaluation Investment Program (CTEIP)
  3. T&E Science and Technology (S&T) Program

 

1) Major Range and Test Facility Base
All Services operate ranges and test facilities for test, evaluation, and training purposes. These activities constitute the Major Range and Test Facility Base. This MRTFB is described as “a national asset which shall be sized, operated, and maintained primarily for DoD T&E support missions, but also is available to all users having a valid requirement for its capabilities. The MRTFB consists of a broad base of T&E activities managed and operated under uniform guidelines to provide T&E support to DoD Components responsible for developing or operating materiel and weapon systems.”
DoD Major Range and Test Facilities

DoD Major Range and Test Facilities

 

The MRTFB facilities are available for use by all the Services, other U.S. government agencies and, in certain cases, allied foreign governments and contractor organizations. Scheduling is based on a priority system; and costs for usage are billed uniformly.

 

2) Central Test and Evaluation Investment Program
The Central Test and Evaluation Investment Program (CTEIP) provides OSD funding and a mechanism for the development and acquisition of new test capabilities to satisfy multi-Service testing requirements. It oversees the acquisition and integration of all training and associated test range instrumentation and development-related policy.

 

3) T&E Science and Technology (S&T) Program
The T&E Science and Technology (S&T) Program develop technologies required to test future warfighting capabilities.

 

AcqLinks and Resources:

Updated: 6/5/2018