Military Costs and

Challenge of Total Force Management

13 October 2004

Jo A. DeckerDCNO for Manpower & Personnel

(N10)Chief of Naval Personnel

American Society of Military Comptrollers –

Washington Luncheon

2

Agenda

• Rising Military Personnel Costs– Historical Perspective & Trends

• Total Force Management– Human Capital Strategy

– Synchronization Challenge

• MPN POM/Budget– Resourcing Process Deficiencies

– Way Ahead

3

Historical Perspective

• Before FY01– Deployments were well defined – 6 months every 18 months

• Sea/Shore tours were 4 years at sea/ 3 years at shore• Enlisted ranks were flat at Top 6 of 69%• Retention was low and attrition high

• Since FY01 - USS Cole incident, 9/11 attack, Afghan War, Operation Iraqi Freedom– Deployments as long as 10 months. Under Fleet Response Plan

(FRP), deployments will vary in the future. • Sea/Shore tours are being lengthen – 5 years at sea/ 2 years at shore for junior

enlisted• The need to increase retention and lower attrition, increased the need to

increase Top 6, targeted pay raises, & incentive pays

4

320,000

330,000

340,000

350,000

360,000

370,000

380,000

End FY03 End FY04 End FY05 End FY06 End FY07 End FY08 End FY09 End FY10 End FY11

Navy Active End Strength Profile

Glide Slope370K Active members in PRESBUD 04

Glide Slope357K Active members in PRESBUD 05

Current Glide Slope 348K Active members

Military Manpower Requirements Decreasing …

Reduction targeted against Overhead and Shore Installations

5

Average Costs Increasing . . .

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

$100,000

$110,000

$120,000

$130,000F

Y90

FY

92

FY

94

FY

96

FY

98

FY

00

FY

02

FY

04

FY

06

Per

Cap

ita

Cos

t of

Man

pow

er

DHP Health Care

Accrual begins

AVF “Marketplace “ Fact of Life per capita Costs

Increasing

Officer

Enlisted

TY$ FY00 FY01 FY02

Officer 97352 99152 103119Officer w / DHP

Enlisted 43426 44046 46899Enlisted w / DHP

TY$ FY03 FY04 FY05 FY06

Officer 105,493 109,430 114,775 116,459Officer w / DHP 109,729 114,002 120,139 122,158

Enlisted 48,888 50,064 51,262 53,983Enlisted w / DHP 53,124 54,636 56,626 59,682

TY$

6

Result . . . MILPERS share of Navy TOA largely unchanged

0

20

40

60

80

100

120

140

$ B

illio

ns

MILPERS TOA Total Navy TOA

22.9

%

22.7

%

21.9

%

21.4

%

21.7

%

22.4

%

23.3

%

23.4

%

22.6

%

23.1

%

The Opportunity Cost . . . Navy Unable to invest in

Recapitalization Requirements

Navy TOA

MPN % of Navy TOA

7

373,800 Active

190,000 Civilian

180,000 Contractors

85,900 Reserve

Navy Manpower DeterminationApproximately 830,000 Salaries

568,000 Shore (68%)(198,000 Military + 190,000 Civilian + 180,000 Contractor)

48,000 Individuals Account (6%) (Students, transients)

214,000 Battle Forces (26%)(Manpower Documents)

• Focusing Military on War Fighting

• Concentrating on Shore Support Infrastructure

• “Sea Enterprise” Efficiencies, Strategic Sourcing

8

Total ForcePast & Future

0

200

400

600

800

1000

1200

1400

FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11

Pers

onne

l Str

eng

th (K

)

32.5% Decrease(- 87K)

Contractor

DoN Civilian

Active and Reserve Military

39.5% Decrease(- 127K)

42.8% Decrease(- 317K)

39.9% Decrease(- 531K)

Navy Post-Cold War Drawdown

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Strategic Vision

• Total Force Human Capital Strategy will deliver the right number of Navy team members.

• Active duty uniformed strength represents just one component of the larger Navy human capital resource universe.

• The Navy will leverage the human capital assets embedded in our active military, reservists, civilians, and contractors.

• Must be accomplished in a fiscally responsible manner and within a Total Force context.

10

Our Human Capital Strategy• Moving toward a Sea-Centric, Forward-Deployed Force

– Recruiting and Retention at All-Time Highs

– Quality of Life and Service Critical

– Revolution in Training for Highly Tuned Skill Sets

• Significant cost-savings are in hand…more to come Tools and processes for success

Free up military manpower

• Sea Warrior Initiative The Right Sailor with the Right Skills at the Right Time for the Right Job

Putting the Sailor First in the way we design, engineer, and operate our ships and aircraft

Re-shaping the Force…Reducing Costs…Winning the Battle for People

11

Synchronization Challenge

• Policy changes are not instantaneous – time is required to properly reduce strength and synchronize targeted billets to targeted Strength

– Funding cannot be removed until Work is eliminated, Strength reduced

– Personnel reductions must be managed by community and Claimants

• Bottom Line: Billet reductions must be synchronized with executable Strength and Funding profiles to achieve savings

12

MPN $ Challenge

Current Business Processes are not Precise• Programming

– Military manpower priced based upon averages of averages– Limited data to support decision making

• Budgeting– MPN budget built on 12 to 24 month old data– Current methodology presumes Behavior and External Factors

remain the same from year to year.

• Execution– Each year on average requires significant reprogramming

Today’s legacy systems and methods are based on processes that have existed for 30 years

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• Transformation critical to:

– Capture and use updated Fleet requirements as the basis for future Strength and Budget projections

– Shift to more accurate HR and Pay data sources

– Obtain more granular data with increased detail

– Provide visibility into programming & budgeting assumptions

MPN $ Challenge

Way Ahead

The Future

Step 1 Step 2 Step 3

FY 2004CFO Compliant

Execution Reports

Enterprise Data Warehouse

• Live Personnel Data

• DFAS detailed pay reports

Replace ManpowerProgramming

& Budget Process

FMMP Focus

• Shift to accurate data sources

• Granular data for decision making

Replace DFAS LegacyPay and Reporting

Forward Looking Focus

• Use Navy NSIPS as source data for pilot to test & evaluate new financial accounting functionality

• Build-Test COTS Financial Reporting System – CFO Compliant, Automated Data Entry

• Phased approach - manageable• Embraces FMMP/BMMP• Joint • Pilot enables choices/options• Builds functionality for the Future

15

Additional Back-ups

16

The best Sailor to the key assignment at the right time

SeaTrial

SeaEnterprise

SeaWarrior

Manpower

ImprovingNavy’s

Workforce

PersonnelOptimal

Distribution

TrainingRevolution in

Training

Sea Shield

Sea Basing

Sea Strike

Sea Warrior Delivers Readiness with a market based approach in a competitive environment

Sea Warrior – Key Manpower Enabler