1. No category

PROCEEDINGS OF T H E
SAVE
CONFERENCE
1978
HOW TO OBTAIN VE PROGRAM RESULTS
Henry S. M l o d o z e n i e c
HQ DARCOM V a l u e E n g i n e e r i n g Program Manager
O f f i c e of Manufacturing Technology
H e a d q u a r t e r s , US Army M a t e r i e l Development & R e a d i n e s s Command
A l e x a n d r i a , V i r g i n i a 22333
Abstract
T h e r e a r e a number o f ways t o l o o k a t the
s i g n i f i c a n c e o f t h e DARCOM m i s s i o n . F o r
p u r p o s e s of VE we w i l l l o o k a t i t o n l y i n
terms o f t h e r e s o u r c e s we manage.
We a r e
c h a r g e d w i t h t h e management o f a budget ( F Y
77) i n e x c e s s o f $13 b i l l i o n , e x c l u s i v e o f
personnel.
This represents
approximately
6 0 % o f t h e t o t a l Army b u d g e t a n d makes
DARCOM e q u i v a l e n t t o number t e n r a n k on
F o r t u n e 5 0 0 . Another a s p e c t o f t h e DARCOM
m i s s i o n i s management o f t h e Army m a t e r i e l
i n v e n t o r y , t h i s c o n s i s t s o f n e a r l y 300,000
d i f f e r e n t l i n e i t e m s v a l u e d i n e x c e s s o f $36
billion.
Whether i n terms of items o r
budget d o l l a r s , DARCOM h a s t h e r e s p o n s i b i l i t y t o manage i t s a s s e t s w i s e l y .
We employ
the VE methodology a s p a r t o f t h a t prudent
management.
T h i s paper o u t l i n e s a s e r i e s o f management
s t e p s t a k e n to a d j u s t t h e US Army M a t e r i e l
Development and R e a d i n e s s Command (DARCOM)
Value Engineering
(VE) Program to y i e l d
increased
r e s u l t s w i t h o u t any a d d i t i o n a l
increase
i n total
resources
expended.
To a c c o m p l i s h t h i s " f i n e t u n i n g " o f t h e
DARCOM VE P r o g r a m , i t was n e c e s s a r y t o
examine such elements of t h e program a s
c u r r e n t p a r t i c i p a t i o n , performance goal
assignment, t r a i n i n g , r e p o r t i n g procedures,
f u n d i n g , r e t u r n on i n v e s t m e n t , m o t i v a t i o n ,
and a w a r d s .
These elements along with
other considerations a r e discussed a s w e l l
as those changes e f f e c t e d t o o b t a i n t h e
desired results.
F i g u r e 1 shows t h e o v e r a l l o r g a n i z a t i o n
s t r u c t u r e o f H e a d q u a r t e r s , DARCOM i n
Alexandria,
V i r g i n i a , w h i c h i s commanded by a f o u r s t a r g e n e r a l .
As c a n b e
seen,
there i s a functional d i v i s i o n
along mission
lines.
On t h e o n e s i d e
we
have
t h e D e p u t y Commanding
General
f o r M a t e r i e l Development. He s u p e r v i s e s t h e
HQ S t a f f D i r e c t o r a t e s and o f f i c e s w h i c h have
r e s p o n s i b i l i t i e s i n the m a t e r i e l development
area.
On the o t h e r i s the Deputy Commanding
General
f o r M a t e r i e l R e a d i n e s s who s u p e r v i s e s t h r e e d i r e c t o r a t e s which d e a l primari l y i n thereadiness area.
Reporting to the
C h i e f o f S t a f f a r e t h o s e d i r e c t o r a t e s and
o f f i c e s whose r e s p o n s i b i l i t i e s
transcend
b o t h m i s s i o n a r e a s ; f o r example c o m p t r o l l e r ,
personnel,
and l e g a l .
So t h e o v e r a l l
f u n c t i o n o f HQ DARCOM i s t o p r o v i d e c e n t r a l
d i r e c t i o n and c o n t r o l i n b o t h t h e R&D and
readiness mission
areas.
HQs s p e c i f i c
r e s p o n s i b i l i t i e s a r efor policy formulat i o n , program development, r e s o u r c e a l l o c a t i o n , and p e r f o r m a n c e e v a l u a t i o n .
Introduction
W h i l e many p e o p l e a r e w e l l a c q u a i n t e d
with
the g i a n t s of i n d u s t r y and what
they
produce, few a r e p r o b a b l y aware of t h e
m i s s i o n -and f u n c t i o n s o f t h e US A r m y
M a t e r i e l Development and R e a d i n e s s Command
(DARCOM).
So, b e f o r e we f o c u s down on VE
a t DARCOM, l e t me g i v e you a b r i e f o v e r v i e w
of what DARCOM i s , t h e m i s s i o n and f u n c t i o n s , and how we a r e o r g a n i z e d t o accomp l i s h them.
DARCOM i s one o f t h e Army m a j o r commands,
On a n e q u a l b a s i s w i t h t h e T r a i n i n g a n d
D o c t r i n e Command, t h e F o r c e s Command, and
t h e t a c t i c a l commands s u c h a s US Army
Europe, and E i g h t h Army ( K o r e a ) .
However,
we have a s i g n i f i c a n t l y d i f f e r e n t m i s s i o n .
DARCOM's m i s s i o n i s t o s u p p o r t t h e t o t a l
Army.
We p r o v i d e
t h i s support through
accomplishment of our mission i n three
areas:
t h e r e s e a r c h , development and
a c q u i s i t i o n o f Army m a t e r i e l ; t h e r e a d i n e s s
of t h a t m a t e r i e l once i n t h e hands o f t h e
t r o o p s ; and t h e r e a d i n e s s o f war r e s e r v e s
prepositioned,
and o t h e r , to s u p p o r t t h e
t r o o p s ; a l s o , we a r e t h e D e p a r t m e n t o f
Army e x e c u t i v e agent f o r F o r e i g n M i l i t a r y
Sales.
The DARCOM f i e l d o r g a n i z a t i o n i s s i m i l a r l y
b r o k e n o u t a l o n g R&D and r e a d i n e s s l i n e s a s
shown on F i g u r e 2.
The Deputy Commanding
G e n e r a l f o r M a t e r i e l Development s u p e r v i s e s
t h e R e s e a r c h a n d D e v e l o p m e n t Commands,
t h e T e s t a n d E v a l u a t i o n Command, a n d
t h e DARCOM c o r p o r a t e l a b o r a t o r i e s . T h e
91
PROCEEDINGS OF T H E
SAVE
CONFERENCE
—
1978
DARCOM HEADQUARTERS
• •**
COMMANDING
GENERAL !
• • •
DEPUTY
• •
•*•
COMMANDING
DEPUTY
GENERAL FOR MATERIEL
CHIEF OF STAFF
COMMANDING
GENERAL FOR
DEVELOPMENT
MATERIEL
READINESS
ii
DEVELOPMENT
BATTLEFIELD
AND
COMMAND
PERSONNEL, TRAINING
FORCE
R&D
MANUFACTURING
AND
DEVELOPMENT
MANAGEMENT
TECHNOLOGY
MANAGEMENT
PROCUREMENT
INFO
STAFF
SYSTEMS
Figure 1
D A R C O M FIELD ORGANIZATION
COMMANDING
GENERAL
COMMANDING
FOR MATER/EL
RESEARCH
GENERAL
DEPUTY C O M M A N D I N G GENERAL
DEVELOPMENT
AND
FOR M A T E R I E L R E A D I N E S S
MATERIEL
DEPOT
DEVELOPMENT
EVALUATION
READINESS
SYSTEM
COMMANDS
COMMAND
COMMANDS
COMMAND
TEST
AND
USA
CORPORATE
SECURITY
ASSISTANCE
LABORATORIES
CENTER
-PROJECT
MANAGERS
Figure 2
92
AND
PLANS, DOCTRINE
OFFICES
MANAGEMENT
DEPUTY
ASS/STANCE
PRODUCT/ON
OTHER SPECIAL
COMMAND
USA SECURITY
CENTER
SYSTEMS
IMPROVEMENT
LAB AND DEV
MATER/EL
COUNSEL
READINESS
MANAGEMENT
INTERNATIONAL
I
COMPTROLLER
SYSTEMS
OFC OF PROJECT
PRODUCT
ENGINEERING
AND
PROCEEDINGS O F T H E
SAVE
D e p u t y Commanding G e n e r a l
f o r Materiel
Readiness supervises the Materiel Readiness
Commands, t h e Depot Systems command, and t h e
the USA S e c u r i t y A s s i s t a n c e C e n t e r .
Project
Managers a r e a s s i g n e d a s n e c e s s a r y t o e i t h e r
R&D o r r e a d i n e s s commands, o r c a n b e a s s i g n ed t o r e p o r t d i r e c t l y t o HQ DARCOM.
— 1978
I n a move t o expand t h e VE b a s e , t e n p r o j e c t
m a n a g e r s r e p o r t i n g d i r e c t l y t o HQ DARCOM
w e r e b r o u g h t i n t o t h e VE p r o g r a m l a t e i n
1977.
They h a v e been a s s i g n e d VE g o a l s and
FY 78 w i l l be t h e i r f i r s t
f u l l year of
participation.
T h e i r c o n t r i b u t i o n t o t h e VE
program f o r t h e s h o r t p e r i o d d u r i n g FY 77
i n d i c a t e s t h a t t h e management d e c i s i o n to
i n v o l v e t h e s e PMs i n v a l u e e n g i n e e r i n g was a
p o s i t i v e one.
T h e i n t r o d u c t i o n o f new
p e o p l e t o t h e VE program i n 1977 prompted a
c o m p r e h e n s i v e s u r v e y of o v e r a l l DARCOM needs
i n t h e a r e a of VE t r a i n i n g .
A l l particip a n t s were q u e r i e d by means o f a d e t a i l e d
questionnaire
as to t h e i r
c u r r e n t and
f u t u r e r e q u i r e m e n t s f o r t h e AO hour P r i n c i p l e s and A p p l i c a t i o n s o f VE Methods (PAVE)
c o u r s e and t h e 40 hour C o n t r a c t
Administrat o r s VE (CAVE) C o u r s e a s w e l l a s r e q u i r e ments
f o r t h e b a s i c VE • I n d o c t r i n a t i o n
Course.
T h e Army Management
Engineering
T r a i n i n g Agency was a d v i s e d o f t h e s u r v e y
results
and i s s c h e d u l i n g
VE t r a i n i n g
accordingly.
DARCOM VE P o l i c y
DARCOM V a l u e E n g i n e e r i n g
(VE) p o l i c y i s
t h a t VE w i l l
be a p p l i e d e a r l y i n t h e
acquisition
process
within
h o u s e , and
through contract
c l a u s e s , to enhance
m i l i t a r y worth or e l i m i n a t e unnecessary
costs.
This policy i s translated into
dollar
savings/cost
avoidance a tthe
subordinate
c o m m a n d s , d e p o t s , a n d PM
offices
by t h e c o n d u c t o f i n - h o u s e VE
s t u d i e s of i d e n t i f i e d high
cost
items/
systems or operations.
Contractors a r e
encouraged to i d e n t i f y c o s t d r i v e r s i n
t h e i r c o n t r a c t s and conduct s i m i l a r s t u d i e s
t h r o u g h e x e r c i s i n g t h e VE i n c e n t i v e o r VE
program requirement c l a u s e s which
allow
them t o s h a r e i n t h e d o l l a r s a v i n g s / c o s t
a v o i d a n c e r e s u l t i n g from approved V a l u e
Engineering
Change
Proposals
(VECPs).
At DARCOM, VE i s funded by t h e b e n e f i t i n g
appropriation.
I n recognition
of t h e
o v e r a l l b e n e f i t s t o be d e r i v e d , i t i s t h e
p o l i c y o f DARCOM t o i n c l u d e i n a l l budget
estimates
and o p e r a t i n g
budgets,
such
amounts a s n e c e s s a r y
t o pay f o r VEPs/
VECPs, t e s t i n g , and o t h e r c o s t s a r i s i n g
from v a l u e e n g i n e e r i n g .
VE
CONFERENCE
VE
Performance
F o r F Y 77 t h e t o t a l DARCOM VE G o a l s w e r e
533 V E C P s , 1 2 9 5 V E P s , a n d $ 6 2 , 0 0 0 , 0 0 0 i n
d o l l a r savings/cost avoidance.
Performance
a c h i e v e d was 1488 VEPs o r 1 1 5 % o f g o a l , 506
VECPs o r 9 5 % o f g o a l , and $132 m i l l i o n i n
f i r s t year estimated d o l l a r savings/cost
avoidance, o r 212% of goal.
The r a t i o o f
of i n - h o u s e s u b m i t t e d VEPs t o c o n t r a c t o r
s u b m i t t e d VECPs i s b e t t e r than 3:1. With
the number of c o n t r a c t s l e t e v e r y y e a r by
DARCOM, i t seems t h a t t h e r a t i o s h o u l d be
j u s t t h e r e v e r s e ; t h r e e c o n t r a c t o r VECPs t o
each i n - h o u s e VEP. I n c r e a s e d u s e o f b o t h
the V a l u e E n g i n e e r i n g
Program R e q u i r e m e n t s
Clause
a n d t h e VE I n c e n t i v e C l a u s e i s
i n d i c a t e d , a s w e l l a s a more c o n d u c i v e
relationship
between
DARCOM
procuring
o f f i c e s and c o n t r a c t o r s t o e n c o u r a g e c o n t r a c t o r s u b m i s s i o n o f VECPs.
The p o t e n t i a l
f o r much g r e a t e r d o l l a r s a v i n g s t o t h e Army,
and r e s u l t a n t d o l l a r s h a r i n g to t h e c o n t r a c tor
i s t h e r e , b u t i t n e e d s t o be b e t t e r
c u l t i v a t e d by b o t h t h e government and t h e
contractors.
We v i e w t h i s a s a c h a l l e n g e
and hope i n d u s t r y does a l s o .
Program
The HQ DARCOM V a l u e E n g i n e e r i n g
Program
Manager (VEPM) i s l o c a t e d i n t h e O f f i c e o f
M a n u f a c t u r i n g Technology w h i c h r e p o r t s t o
the Deputy Commanding G e n e r a l f o r M a t e r i e l
Development. C u r r e n t l y t h e r e a r e p a r t i c i p a t i n g i n t h e VE program and r e p o r t i n g t o t h e
HQ DARCOM VEPM, f o u r t e e n s u b o r d i n a t e command
VE managers, e l e v e n Army depot VE managers,
and t e n VE managers from P r o j e c t Managers
offices.
At the' beginning of each f i s c a l
y e a r t h e HQ DARCOM VEPM a s s i g n s VE g o a l s
t o p a r t i c i p a n t s o f t h e VE p r o g r a m i n t h e
form o f number o f i n - h o u s e VEPs, number o f
VECPs, and a d o l l a r s a v i n g s / c o s t a v o i d a n c e
goal f o r the f i s c a l year.
VE g o a l s a r e
p r e d i c a t e d upon t h e t o t a l d o l l a r program
available
to t h e p a r t i c i p a n t ,
current
m i s s i o n , p r e v i o u s p e r f o r m a n c e , and t h e r a t i o
of i n - h o u s e t o c o n t r a c t d o l l a r s .
Commanders
h a v i n g P r o j e c t Managers r e p o r t i n g
through
them n o r m a l l y r e a l l o c a t e a p a r t o f t h e
command's
goal
t o t h e i n d i v i d u a l PMs.
Over t h e y e a r s DARCOM h a s a l w a y s r e c o r d e d
i t ' s VE d o l l a r s a v i n g s / c o s t a v o i d a n c e b u t
did
n o t r e c o r d t h e c o s t to develop and
implement t h e VEPs/VECPs.
Again, a s a
f i r s t i n 1977 we m o d i f i e d o u r VE r e p o r t i n g
system to include cost data necessary to
c o m p i l e a R e t u r n on I n v e s t m e n t ( R O I ) . The
$132 m i l l i o n d o l l a r s i n f i r s t y e a r s a v i n g s /
c o s t a v o i d a n c e f o r FY 77 was a t t a i n e d a t a
93
PROCEEDINGS OF T H E
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CONFERENCE
1978
i s also a v a i l a b l e to the f i v e i n d i v i d u a l
c o n t r a c t o r s who have s u b m i t t e d t h e h i g h e s t
number o f V E C P s t o DARCOM f o r t h e f i s c a l
year.
N o r m a l l y t h e O u t s t a n d i n g Achievement
Award i s p r e s e n t e d a t t h e C o n t r a c t o r
Corporate
O f f i c e s b y a DARCOM G e n e r a l
Officer.
A l e s s e r c o n t r a c t o r award f o r
VECP s a v i n g s amounting to $100,000 o r more
is also available.
I t h a s been o u r e x p e r i e n c e i n DARCOM t h a t m o t i v a t i o n a l a w a r d s
pay f o r t h e m s e l v e s many t i m e s o v e r
through
r e c u r r e n t accomplishment.
DARCOM i n v e s t m e n t i n VE o f $18.5 m i l l i o n
d o l l a r s , f o r an ROI o f 7:1 on o u r s h a r e of
the s a v i n g s .
How d o e s t h e F Y 77 V E P e r f o r m a n c e o f
$132 m i l l i o n d o l l a r s a v i n g s / c o s t a v o i d a n c e
compare w i t h p r e v i o u s y e a r s ?
During the
immediate y e a r s o f 1973 - 1976 DARCOM was
on a p l a t e a u a v e r a g i n g $98 m i l l i o n d o l l a r s
per y e a r i n VE s a v i n g s / c o s t a v o i d a n c e .
FY
77 s i g n a l e d a movement away f r o m
this
plateau.
We would l i k e to t h i n k t h a t t h e
i n c r e a s e of approximately
$30 m i l l i o n
d o l l a r s f o r FY 77 was b r o u g h t about by a
number of r e c e n t changes i n t r o d u c e d to t h e
program, t h e f o r e m o s t of w h i c h was t h e
d e c i s i o n t o expand t h e VE b a s e by i n c l u d i n g
t h e p r o j e c t managers who r e p o r t d i r e c t l y t o
HQ DARCOM a s p a r t i c i p a n t s i n t h e VE p r o gram.
VE Program Review and A n a l y s i s
F i n a l l y , l i k e a l l government programs, t h e
Army VE p r o g r a m i s r e v i e w e d
i n detail
p e r i o d i c a l l y by t h e Government
Accounting
O f f i c e (GAO).
I n a November 1 9 7 7 r e p o r t
t h e GAO o v e r a l l summary s t a t e m e n t made t h i s
comparison:
"Army w i t h o n l y 1 5 % o f t h e
combined
total
procurement
obligation
a u t h o r i t y of a l l t h r e e s e r v i c e s produced
38% of t h e s a v i n g s ; t h e A i r F o r c e w i t h 2.4
t i m e s a s much o b l i g a t i o n a l a u t h o r i t y
produced o n l y 4 5 % o f t h e s a v i n g s ; and t h e
N a v y , w i t h n e a r l y a s much o b l i g a t i o n a l
a u t h o r i t y a s t h e Army a n d A i r F o r c e comb i n e d , produced o n l y 1 7 % of t h e s a v i n g s . "
DARCOM VE AWARDS
A newly d e s i g n e d s e t o f VE awards a r e now
in u s e as a motivating f o r c e towards
a c c o m p l i s h m e n t o f both t h e i n - h o u s e and
c o n t r a c t o r VE g o a l s .
Awards f o r i n - h o u s e
VE p e r f o r m a n c e a r e p r e d i c a t e d upon DARCOM
p a r t i c i p a n t s meeting or exceeding
t h e HQ
DARCOM a s s i g n e d f i s c a l y e a r g o a l s f o r
VECPs, VEPs, and d o l l a r s a v i n g s / c o s t
avoidance.
F o r FY 77 s i x o f t h e f o u r t e e n
DARCOM commands and n i n e o f t h e e l e v e n Army
depots were s u c c e s s f u l i n meeting t h e
requisites,
and earned
t h e handsomely
framed "DARCOM V a l u e E n g i n e e r i n g C e r t i f i c a t e o f Achievement."
I n - h o u s e awards a r e
normally presented to t h e i n d i v i d u a l
commanders a t t h e DARCOM Commanders Conference.
"By
t h i s m e a s u r e m e n t t h e A i r F o r c e VE
program was o n l y h a l f a s p r o d u c t i v e and t h e
Navy program o n l y one s e v e n t h a s p r o d u c t i v e
a s Army's."
We a t DARCOM t h i n k t h a t t h e c h a n g e s a n d
i n n o v a t i o n s i n t r o d u c e d i n t h e management o f
t h e VE p r o g r a m d u r i n g t h e l a s t two y e a r s
a r e p r o d u c i n g good r e s u l t s .
We h a v e i n
mind s e v e r a l o t h e r a d j u s t m e n t s t o c o n t i n u e
to " f i n e t u n e " t h e program and hope t h a t
they w i l l f u r t h e r c o n t r i b u t e to t h e s u c c e s s
of t h e VE Program.
A m o t i v a t i o n a l n o n - g o a l o r i e n t e d DARCOM VE
award i s a v a i l a b l e to i n d i v i d u a l s or
p e r s o n s who, o v e r t h e y e a r s have f o s t e r e d
the a p p l i c a t i o n of t h e Value E n g i n e e r i n g
Methodology.
S i g n i f i c a n t contributions to
the p r a c t i c e o f VE s u c h a s t h e p u b l i c a t i o n
of VE a r t i c l e s
i n technical
journals,
p r e s e n t a t i o n o f VE p a p e r s t o t e c h n i c a l
s o c i e t i e s , a n d any o t h e r a p p l i c a t i o n o f
professional abilities
to further the
p r a c t i c e o f VE may be rewarded by award of
t h e "DARCOM V a l u e E n g i n e e r i n g E x c e p t i o n a l
S e r v i c e Award."
Reference:
PSAD-78-5, November 16, 1 9 7 7 ,
R e p o r t t o t h e C o n g r e s s by t h e C o m p t r o l l e r
G e n e r a l o f the U n i t e d S t a t e s .
T h e "DARCOM V E A w a r d f o r O u t s t a n d i n g
A c h i e v e m e n t , " a handsome b r a s s p l a q u e on
h a r d wood, i s awarded t o i n d i v i d u a l c o n t r a c t o r s whose approved VECPs h a v e s a v e d
t h e DARCOM $ 5 0 0 , 0 0 0 o r more d u r i n g t h e
f i s c a l year i n which submitted.
T h i s award
94