Rebecca Beck

Director of Finance - DFAS Columbus

Procure to PayWinning the Procure-to-Pay Battle

22

DFAS Today

Supports more people than any other financial agency

Pays more vouchers, accounts, and appropriations and funds

Supports DoD in decreasing Overseas Contingency Costs in a complex environment of cost containment

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DFAS Mission: Lead the Department of Defense in finance and accounting by ensuring the delivery of efficient, exceptional quality pay and financial information.

Sales & Service - $1.6B Scope of Business• Military Pay $160.6M• Civilian Pay $ 82.8M• Retiree Pay $ 68.9M• Travel Pay $ 46.9M• Commercial Pay $182.1M• Accounting Services $473.5M• Support to Others $201.7M• Others $355.2M

• Processed 181 Million Pay Transactions (6 million people)

• Made 7.8 Million Travel Payments• Paid 12.8 Million Commercial Invoices• Maintained 178.8 Million General

Ledger Accounts• Managed $426.7 Billion in Military

Retirement and Health Benefits Funds• Made $553 Billion in Disbursements

to Pay Recipients• Made $37.7 Billion in Foreign

Military Sales (reimbursed byforeign governments)

• Account for 956 Active DoD Appropriations

*Source: HR Flash Report 04/30/10

People• 13,329 employees * (Civilian and Military)• Located in:

• 12 sites• 8 states• 3 countries

DFAS – What We Do (2009 Data)

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MECHANIZATION

OF

CONTRACT

ADMINISTRATION

SERVICES

Major Acquisition - MOCAS

Integrated system supporting post award contract administration

Used by: DCMA Contract Administration Offices DFAS Procurement Offices / Resource Managers Funding Stations (Prevalidation Business Partners)

Pays More Complex Contracts High Dollar Multiyear Contracts Multiple Deliverables

Makes Financing Payments Progress payments Performance-based payments Commercial item financing Interim cost payments

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MOCAS – FYTD 10*(through April) 346,010 Active Contracts 18,970 Active Contractors 615,431 Invoices Processed $132.1 Billion Disbursed

MOCAS – FY 09 336,819 Active Contracts 18,792 Active Contractors 1,324,577 Invoices Processed $195.4 Billion Disbursed

Need for the P2P Initiative: MOCAS Magnitude

*As of 04/30/10

66

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

2007 2008 2009 2010 2011 2012

Increased Manual Transactions After ERP Implementation

P2P - Supports ERP Implementations

P2P Mission: Decrease Manual

Workload in ERP Environment

Navy ERP P2P

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Program Managers

Finance

Acquisition

Logistics

Disconnects in the level of data between contractual

and accounting requirementsleads to manual process

in entitlement, prevalidation,and disbursement posting.

The failure to alignrequirements across the P2Pprocess leads to inefficient

material management.

Failure of the alignment leads to delays and

mismatches in expendituresthat delays critical

information needed tomanage the Program.

The mismatch of information delays impacts paymentsto vendors, inhibits the

government from meetingcontractual obligations,

creates rework, and impacts the ability to close contracts.

Purpose

To provide a more cost-effective procure-to-pay process in support of equipping and supplying the Services.

Goals Standardization and consistency Identify areas that require

manual touch points Identify areas that require Policy

and Procedure changes

Scope Manual process or touch points Initial scope Navy with the ability

to export to other components Main P2P entitlement system

analyzed is MOCAS

The Procure to Pay (P2P) Initiative

8

P2P Projects Targeting Identified Gaps

Purchase Requisition

9 Gaps

Purchase Order11 Gaps

Goods Receipt10 Gaps

Invoice Receipt15 Gaps

Expenditure13 Gaps

Core Processes:

P2P Projects to Improve Core Gaps in Process :

Requirements Alignment

Data Driven Contracting

Contract QualityPreponderance of

Funds

Procure Pay

9

Proposed Solutions

Problem:

Non standard and manual data in P2P front end (e.g., ELIN) is driving rework throughout the P2P process.

Solution:

Focused Improvement Pilot Isolate the minimum data requirements necessary for P2P processes across functional areas

Using Lean6 methods, establish a pilot with a specific customer and contract type

Status:

Team has 30 days to identify resource requirements

Requirements Alignment

1010

• Problem: ELINs not sent as part of Contract Data

ELIN text is provided through contractual attachments

ELINs require manual input

DFARS 204.7105

Exhibit Line Item Number (ELINs)Requirements

Alignment

1111

ELIN Alignment

Accounting

ELIN

Entitlement Inventory Disbursement

CLIN 0001

Contract

Requirements Alignment

12

DoD policy change requiring these contract line item numbers to be passed as

data fields in lieu of images

• Automates the process

• Eliminates significant delays, reduces rework, and lowers costs previously rising

from manual contract input, prevalidation, and disbursement posting

Since September 2009, the Navy, as the first Military Department to use this

solution, successfully began transmitting electronically contracts containing

ELINS to the entitlement and accounting systems

• Overall baseline figures indicate the ELIN solution will impact approximately 17,000

contracts and 400,000 ELINs

Rework from the manual contract load, obligation validation and disbursement

posting is steadily declining

12

P2P Success with ELINs

13

Problem:

Special payment instructions required manual intervention. During fiscal year 2009, more than 20,000 contracts were manually entered. Delay in contract closeout notices are increasing administrative costs, reconciliation and delaying recovery of excess funds to obligate for other procurement, etc.

Solution:

DFARS PGI 204.7108 case added clause driven payment instructions and eliminated manual text.

Published clauses and instructions in DFARS – Oct 15, 2009

Begin updating Entitlement systems at

contract level –August, 2010

MOCAS accept special pay

instructions at CLIN level -July, 2011

DFARS case linked numeric IDs to payment

instructions

Required contracting

system tables to be updated – April 1, 2010

(processedas text)

(not intables)

Special Payment Instructions

Special Payment Instructions Timeline

Data Driven Contracting

Status:

Benefits:Facilitate end-to-end electronic processing (API rate)Reduce interest paymentsAccurate payment of the contract

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Initial set of instructions as text published in

DFARS PGI 204.7108

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Problem:

In the current business environment, there is limited visibility on contract closeout. Accounting systems are not notified that contract closeout has occurred.

Solution:

Contract Closeout ECP to electronically post notifications to EDA in FY11.

Benefits: Preparation for system conversion Improved communication Reconciliation and audit ability Visibility of funds remaining and financial status New obligation existing funding

Status:

MOCAS system changes being prepared to be submitted to the Operational Requirements Committee.

Contract CloseoutData Driven Contracting

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Contract Writing System

EDA

WAWFMOCAS

Contract as IndexedPostcript

GEX Indexed PDF

GEX850 UDF

850 UDF

Pre-populateData

Human ReadableAccounting and

Finance Systems(including

entitlement)

850 UDF

EDA XML

PDF

Existing 850 UDF translated to EDA XML extract for non SPS

contract writing systems

Problem:Availability of contracts and contract data in Electronic Document Access (EDA) system.

Solutions:

1. EDA Scorecard.

2. Transition to Procurement Data Standard. (PDS)

3. Policy for Procuring Contracting Officers to be registered in the Electronic Document Access (EDA) system:

Over an 11.5% increase!

Status:EDA Scorecard in pilot production expected June, 2010.

PDS Phase I in test.

Electronic Document Access

Interim StepGreen lines are new or modified parts

Data Driven Contracting

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90.6% EDA PDF Match to FPDS

50.0% EDA XML Match to FPDS

Excluding DLA

75.3% EDA PDF Match to FPDS

36.9% EDA XML Match to FPDS

DoD TotalGoal: High 90%

EDA Scorecard Q1 FY10Data Driven Contracting

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Overview

Problem:

Problems in contract structure and distribution can cause significant manual intervention and rework to process the contract and actions resulting from the contract, i.e. receipt and acceptance, invoice processing, expenditure and disbursement processing.

Solution:

1. Implement SPS for all customers

2. Complete SPS/MOCAS interface for modifications

3. Implement SCRs to improve data mapping

4. Introduce data validation within SPS

Contract Quality

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Success with Standard Procurement System (SPS)

SPS to MOCAS Interface for Contracts: Navy – all sites Air Force – 55 sites

EDA (Electronic Document

Access System)

(Contract Writing System)

Past State:PDF File

(Manually Reviewedand Input into System MOCAS

(EntitlementSystem)

Contracts Now

Transfer Systemically!

MODs in FY 10!

Contract Quality

Testing SPS Solution with Contract Modifications - Go “live”~ Summer 2010

Next Steps:

USMC WHS MDA

DTRA Army

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MOCAS System Enhancements

To further improve the MOCAS acceptance rate,the P2P team developed 4 System Change Requests (SCRs)

Mandatory Review Code – Eliminate manual effort by DFAS to have to manually review simple contracts without financing

Accept Alphanumeric Units of Measure – Allow for more contracts to be submitted and accepted

Issue by DoDAAC & Ship-to-Code – Eliminate the failed contracts that did not pass a valid ship-to DoDAAC

Automatically Recycle Processed Electronic Contracts – Allows for more electronic contracts to process

Contract Quality

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Initiatives to Continue Improving EC Rate Implementing Army SPS – MOCAS interface to 12 sites

Developing procurement trends and analysis

Reduce or eliminate improper use of informational SLINs

Roll-out ELIN solution

Continue cross-agency lean6 certifications

Contracts FY08 FY09 FY10

Navy 18.1% 16.8% 40.2%

Air Force 31.7% 29.8% 32.9%

Army 35.8% 36.9% 38.4%

DLA 93.5% 88.9% 92.8%

All 47.1% 49.2% 61.9%

* Reflects all contract writing systems

* FY10 data as of March 2010

ResultsContract Quality

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Enterprise-level initiatives

Problem:

Reduced systemic processing of contracts and invoices are due to cascading errors within the P2P process, such as missing Ship-to-Code and Not Separately Priced (NSP) Exhibit Line Item.

Current business practices do not reflect the increase in system assurance, for instance, manually reviewing simple contracts under $100k.

Solution:

Enterprise level initiatives:

Standard Procurement System Improvements Validate Ship-to-DoDAAC during Contract Construction. Reprogram informational Sub-CLIN to be in compliance with the DFARS

Electronic Document Access – Contract Deficiency Report (2 SCRs)

Status: Developing Business cases. Estimated Closing Date – June 10

Contract Quality

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Procurement Data Standards

Problem:

Financial Managers have limited capability to see their own funding on outside entity documents.

Solution:

Procurement Data Standards Implementation:Funding notification sent to Financial Managers at the time the contract is posted to EDA which provides visibility for Financial Managers to see notifications when funding is provided by other services on the contract. (See diagram below).

Status:PDS solution currently being tested.

BenefitAdds Visibility!

EDA (Electronic Document

Access System)(Contract Writing System) (Management)

FundingNotification

Procurement Data Standards

Preponderance of Funds

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Problem:

In today’s current environment, the ERP systems have demonstrated limited readiness to process multi-service funded contracts.

Solution:

PoF memorandum: Use MOCAS as interim solution.

Objective:

Need Components to configure and implement ERP capability to process transactions for others (TFOs) and transactions by others (TBOs).

Status:

Memo in coordination.

Action: Require all stakeholders to reach concurrence.

MemorandumPreponderance of

Funds

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• Increased Electronic Acceptance Rate Standard Procurement System (SPS) to MOCAS Interface

Contracts (Navy and Air Force)

Contract Modifications

Improvements to Entitlement System (System Change Requests (SCRs) to MOCAS)

• Enhanced Special Payment Instructions

• Procurement Data Standard Implementation

• Increased Electronic Document Access (EDA) / Contract Deficiency Report (CDR) Registration Rates by over 11.5%

• Navy ELIN Solution

P2P Accomplishments

2525

Implement additional MOCAS Improvements

Increase electronic rates

Apply SPS solution to all Services

Roll out contract interface to the Army/DTRA

Implement SPS/MOCAS interface for modifications

Continue to reach goals: Standardization and consistency

Identify areas that require

manual touch points

Identify areas that require Policy and Procedure changes

Develop informational Sub CLIN Solution

The P2P Initiative Moving Forward

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BACK UP

2727

Interest $ Per Million

Prompt Pay Act $ Disbursed

Interest Paid

$52 $51

In Billions

$148

$180$158

Overage Invoice Percentage

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

FY 06 FY 07 FY 08 FY 09 FYTD 10

.98%

2.01%

1.19%

$0

$3

$6

$9

$12

$15

FY 06 FY 07 FY 08 FY 09 FYTD 10

$7.64$9.17

$7.99

In Millions

$74

$56

$14.5

$195

1.56%

$59 $116

$6.81.71%

MOCAS Operations at a Glance

FY10 Goal$55

Goal2%

FYTD as of 04/30/10