Rebecca Beck

Director of Finance - DFAS Columbus

Procure to PayWinning the Procure-to-Pay Battle

2

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

3

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 by

foreign 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)

4

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

5

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

Total Contracts - FY 10

Army

13.4%

DLA

33.4%

Marines

0.6%

Navy

33.1%

Other

3.8%Air Force

15.7%

Obligation Dollars by Service - FY 10

Air Force

34.4%

Other

4.3%Navy

27.7%

Marines

2%

DLA

0.6%

Army

30.9%*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

7

Program

Managers

Finance

Acquisition

Logistics

Disconnects in the level of

data between contractual

and accounting requirements

leads to manual process

in entitlement, prevalidation,

and disbursement posting.

The failure to align

requirements across the P2P

process leads to inefficient

material management.

Failure of the alignment

leads to delays and

mismatches in expenditures

that delays critical

information needed to

manage the Program.

The mismatch of information

delays impacts payments

to vendors, inhibits the

government from meeting

contractual 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

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P2P Projects Targeting Identified Gaps

Purchase

Requisition

9 Gaps

Purchase Order

11 Gaps

Goods Receipt

10 Gaps

Invoice Receipt

15 Gaps

Expenditure

13 Gaps

Core Processes:

P2P Projects to Improve Core Gaps in Process :

Requirements

Alignment

Data Driven

ContractingContract Quality

Preponderance 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

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• 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

11

ELIN Alignment

Accounting

ELIN

Entitlement Inventory Disbursement

CLIN 0001

Contract

Requirements

Alignment

12

P2P Success with ELINs

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

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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

(processed

as text)

(not in

tables)

Special Payment Instructions

Special Payment Instructions Timeline

Data Driven

Contracting

Status:

Benefits:

Facilitate end-to-end electronic

processing (API rate)

Reduce interest payments

Accurate 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

SystemEDA

WAWFMOCAS

Contract as

Indexed

Postcript

GEX Indexed PDF

GEX850

UDF

850

UDF

Pre-populate

Data

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 FPDS36.9% 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 Reviewed

and Input into System MOCAS(Entitlement

System)

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

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10

Electronic Contracts Accepted

FY 10

FY 08 Rate 47%

FYTD 10 Rate: 61.9%

FY 09 Rate 49%

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

22

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.

Benefit

Adds Visibility!

EDA (Electronic

Document

Access System)

(Contract Writing System) (Management)

Funding

Notification

Procurement Data Standards

Preponderance of

Funds

23

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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P2P Accomplishments

• 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

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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

27

$0

$40

$80

$120

$160

$200

FY 06 FY 07 FY 08 FY 09 FYTD 10

Interest $ Per Million Prompt Pay Act $ Disbursed

Interest Paid

$0

$20

$40

$60

$80

$100

FY 06 FY 07 FY 08 FY 09 FYTD 10

$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

$6.8

1.71%

MOCAS Operations at a Glance

FY10 Goal

$55

Goal

2%

FYTD as of 04/30/10