Budget cuts are the “new normal” for the foreseeable future, as agencies consider multi-year cost reduction strategies. To continue serving constituents and agency missions despite reduced funding and growing uncertainty over the coming fiscal years—how prepared is your organization to make sustainable cuts? br> Guests:
Janet Hale, Director, Deloitte Consulting LLP and the former Undersecretary of Management at the Department of Homeland Security. Joann Boutelle, Lead Client Service Partner for the Department of Defense, Deloitte & Touche LLP and the former Deputy Chief Financial Officer at the Department of Defense
Impact of cost reduction on federal agencies in the coming years
Practical steps agencies are taking to cut costs that do not compromise essential service levels
Sustained cost reduction
Lessons learned from the private sector— re-emerging from an economic downturn.
The following is a full transcript of an interview with Janet Hale, Director, Deloitte Consulting LLP and Joann Boutelle, Partner, Deloitte & Touche LLP, conducted by Jane Norris, on November 1, 2012. To hear full interview, go to http://www.deloitte.com/us/fedcentral.
Jane Norris Hello and welcome to FedCentral on Federal News Radio 1500 AM brought to you by Deloitte; a program where executives and federal government leaders talk about the issues and initiatives that are making a real impact on the business of government today, to help government help America.
Today, we’re going to talk about something that really all of America’s talking about, and that’s the budget and new budget realities and cost recovery strategies that the federal government will need to employ in order to meet their new mandates. Joining us today we welcome Janet Hale. She’s a director with Deloitte Consulting and a former undersecretary of management with the Department of Homeland Security. Also here, is Joann Boutelle. She’s a partner with Deloitte’s DoD practice and former deputy chief financial officer at the Department of Defense. Ladies, thank so much for being here.
Janet Hale Thanks, nice to be here.
Joann Boutelle Thanks, Jane.
Jane Norris Great to have both of you. So, you’re both former senior- level managers within the federal government, and of course, you’re senior-level managers at Deloitte, as well. So here’s the new reality. The government landscape, just like, I think, everything that we’re going through today, everything the country is going through today, is looking at cost reductions, ways to maximize what they do for the American people but to really measure the kind of investments that they make and go through some cost reductions and changes in the way that they handle their mission. So tell me how the government you know, based on your years of experience — how does the federal government accomplish this? Joann?
Joann Boutelle Well — well, Jane, it’s not one of those easy answers or they would’ve already done it, right? So this is very difficult. I think that first of all, we have to understand it’s the — the new norm doing — there — there’s just not enough money to — to continue to pay for everything that — in Department of Defense’s case, which is where I had my experience — that — that they’ve been doing. So they have to start making some bold cuts. You know, President Obama’s looking to cut the budget at DoD what — I think the latest number was somewhere around $400 billion over the next several years. What — that’s — that’s a lot of money, and so there’s going to take some bold changes to make that happen, and — and that’s going to require top leadership involvement and top leadership making some tough decisions. This isn’t something that can be done through a budget drill. In the past you know, you get a cut in your budget of 5-10%. The components look for where to take that cut, and they don’t always make the cuts based on strong business cases. They make them on where it is the easiest place to cut and keep moving. That’s not going to be the case going forward. That — those are short term risk and long-term risk that — that are going to be factored into these decisions on which weapons systems that they’re — they’re not going to continue to procure, what business processes that they’re going to have to change, what systems they’re going to implement. Are they going to consolidate organizations or not?
So I guess kind of the bottom line is that this you know, has Secretary Gates focus on it, and he’s been driving it since last year. You know, it’s going to need to continue with that level of involvement for this to be successful is — is my view.
Jane Norris Senior-level leadership.
Joann Boutelle Absolutely, it’s critical.
Jane Norris So, in civilian agencies, Janet, similar?
Janet Hale Absolutely, and I think they face the pressures over the years, but I think this one is so much more intense as the budget deficits have gotten — just spiraled. So, it’s both senior leadership. It’s a dedication of a group of people. It can’t just be a human capital or a CFO, as Joann said. It’s really got to be let’s make the right business decisions, and then let’s make sure we’ve got processes, governance processes in place to be able to execute, not just from the plan but all the way through. It is hard to do this. It is pretty easy to get the business case done but much harder to what’s the details behind it. How many different factors in the departments or in the agencies and how do we be sure we do that without harming the — the services to the, as you referenced, the American citizens that are — are expecting this program, so — these services. It’s really a lot about a team of people driving the change with the leadership Joann talked about but with the execution strategy around it, and then how do you capture it.
Jane Norris All right, so let’s talk about some of the change that has to happen. There are changes that are occurring, I think, a lot of them around new technology just because technology allows more functionality. So how does that impact? I mean, there are costs associated with that, but there are obvious savings that come at the end of those kinds of transitions. So how does that impact agencies?
Joann Boutelle Well, up to this point, DoD is very — has a lot of processes that are very what we would say transactional level. So a lot of paper that still moves, a lot of people involved in processing those transactions, so whether it’s the order to pay process or the hire to retire process, a lot of people involved. So to eliminate the people, which is where the biggest cost usually is in the non-weapons system areas requires them putting some technology in place. So better systems, more integrated processes in those systems to where — and when I say that, I mean you know, today they have systems, but many times, they are stovepipe systems and they interface as opposed to — to actually being an integrated system with the right controls in place that will eliminate the — the people having to do so much of the checking. So I think technology enhancements are going to be really important going forward to gain some efficiencies. I think one of the things DoD’s looking at that I think is absolutely the right thing to do is the data center consolidations There’s — that’s the perfect example of redundancy that — that is happening across the department. So huge savings there I would imagine. The cloud — you know, we — we hear about the cloud a lot, but in DoD, that’s another opportunity for the components to take advantage of services as opposed to everybody buying their own. So I think the toe technology area, there’s many, many opportunities there.
Having said that, there’s also some fundamental things that they need to put in place for that to happen. So they need to have a better standard architecture, and I know, you know, the business enterprise architecture — they been working on that for years and that’s been moved up now with the deputy chief management officer, which I think is a — a great place for that to be. She’ll make sure that across the department that there’s some discipline put in place, but that’s going to be a critical piece of driving these systems that are going to be needed to — to give the business intelligence that’s going to — to be needed for better decision-makings going forward. So technology I think you’ll see a lot of positive moves in.
Janet Hale Absolutely agree, and I think one of the big changes is not necessarily just the big bang. Have I got a grand, new, big system for you. So you talked about the enterprise architecture. I think you have to be sure you have real requirements that are clearly defined and then usable segments. So sort of saying it’s a 20-year modernization effort or a 10-year modernization. We’ve watched too many of those systems fail. So getting to be more agile, more flexible, and understand technology is changing so fast that a 10-year — excuse me — 10-year technology program might need to be done and what can I get done, what brings bang right now, and how can I be sure I’m not 10 years from now working on the same system? So it’s both the enterprise architecture, it’s the requirements, and it’s usable segments I would say.