Friday, April 17, 2009

Flexible contract mentality

Last month our budget was slashed. We responded immediately by prioritizing projects and improving our troubleshooting. Surprisingly, our spendthrift culture turned on a dime--I was really proud of my shipmates for that. What's been difficult this past month is rooting out all the vestiges of that spendthrift era. My squadron, really the whole Navy, had put the mission before everything else for years. Expediting was more important than analyzing. That's all changed now, but we still have bad habits we don't even realize.

A big drain on our budget are all the contracts we fund for service providers to draw against. For example, if we send a helicopter to North Carolina to be repaired, we fund an account with about $40K for the myriad supplies they'll need to do the overhaul. In addition to that, any additional parts they need that aren't covered in the specified scope of repair go on our dime too. This is all valid, but what had happened over the 7 years of feast is that whenever the repair facility ran over that $40K, they'd just ask for the contract to be augmented for whatever extra they thought they'd need--the contract was seen to be elastic, and it was. And for the extra parts that were needed, which can run upwards of $100K each, we should be consulted before the part is obligated to our aircraft. But when money doesn't matter, why bother. And so a de facto process developed in which the repair facility spent our money without our approval. It didn't seem to matter then; it does now.

This flexible contract mentality exists for nearly every contract we have, and we have many. So, I've learned that it's not enough simply to commit to spending less. You first have to fully understand what you spend. When I started inspecting every element of the operation which requires funding, I was finding lurking requirements that haven't been addressed. And the owner of every single funding requirement must individually adapt their part of the operation to the new fiscal climate. They will accept the budget cuts, but only after they realize that they're even affected by them.

I actually really enjoy this work. There's far more creativity and consideration in this period of less. And the impact of the 2/3 budget cut to our operations is far from direct, which we'd lead ourselves to believe.