there is money left over for the manager to reallocate;


if they were not, it’s an


avoidance, because there is nothing to reallocate. Te distinction seems simple enough, yet experience has shown that even among individuals familiar with the definitions, there is wide variation in applying the terms.


THE PROBLEM OF ‘REAL’ SAVINGS Terminology can be used for good or bad—to clarify, or to obfuscate. Despite the guidance provided, ad hoc definitions are continuously created and destroyed in the service of efficiencies, taskers and funding drills. Some Eskimo languages have more than 50 different


terms for


snow, illustrating the variety of their expe- rience. Te root of our problem is that we only have a handful of terms—cost reduction, cost savings and cost avoid- ance —to describe a delicately nuanced scale of efficiencies, hindering our ability to communicate on the subject.


Here, for example, are a few distinctions in the spectrum of financial benefits:


1. A reduction in unfunded requirements. 2. Taking an action that avoids increas- ing the cost of requirements (i.e., the requirement is funded, but an increase is not).


3. A cost reduction in an out-year subject to future program objective memo- randum (POM) planning


(funding


requirements will be reduced in the next POM cycle).


4. A cost reduction in the year of execu- tion after funds are received, whereby the dollars can be reallocated for another approved purpose.


We can easily agree that the last example can be called a cost savings, and there is general consensus, backed by the “Cost Benefit Analysis Guide,” that the first is


BACK INTO SERVICE


“Real” cost savings is money in the bank that can be used to buy something else, whereas a funded future requirement is only as good as the promise to fund it. Here, Common Remotely Operated Weapon Station field service representatives and instructors Anthony Palmer, Bagram Airfield, Bryan Idalski, Forward Operating Base (FOB) Sharana, Seamus C. Murphy, seated, FOB Shank, and Floid Krajcovic, FOB Salerno, clean, wrap, bag and tag components for weapons adaption kits from components turned in at retrosort yards. Recovery of serviceable components has resulted in a cost avoidance of $8,650,107 from Feb. 21 to Mar. 23, 2013. (U.S. Army photo by Summer Barkley, AFSB PAO)


TEAMWORK


The definition of cost reduction is reducing the cost to meet a customer-established requirement by improving a process or function. Here, a TACOM logistics assistance representative (LAR) works with Soldiers from 96th Aviation Support Battalion, 101st Combat Aviation Brigade, in trouble- shooting problems with a vehicle. The LARs provide training to Soldiers which directly results in cost savings or avoidance by extending the life of equipment, keeping equipment mission ready and ensuring equipment is safe to operate. (U.S. Army photo by Summer Barkley, 401st Army Field Support Brigade (AFSB) Public Affairs Office (PAO))


ASC.ARMY.MIL


161


COMMENTARY


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