Cost Restructuring Can Help Agencies Meet Budget Challenges

April 28, 2013

In the aftermath of sequestration, it’s clear that significant budget cuts are inevitable for agencies and programs throughout government. Already, procurements of complex equipment have been reduced or cut; support contracts have been negotiated more aggressively — and, in many cases, cut back or canceled.

These actions have risks. By failing to strategically assess budget challenges, an agency may increase mission risk and miss opportunities for effective and sustained cost reduction.

We need a new way of thinking about cost reduction, a way that agencies can save money while maintaining, and often improving, mission performance.

Using an approach called cost restructuring, the Navy was able to reduce $3.5 billion in costs and cut production schedules by 30 percent on its Virginia-class submarine program. Project leaders set aggressive cost objectives and engaged key stakeholders — senior government leaders, functional area leaders and contractors — to agree on and support cost savings targets. Stakeholders include owners of data, information and critical processes, and decision influencers/makers on investments and initiatives.

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