COST REDUCTION AND MANAGEMENT IMPROVEMENT IN GOVERNMENT OPERATIONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84-00780R000700060003-8
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 11
• Document Creation Date: December 12, 2016
• Document Release Date: July 16, 2002
• Sequence Number: 3
• Publication Date: June 8, 1965
• Content Type: MEMO

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(CLASSIFICATION)
OFFICE OF THE DIRECTOR D / S B X G 15 T R Y
1-7
F ILK.
Date 8 JUN 1965
Deputy Director for Intelligence
TO Deputy Director for Plans
Deputy Director icr Science & Technology
Deputy Director for Support
Inspector General
General Counsel
Cost Reduction and Management Improvement in
REFERENCE: Government Operations
I ction Memoranda A-3 0 and A-41 1. same subject
i. The President continues to bear down on cost reductions and irz :..rove-
ments in the general cf:fectivcness of Government operations. !Agency c t: arts
to improve efficiency and effect economies over the past year and a hal;
have been commendable. Although our reports to the Bureau of the Bucgot
on cost-savings actions have been general in nature and no specific maxipower
or dollar savings have been identiAed, a spirit of cost consciousness h s
been instilled among employees and we have been responsive to the
President's program.
2. To further strengthen the i-'re>sident's economy program and provide
more precise reporting on economy measures, the BOB has issued
Circular No. A-44, Revised, effective 3 i July 1965, which is attached.
Compliance with this circular requires the Agency to put into effect a ffirr-zal,
organized cost reduction program, the preparation of cost reduction pl6ri.e
and reports, and an identification of the use of savings. In order to give
more supervision and greater empha:3is to economy programs and coma--ly
with BOB directives, it is requested that each Deputy Director assume
direct responsibility for the preparation of a coat reduction plan with specific
savings goals for Fiscal Years 1966 and 1967. The guidelines in AttacLrvient
A to the BOB Circular shall be followed. These plans shall be forward:!di to
the Director, Budget, Program Analysis aaad Manpower by 1 August 19( ,5
e' ISPENSE DATE:
\ugust 1965
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BUREAU OF THE BUDGET t~~
WASHINGTON, D.C. 20503
March 29, 1965 CIRCULAR NO. A-44
Revised,
SUBJECT: Cost reduction and management improvement in Government
operations
1. Purpose and coverage. This Circular sets forth policies, procedures
and responsibilities for carrying out the President's program to-reduce
the cost and improve the general.effectiveness of Government operations.
It applies to all departments and agencies of the executive branch
effective July 31, 1965. On that date this Circular replaces Circular
No. A-44 of October 31, 1962, as revised.
2. Policy. The President has directed that each department and agency
head put into effect and assume direct supervision of a formal, organ-
ized cost reduction program. The President is interested in savings
for three principal reasons:
? To reduce the cost of Government;
? To finance new and needed programs; and
To offset increased costs for personnel and other resources.
The following policies will be observed in agency cost reduction
activities:
a. The head of each department and agency is as responsible for
efficiency and economy in the conduct of agency programs as he is for
program results.
b. Management at all levels in each agency is expected to under-
take vigorous and continued efforts to reduce costs by eliminating
nonessential activities and positions and by increasing productivity.
c. The heads of departments and agencies and their subordinates
will make every effort to meet new workload requirements through adjust-
ments in existing activities and procedures, and by improved manpower
control and utilization.
(No. A-44)
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d. Government business will be conducted in accordance with the
same exacting standards that apply to the most expertly. managed private
business.
e. Improved organization, more efficient methods and procedures,
use of labor-saving equipment, strengthened supervision, wise and
economical procurement, and other actions to reduce the cost of current
programs will be constantly sought so that available resources can be
most effectively utilized in meeting the Nation's urgent needs.
3-' Cost reduction plans and reports. Each department and agency
head will prepare an annual cost reduction plan with specific savings
goals. In preparing his plan he will make a systematic review of
agency programs from the standpoint of relative priorities and subject
major proposed expenditures to searching scrutiny in terms of cost and
benefits. Specific efforts should be planned to eliminate or cur-
tail low priority activities, seek new and less.costly approaches
to achievement of program objectives., and devise better solutions'
to management problems. Positive steps should be taken to encourage
innovation in the development and use of new techniques for increasing
productivity.
a. Goals. At the beginning.of each fiscal year each department
and agency, head will establish cost reduction goals for at least the
year just beginning and the following fiscal year. The goals will be
quantified to the extent possible and based on reasonable projections
of concrete actions contemplated and savings expected, but desirable
improvements or benefits which cannot be quantified in terms of dollar
savings may be included.
b. Reporting of goals. The head of each department and agency
will submit to the President, through the Director of the Bureau of
the Budget, by September 1 of each year, a report on the cost reduction
goals he has established for the current fiscal year and at least one
following year. The report will be submitted in triplicate and provide,
in accordance with the attached. guidelines and format (Attachments A
and B), a brief description of the actions contemplated, when they are
to be completed, and appropriate annual man-year and dollar savings
targets. If legislative action is required to achieve these goals,
this should be noted and a legislative proposal should be submitted,
in accordance with Bureau of the Budget Circular A-19, revised.
c. Reporting of progress. Each department and agency will send
to the President, through the Director of the Bureau of the Budget,
semi-annual progress reports showing the extent to which cost reduction
goals are being reached. The reports covering the first half of the
fiscal year and the entire fiscal year will be due on March 1 and
(No. A-44)
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September 1, respectively. They will be submitted in triplicate in
accordance with the attached guidelines and format (Attachments A and
B). Cost reduction goals and improvement actions may be updated in
the March 1 progress report. Savings resulting from actions taken in
the first half and in the entire fiscal year, respectively, will be
estimated for both the fiscal year reported on and the next fiscal
year. Savings will be in terms of dollars and man-years, as appro-
priate. The report will also show the nature of savings or benefits
and the proposed disposition of savings.
d. Definition of savings and other benefits.
(1) Savings. Savings generated and reported under this
program will be only those which result from new, improved, or in-
tensified management practices and actions or from the elimination
or curtailment of low priority' activities during the fiscal year
reported on. They are not to include reductions due to deferment of
programs or activities to.some future date. Savings are to be measur-
able and identifiable. They will be calculated using as a base the
level of expenditures or unit costs of the fiscal year immediately
preceding the current year, except where another base year has been
approved by the Director of the Bureau of the Budget. As a general
rule, savings should result in one or more of the following:
Reduced level of expenditures for a defined workload or
program
Increased production or more effective program perfozlnance
at no added cost
. Reduced requirements for additional funds
(2) Other benefits. Noteworthy management improvement actions
that do not result in measurable monetary savings should be reported
as "other benefits." Such benefits might be more prompt service, more
effective program results, or more equitable treatment of clientele.
4+. Use of savings. Since savings may constitute an additional
resource for other worthwhile work, recommended and actual use of
savings will be specified and reported by agencies. Recurring savings
and those projected for the budget year will be considered durin: the
budget review process. Recommended high-priority uses of savings will
be categorized as follows:
a. Use to finance increased costs, such as statutory pay increases.
b.- Apply to the production of more units of work.
(No. A-44)
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c. Apply to raise the quality of service or performance.
d. Use to finance some other approved program or activity of
the reporting agency.
e. Place in reserve, or apply to reducing the President's budget.
The need for application of savings to categories (a) through (d),
above, will be fully explained in the report.
5. Validation of savings. Savings will be measured using the tech-
niques appropriate to the particular circumstances. Care will be taken
to prevent double counting and to consider offsetting costs. All off-
setting costs applicable .to an individual savings action, whether in-
curred within or outside the reporting agency, will be deducted before
net savings are reported. Savings should be validated-by a review
performed independently from the claiming unit... Such validations will
be performed before data and reports are submitted to the Bureau of
the Budget and the President. The term "validation" means an inde-
pendent evaluation of the reasonableness of amounts reported as
accomplishment against goals through selective examination of reports,
records, and operations.. .
6. Central assistance for improving management.
a. The staff of the Bureau of the Budget is available-to advise
agencies in their management improvement and cost reduction programs
and to serve as a clearinghouse for exchanging information on techniques
and programs, from within and outside of the Government, that have
produced noteworthy results. To meet unusual problems where the agency
does not have the expertise or the financial resources to undertake
special management studies, assistance may be provided from the appro-
priation to the President for Expenses of Management Improvement.
b. Federal Executive Boards in major centers of Federal activity
outside of the Washington area will give specific attention to the ex-
change of information and cooperative efforts designed to improve
management and performance of Federal activities in the field.
c. The Bureau of the Budget, the Civil Service Commission, and
the departments and agencies have undertaken a systematic progra: of
agency management and manpower reviews. The schedule for these reviews
is developed by the Bureau of the Budget-and the reviews are carried
out jointly by staff of the Bureau, the Commission, and the agency
concerned. The reviews are made on a selective basis giving priority
(No. A-1+i+)
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attention to areas where the most significant problems and potential
savings exist. The results of these reviews are reported to the head
of each agency for immediate attention and such action as is neces-
sary.
E MM GORDON
Director
(No. A-44)
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ATTACHMENT A
Circular No. A-1-L
GUIDELINES FOR REPORTING COST REDUCTION GOALS AND ACCOMPLISH'?VNTS
(See paragraphs 3 and , Bureau of the Budget Circular A-
I. Categories for Goals and Semi-annual Prot ess Reporting
Cost reduction goals and accomplishments will be reported,by the head
of each department and agency under the following categories. Addi-
tional categories may be used if desirable, and some of those listed
here may be excluded if they do not fit.
A. Increased productivity and efficiency. Annual productivity goals
and progress in achieving them may be reported for the organization-as
a whole or for major organizational components. They may be expressed
in percentage increases in productivity or decreases in unit costs. All
improvement in productivity or efficiency should be translated into
specific dollar and manpower savings. Depending on the size of the
agency, they may be presented in aggregate or in terms of specific
projects.
B. Elimination of low priority activities; substitution of less costly
alternatives. This may include savings resulting from such actions as
the elimination of unessential programs or activities or reduction of
specific program levels (excluding reductions imposed externally by the
President's budget or appropriation actions) and the selection of an
alternative program or course of action from that originally approved
or in use.
C. Increased management and program effectiveness. The intended and
actual results or benefits of management improvement actions during the
current year for which specific and demonstrable savings are impossible
to calculate will be reported under this category.
II. Annual Goals
The statement of cost reduction goals, set by each department and agency
and submitted to the President through the Director of the Bureau of the
Budget by September 1 of each year, will contain these elements stated
as briefly as possible:
A. Narrative description
1. Goal. Describe each separate goal, listed by category as defined
in Section I above, including estimated dollar and man-year savint;s
or other benefits.
(No. A-1+4)
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2. Projects. Under each goal, list and provide a brief description
of the program, projects or actions designed to reach the goal,
together with a timetable of implementation. These will be
reported in terms of general programs, major projects or speci-
fic actions, as appropriate to the size of the reporting
department or agency.
Nature of savings or benefits. For each program, project or
action, describe the type of saving or benefit; indicate when
it is to be achieved, and indicate whether it is one-time or
recurring.
4. Disposition of saving:. Explain the proposed use of savings
in accordance with the criteria included in paragraph 4 of
Circular No. A-14+.
5. Problem areas. Note and explain any roadblocks in planning
or accomplishing the goal which require the assistance of the
Bureau of the Budget, the President, other agencies,, and/or
require new or revised legislation.
6. Innovation. Identify and describe steps to encourage innovation,
including specific actions, planned or underway, to develop and
use new management techniques. Where appropriate include eval-
uation of results.
B. Summary form. Recapitulate in the first five columns of the summary
form Attachment B) the essential information provided in the narrative.
The summary form will also be used for subsequent semi-annual reporting
of progress.
III. Semi-annual Progress Report
A. Narrative report. The semi-annual narrative progress reports will,
contain:
1. Any changes in the narrative description provided at the time
the cost reduction plans were submitted.
2. Changes in goals, but these should not ordinarily be reduced
unless the original plan was greatly overestimated. Any
slippages in goals should be indicated, together with the
reasons.
3. A description of major actions taken during the preceding six
months on each program, project or action listed in the plan.
(No. A-44)
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4. An explanation of the use proposed for any savings.
B. Summary form. The summary form (Attachment B) will contain:
1. Recapitulation of the programs, projects or actions by which
goals are to be reached, as specified in the annual plan and
in the narrative section of the report.
2. Estimate of savings in dollars and rran-years, or,other benefits
to result from action on each goal or project.
Proposed disposition of anticipated savings using the key
provided on the form (Attachment B), that is --
a. Use to finance increased costs, such as statutory pay
increases.
b. Apply to production of more units of work.
c. Apply to raise quality of service or performance.
d. Use to finance some other program or activity of the
reporting agency.
e. Place in reserve, or apply to reducing the President's
budget.
(No. A_14)
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SUMMARY REPORT
COST REDUCTION AND MhNAGU4ENT IMFROVr3MMENT PROGRAM
Departmet or Agency)
(Date~_.__
Goals and Programs, Projects,
or Actions To Achieve Them
(Take by title from the narrative
report)
Date in Reporting Yeai
man-years dollars
man Tdollars
-years -
Cy !
*-~ __NY ~* -I- B CY* 1 NY ~-?NY
A. Use to finance increased costs, such as pay increases.
B. Apply to production of more units of work.
C. Apply to raise quality of service or performance.
D. Use to finance some other approved program or activity.
E. Place in reserve, or apply to reducing President's budget.
as i
tmatiea tinrnr-.ai savings rrom wctions zo
CY - Current fiscal year
NY - Next fiscal year
BNY - Beyond next year
Other.
Beneft .s
Proposed Use of
Dollar Savings
(See Key)
*For the second of the semi-annual progress re.:orts the curr,?nt year
column will be the fiscal year ending on the previous June O.
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