The Defense Finance Accounting Service (DFAS)

The Defense Finance and Accounting Service is an agency within the United States Department of Defense. DFAS is responsible for contract pay. Its pricing policy is nonlinear and its purchasing decisions are inefficient. This article will examine the problems that DFAS faces. It will also highlight the ways that DFAS can be improved. This article will provide some information about how DFAS can improve its purchasing decisions. It will help you make a better buying decision.
DFAS is responsible for contract pay
The Defense Finance and Accounting Service (DFAS) Columbus Center disburses $85 billion in contracts annually to defense contractors. Since the beginning of the 1990s, the DFAS has faced unacceptably large backlogs in contract payment, making timely payment of contractors a major concern. To combat this problem, DFAS developed a plan and hosted the first Government-Industry Contract Administration and Contract Payment Summit.
DFAS specializes in handling government-wide accounting for the military. The organization also performs accounting services for the Department of Veterans Affairs and the Department of Health and Human Services. In addition to paying contractors, DFAS supports electronic government initiatives. It is responsible for the financial management of the federal government’s budget and all DoD personnel and major contractors. Its customers include the Executive Office of the President, Department of Health and Human Services, Department of Veterans Affairs, and the U.S. Agency for Global Media.
DFAS’s cost rigidity
The current rules for Defense Working Capital Fund transfer pricing prescribe expected average cost transfer pricing. The Defense Finance and Accounting Service (DFAS) has significant fixed costs, which complicates its price-setting. In addition, DFAS revenues and costs are sensitive to the ebb and flow of customer demand. Therefore, a nonlinear pricing strategy would be more appropriate. This article examines some of the implications for DFAS’s cost structure.
The first area the research team examined was DFAS’s pricing policy. It is supposed to recover its operating costs through fees charged to its customers, but there was a disconnection between observed cost patterns and DWCF pricing rules. DFAS revenues are based on the number of “work units” performed, and prices per work unit are set two years in advance. The prices are supposed to capture fixed costs and more variable expenses and result in revenues equal to costs, at least in the short term.
Its pricing policy is nonlinear
The Department of Defense’s Defense Working Capital Fund (DWCF) has a prescriptive pricing policy based on expected average cost transfer. This policy is not suited to the Defense Finance Accounting Service, which has considerable fixed costs. In contrast, the DWCF pricing rules would be more consistent with nonlinear pricing, which distributes fixed costs among customers proportionately to their customer demand levels and revenues.
The Department of Defense’s Defense Finance and Accounting Service is responsible for overseeing payments to DoD employees, vendors, and contractors. The service also provides business intelligence and financial information to decision-makers within the Department of Defense. To date, the service has served more than 100 million customers, including the Department of Defense, the Executive Office of the President, the Department of Health and Human Services, and the U.S. Agency for Global Media.
Its inefficient purchasing decisions
The Defense Finance Accounting Service (DFAS) is facing a serious problem with inefficient purchasing decisions. The Department of Defense has found that over a quarter of its purchases are inefficient. This problem has led the DFAS to change its purchasing policies. To address this issue, the DFAS set up a Reconciliation Project Office. This office collaborates with the Department of Defense’s contracting offices, funding stations, and military departments. The DFAS is trying to reduce the cost of the contracts and improve reporting accuracy.