Original Date: 08/07/1995
Revision Date: 01/18/2007
Information : Automated Budget Control System
Lockheed Martin Tactical Aircraft Systems (LMTAS) has established an automated Budget Control System to increase the speed and efficiency with which high-volume procurements are initiated and approved. This new system, in use since 1994, has been effective not only in streamlining the purchase order process but also in increasing accountability for those purchases made.
The goal of the new system is to maintain control of all procurements at the part number level. When purchase orders are placed and entered into the system, the estimated price is compared with pre-established target costs originally made from customer negotiations. Cost data for the purchase order is accessed and prorated to the individual part number to obtain unit cost data. This value is then used to classify the item as a high dollar or low dollar procurement. If the purchase order is classified as a high-dollar procurement (more than $500), acceptance is granted if the unit cost falls under the preset Budget Bank Target quantities. If the purchase order is classified as a low-dollar procurement (less than $500), acceptance is granted if the unit cost falls under the modified average unit cost. Currently, the modified average unit cost is calculated as 130% of the average unit cost.
Once determined to the preestablished target costs, the purchase order is automatically accepted without the buyer’s concurrence. However, if the purchase order is rejected, it is forwarded to the maintenance budget control analyst, who determines the best course of action. Usually, if acceptance of the purchase order must be allowed, the buyer will change the quantity and corresponding unit price or the purchase order rejection will be overridden.
There have been several benefits gained by introduction of the new automated Budget Control System. Budget issues are resolved much more quickly, substantially reducing procurement cycle time. Predetermined target data has aided buyer negotiations with the supplier and allows for quick identification of potential procurements exceeding budget limitations. Additionally, Procurement’s awareness of controls provides for greater accountability of quantities ordered.
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