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Advantages of DWCF Pricing for DFAS

• By rewarding customers with lower prices when they switch to automated approaches, DWCF pricing encourages customers to limit their burden on DFAS.
• DWCF pricing encourages ongoing cost-related dialog both within DFAS and between DFAS and its customers.
• Being a DWCF entity provides greater managerial flexibility to DFAS than if it were solely dependent on direct appropriations. For example, it can meet increased demands without requesting additional appropriations and can continue to operate during a budget sequester.

Disadvantages of DWCF Pricing for DFAS

• The DWCF structure appears to impose greater cost accounting burden than would a direct appropriation mechanism, because DFAS has to attribute its costs to specific outputs.
• DFAS customers may be developing skepticism about the actual consequences of their cost-saving steps, suspecting that DFAS simply recovers the costs in other ways.

Additional Options

• An aggressive reform that would change DFAS's incentive structure considerably would be to modify DoD policy to allow other governmental or private-sector providers to compete with DFAS for DoD business.
• DoD policy could allow the services themselves to create internal, within-service competition with DFAS. However, in light of DFAS's fixed costs, the current pricing structure cannot accommodate DFAS facing such competition.