An Evaluation of the Effectiveness of the Navy Working Capital Fund (NWCF) Unit Cost Ratio
Abstract
The Navy Working Capital Fund - Supply Management (NWCF-SM) business area attempts to maintain a Unit Cost Ratio (UCR) of 1.0 or below to ensure cash solvency. Calculated by dividing total obligations by net sales, a UCR of less than 1.0 means that sales revenue exceeds total operating costs. This thesis uses eight years of financial data to assess the usefulness of the UCR as a diagnostic metric to the financial health of NWCF-SM, considering more fiscal years in the UCR reduces the metric's variation due to single-year aberrations, allowing for greater short-term flexibility in NWCF-SM's operations. Non-forecastable items resulted in a -$953.58 million net performance, do not enable full cost recovery, and force NWCF-SM management to forego procurements of future needs or higher priority requirements. This analysis estimates that $6.6 billion in requirements were backlogged between FY15 and FY22 due to a 1.6-year lead time on wholesale items and NWCF-SMs inability to execute forecasting purchases under UCR restrictions. PBL contracts only recovered about two cents for every dollar obligated. The resulting UCR from removing PBLs provides a more proper reflection of the fund performance related to solvency.
Document Details
- Document Type
- Technical Report
- Publication Date
- Dec 01, 2023
- Accession Number
- AD1225347
Entities
People
- Mitchell T. Hennessy
- Tyler J. Dear
Organizations
- Naval Postgraduate School