Challenges in Defense Working Capital Fund Pricing: Analysis of the Defense Finance and Accounting Service

The Defense Finance and Accounting Service (DFAS) provides finance and accounting services to customers within the Department of Defense. The authors examine the DFAS pricing structure and its impact on customer demand, the agency’s workload, and equity in pricing. The authors found that the DFAS’s uniform pricing for finance outputs creates cross-customer subsidization, suggesting a need for nonlinear, customer-specific pricing. The authors also examine whether any negative effects arose from the October 1999 switch from unit billing to hourly billing for DFAS accounting work and found no significant evidence that they had.