Gates Efficiency Proposals Don’t Save Much Money

Yesterday, Secretary of Defense Robert Gates held a news conference to lay out his much anticipated plans to wring costs out of the Defense Department’s overhead activities as part of an effort to find $100 billion of savings to be applied to investments in future capabilities. He is freezing senior appointments, reducing the number of boards and internal reports, cutting funding for such activities, eliminating duplication in defense intelligence activities, calling for greater commonality in IT systems and eliminating several defense organizations such as the office of the Assistant Secretary of Defense for Networks and Information Integration, part of the J-6 section, the Defense Transformation Agency and the Joint Forces Command. Possibly the most innovative step Gates proposed was that every new initiative, program or ceremony large or small come with a price tag.

Secretary Gates called yesterday’s announcement a down payment on his effort to reform DoD. This is good because frankly his proposals are rather modest. Freezing senior civilian positions after more than a decade in which their numbers have mushroomed is not going to save much money. Using the Secretary’s own figures, cutting reports, boards and defense organizations will save, at best, $1 billion. This piddling amount will only be realized if everyone in the named organizations were fired and the gates of the facilities padlocked. But this will not be the case, as the Secretary admitted. Many of the functions of those star-crossed organizations will be transferred to other parts of DoD, requiring people to perform them. So, at best the savings will only be a small fraction of their total budgets.

The only way to save real money is to close offices, stop performing their functions and show the people employed there the door. One of the problems with past efforts to save money through base closure and realignment is that the functions performed on the facilities being closed were moved to other facilities along with the personnel slots to perform them. People either moved to the new facility and organization or new people were hired. Because of the increase in people and workload, the bases receiving these functions built additional facilities. Just look at all the building going on in places like Fort Belvoir, Virginia, and Huntsville, Alabama, both of which are experiencing major influxes of people from facilities being closed as a result of the last round of base closures. So in the end, very little will be saved.

In response to a reporter’s question, the Secretary admitted that his effort to save money by insourcing the work of some 30,000 private contractors was not saving money. This is surprising since senior officials in the Secretary’s office and elsewhere in DoD had claimed that a government employee was 40 percent cheaper than a contractor. This assertion had been used by a number of DoD organizations to take logistics and sustainment work away from private contractors who had been performing well and bring it back inside the organic defense industrial base. But the Secretary said in his press conference that the Department had come to the conclusion that the only way to reduce costs of contractor support was by cutting dollars. So much for the claim by some in DoD that insourcing will reduce costs. The plan now is not to make sustainment more efficient through insourcing but simply to spend less on it and take the resulting degradation in availability and output.