In a recent speech before the Veterans of Foreign Wars (VFW), Secretary of Defense Chuck Hagel provided a detailed picture of how he hopes to deal with the impending train wreck for his department due to sequestration. Warning that “we cannot repeat the mistakes of the past” that led to readiness crises and a hollow military, the Secretary reiterated many of the cost cutting ideas he has previously proposed: reducing the size of staffs and cutting back on so-called back office operations, eliminating excess infrastructure and finding ways of operating more efficiently and affordably. The only somewhat new item he added to the list was a call to deal with the “unsustainable” growth in personnel costs.
The problem is that Hagel is repeating the most serious mistakes of the past. His first mistake is to accept the notion that his department has been aggressively cutting costs and improving efficiencies. The Secretary declared that “for several years we have been paring back overhead, making our operations more effective, and putting more emphasis and focus on deeper accountability and more savings in all of our departments, and in particular in our acquisition and procurement programs. ”
Sorry Mr. Secretary, but that just is not true. With respect to paring back overhead, the size of DoD staffs has grown continuously for more than a decade, despite efforts by his predecessor to cut them. The initiative taken by Secretary Gates in 2010 to eliminate Joint Forces Command resulted in virtually no cost savings because almost all the people were moved to other positions. In addition, policy decisions by the White House to expand the definition of activities that were inherently governmental in nature and for DoD elements to take on greater responsibility for the management of large, complex acquisition programs (for example, most recently the Navy-Marine Corps NextGen Enterprise Network) have led to an expansion of government staffs.
With respect to the assertion that there have been savings in acquisition and procurement programs I can only ask where’s the evidence? DoD’s acquisition reform initiative, Better Buying Power, has resulted in more oversight and expanded reporting requirements which increase the costs to both government and business. So too has the robot-like emphasis by AT&L on competition. Such savings as may have been realized were achieved largely by dumbing down requirements and selecting less capable but cheaper contractors. Moreover, the revised version of Better Buying Power actually deleted the directive to eliminate requirements imposed on industry where costs outweigh benefits.
The second mistake is to accept the idea, in the Secretary’s own words, that “DoD will not be able to meet its budgetary savings requirements just through more efficient operations and headquarters reductions.” Hagel apparently has no idea how much money is tied up in the red tape that weighs down the acquisition system. The cost of regulations alone is estimated to be upwards of 20 percent of the $400 billion that the Pentagon spends on goods and services every year. Cutting this in half would save nearly as much as is being lost to sequestration. As former Deputy Secretary of Defense John Hamre recently opined:
“We have had an accretion of laws, regulations, reporting requirements, and mandated procedures that are choking the system. The contract to send a man to the Moon and bring him back safely was written on a single sheet of paper. Now the system is choking on procedures that are sapping energy and enormous sums of money. Fully a third of our procurement dollars are going to “overhead,” much of it dictated by the choking layers of redundant and competitive overseers.”
The third mistake is to take refuge in the idea that DoD is such a unique entity that sound management practices from business cannot be applied to it. The Secretary makes a distinction that is both false and demeaning when he stated in his VFW speech that “DoD is not a corporation, and it cannot be run like one. The costs of our decisions are measured not in how they affect the financial bottom line, but in how they affect human lives.” Defense companies are in some ways just as responsible for the lives of America’s service men and women as is the Pentagon. Moreover, hundreds of contractors have died in Iraq and Afghanistan. But these same companies have managed to shed people and infrastructure, improve their processes and reduce their costs while simultaneously providing products and services to the warfighters. If they can do this, so too can the Pentagon.
The biggest mistake Secretary Hagel is making is not being sufficiently bold in his efforts to reform DoD. With respect, a 20 percent cut to DoD staffs by 2019 is meaningless. A 50 percent cut in regulations weighing down the acquisition system, now that would be bold.
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