The reviews of Secretary Chuck Hagel’s rollout of the FY2015 defense budget are mixed, at best. Some commentaries have praised the Secretary and the Department of Defense (DoD) for seeking to make painful and politically sensitive cuts to cherished weapons systems, reducing the size of both the Active and Reserve Components, asking for a new round of base closures and trying to limit the growth in military compensation. Others criticize the proposed budget for, among other items, cutting too deep, unfairly targeting service personnel and military retirees and relying on the fantasy of increases in future budgets. Most observers believe it will be very difficult to get many of these proposed cost cutting measures through Congress and with good reason. Congress couldn’t even stick to the proposed trimming of the accrual rate on military retirement that was part of the Ryan-Murray plan.
Given Secretary Hagel’s determination to address so many politically sensitive issues and his willingness to confront Congress around the subject of sequestration, it is remarkable that one potential solution to the problem of the mismatch between budget and forces was never mentioned. I am speaking of cutting the laws, regulations and practices associated with the defense acquisition system. In general, government rules and regulations add to the cost of doing business. Some estimates put the total cost at well over $1 trillion. The situation is even worse for the defense acquisition system. There are studies which suggest that the regulatory burden alone adds 20 percent to the cost of most defense items. Since DoD spends some $400 billion a year on goods and services, the burden of rules and regulations would be $80 billion. The actual cost is even higher because these estimates do not count all the people the Pentagon has to hire to write, oversee, maintain and audit all these rules and regulations.
The Pentagon probably could save billions by taking just a few steps to reduce the regulatory burden. It could end the requirement that contractors adhere to its unique accounting standards and go with the generally accepted accounting practices used by the rest of the civilized world. Such a step also would make it easier for smaller, commercial companies without the means to manage two sets of books to enter the defense marketplace. The Pentagon could open up more of its logistics and sustainment work to competition between the public and private sectors. It could make greater use of commercial best practices in supply chain management and strategic sourcing the way that companies such as Apple, Walmart and Boeing do.
The response one often hears to proposals for reducing the burden on defense imposed by unique regulations and rules is that most of these are the result of laws passed by Congress. So what! If Secretary Hagel is willing to confront Congress on hot button topics such as military pay and benefits, base closure and reductions in the National Guard, why not also address relief from burdensome and costly rules and regulations? In fact, Representative Mac Thornberry, a leading contender to be the Chairman of the House Armed Services Committee, already has an effort underway to reform defense acquisition regulations. The least Secretary Hagel could have done was to get on the bandwagon.
Another criticism is that it would take too long to make the necessary changes in laws and regulations. But the proposed force structure cuts and headquarters reductions the Pentagon already has in the works will take until 2019. In fact, if as reported Secretary Hagel intends to submit along with the FY2014 budget a list of additional force structure cuts that he would have to make were sequestration to continue in effect, he could readily complement this with an alternative proposal that identified all the laws and regulations he would seek to have amended or abolished. Congress would have a choice, assuming it did not want to abolish sequestration and was unwilling to cut spending elsewhere or raise taxes: see the U.S. military go hollow or immediately vote to cut the burden of laws and regulations.
It is unconscionable for the Secretary of Defense to ask members of the Armed Forces, present and past, to take a significant hit in pay and benefits without first exhausting all other options. Secretary Hagel should make cutting defense overhead costs, particularly burdensome acquisitions laws and regulations a top priority.
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