The HASC chairman’s proposed reforms would roll back consolidations that have been saving money for decades.
What’s the first thing parents do when they want good behavior from a teenager? Withhold or reduce their allowance, right? House Armed Services Committee chair Rep. Mac Thornberry, who just introduced a much-ballyhooed proposal to save money by eliminating some offices that cut across the military services, is trying the same thing — but backwards. First, give the teenager an unprecedented raise, then ask them to behave.
The outcome of this latest effort at management reform will be the same fiscal failure he and most Secretaries of Defense have encountered when they try to wrangle Pentagon inefficiency to the floor. It will fail because it aims at the wrong target and because the rapidly growing defense budget creates no incentive for management reform.
The Thornberry effort is already sinking. Rep. Adam Smith, the ranking Democrat on the House Committee, has already warned that the Thornberry bill would eliminate essential management capabilities that are tied to operational capability. And former Pentagon management official Peter Levine says the savings from eliminating smaller central management offices would be insignificant.
Levine is right. I have watched this phony management savings waltz for decades. It always takes the same form: a senior official (usually a Defense Secretary like Bob Gates or Leon Panetta) promises savings through management reforms, usually in functions the Secretary controls, sometimes in headquarters for the services. The numbers and rhetoric are dramatic. But the numbers are a WAG that is never realized. They aim at the wrong target and, as long as the money keeps flowing, there is no incentive for the services to behave.
And it is the services – the Army, Navy, Air Force, and Marines – that matter here, not the Office of the Secretary of Defense or so-called “defense-wide” programs and activities. Most of the DoD management is in the services. Still, as a diversion, the services will always argue that the savings are over there, on the other side, in those pesky cross-defense management functions.
So Thornberry is actually playing the services’ game here. He wants to cut back the Defense Logistics Agency, which centralizes logistic management for the services; the Washington Headquarters Service that manages the Pentagon; the Defense Finance and Accounting Services which tries to centralize financial management; and the Defense Information Systems Agency, which does the same for information systems. And he would eliminate several smaller offices that help communities adjusting to base closures, manage test resources, and handle some human-resources issues.
The services would love to divide up some of these larger functions among themselves, rolling back consolidation, regaining funds they once controlled —and recreating the management inefficiencies that led to centralization in the first place.
This is not the first time the defense community has hosted this phony savings rodeo. Back in 1997, participating in the Quadrennial Defense Review at the Pentagon, I had the opportunity to witness a previous assault on cross-defense activities. The Secretary’s planning office brought in a stack of slides on these programs, which the service chiefs argued were eating too much of the defense budget and should be cut back.
But when the rubber hit the road, it turned out that these pesky defense-wide activities included some major rice bowls that mattered, even to the services. Well more than half the defense-wide funds went to important programs — programs Thornberry has also excluded from his proposal. This included a $60 billion health care program that handled benefits (at great cost) for all service members and retirees. Oops. And missile defense, which turned out to matter to the Department’s senior leaders. And significant intelligence activities – can’t go there. And special operations capabilities – absolutely core to what the services do in the modern era. Oops, again.
These activities eat well more than half of the defense-wide funds. It’s the little stuff that’s left, plus those centralized information, logistics, and financial functions. It was disappointing to the services to learn this reality in 1997; it remains disappointing today.
Thornberry is basically weighing in on the side of the services in this decades-old effort to claw back funding and authority from the Secretary and defense-wide agencies.
There is no doubt that management savings can be had at DoD. But this is not where they are. The Defense Business Board concluded in 2010 that overhead at DoD was 42 percent of the overall defense budget. Moreover, 70 percent of overhead spending was in the services, not in cross-defense activities. The Congressional Budget Office estimated in 1997 that 60 percent of the overhead spending at DoD was not combat or combat support activity, but central management. In the services, according to the DBB, this meant education, recruiting, base operations, personnel, and contracting management, among many activities.
Much of this work is done by civil servants – some 700,000 who work for the Department, 75 percent of whom work for the services. In addition, the DBB concluded, more than 300,000 people in uniform were doing work that was “not inherently governmental.” And DoD was employing more than 600,000 individual contractors, many of whom were also doing management functions, most of them in the services.
The Defense Business Board documented this in 2010; I did so in 2012. But precious little has changed and the budget just keeps growing. Thornberry is not producing savings; his bill is a fly swat at the problem; it even misses the fly. Cutting back the agencies as he as proposed would save little money, all of which would be returned to the services, in any case, along with separate service authorities over these activities.
The Defense Department could produce the forces the nation requires, whatever these are, at substantially less cost than current budgets. The funds to do so could be had, not by step-level increases in the defense budget, but by putting the overhead budgets under scrutiny and tight budget discipline. It is not clear Thornberry and his colleagues want to take on that real management challenge.