In a lengthy article in The Washington Post comes he revelation that the Pentagon quashed an internal study that exposed $125 billion in administrative waste.
The Pentagon was concerned that if the report, which it commissioned itself from the Defense Business Board, a federal advisory panel of corporate executives, and consultants from McKinsey and Company, were made public, Congress would slash the defense budget. The report, issued in January 2015, would not have required layoffs of civil servants or reductions in military personnel, but rather cut the budget through attrition and early retirements, as well as finding lower-priced contractors.
The report’s data showed 1,014,000 contractors, civilians and uniformed personnel worked for the Pentagon to support 1.3 million troops on active duty.
The study recommended using the saved $125 billion for troops and modernizing weapons such as the nuclear arsenal.
Deputy Defense Secretary Robert O. Work, the Pentagon’s second-highest-ranking official, ordered the study from the Defense Business Board. But after the study was completed, Work decided to ignore it, deriding the $125 billion savings proposal as “unrealistic … There is this meme that we’re some bloated, giant organization. Although there is a little bit of truth in that . . . I think it vastly overstates what’s really going on.”
Work added that members of Congress hate to reduce or eliminate federal civil service jobs in their districts. He stated, “We will never be as efficient as a commercial organization. We’re the largest bureaucracy in the world. There’s going to be some inherent inefficiencies in that.”
McKinsey’s workers divided the Pentagon’s into five categories: human resources; health-care management; supply chain and logistics; acquisition and procurement; and financial-flow management. McKinsey between $75 billion and $100 billion a year, or between 15 and 20 percent of the Pentagon’s annual expenses, was wasted.
McKinsey had to report to David Tillotson III, the Pentagon’s acting deputy chief management officer.
On Jan. 22, 2015, the full board held its quarterly public meeting, only to hear that the report stated, “We are spending a lot more money than we thought,” and that Defense Department was spending $134 billion a year on business operations; 457,000 full-time employees were assigned to logistics or supply-chain jobs. The Pentagon’s purchasing bureaucracy? 207,000 full-time workers. Over 192,000 people worked in property management. Roughly 84,000 people worked in human-resources.
The Post writes of Work’s response:
He singled out a page in the report. Titled “Warfighter Currency,” it showed how saving $125 billion could be redirected to boost combat power. The money could cover the operational costs for 50 Army brigades, or 3,000 F-35 Joint Strike Fighters for the Air Force, or 10 aircraft-carrier strike groups for the Navy.
“This is what scares me,” he said, according to the two people present. Work explained he was worried Congress might see it as an invitation to strip $125 billion from the defense budget and spend it somewhere else.
McKinsey also found that 199,661 full-time contractors worked for the Army, with an average cost of $189,188; the Navy, 197,093 contractors, $170,865; the Air Force, 122,470 contractors, $186,142.
Frank Kendall III, the Pentagon’s chief weapons-buyer, accused the board of making up numbers, saying the $125 billion figure was “essentially a ballpark, made-up number.” He told Work, “If the impression that’s created is that we’ve got a bunch of money lying around and we’re being lazy and we’re not doing anything to save money, then it’s harder to justify getting budgets that we need.”
Tillotson, the Pentagon’s acting deputy chief management officer, echoed, “They, perhaps, underestimated the degree of difficulty we have in doing something that in the commercial sector would seem to be very easy to do.”