MEMORANDUM
Revised, August 12, 2010
Subject:
Preliminary assessment of efficiency initiatives announced by Secretary of Defense
Gates on August 9, 2010
From:
Stephen Daggett, Specialist in Defense Policy and Budgets, 202 707-7642
CRS prepared this memorandum for distribution to more than one congressional office.
On August 9, 2010, Secretary of Defense Gates announced a number of efficiency initiatives intended to
contribute to a Defense Department effort to achieve about $100 billion of savings over the next five
years. The Defense Department’s intent is not to reduce the defense “top line” budget, but, rather, to apply
any savings to finance currently planned programs. Below, in a table format, is an order-of-magnitude
analysis of amounts of money currently spent in each of the major areas Secretary Gates identified for
savings. It suggests several points.
• The largest savings appear likely to come from a 30% reduction over three years in
funding for “service support contractors.” DOD’s overview of the FY2011 budget cites
plans to reduce the number of “support service contractors” from 39% of the workforce
in FY2010 to 26% in FY2014 by in-sourcing 33,400 positions.1 Using those figures, the
service support contractor workforce in FY2010 totals about 100,200. Annual reductions
of 10% would entail eliminating about 10,000 positions each year. Assuming $120,000
per position per year, and assuming the reductions are phased in at a steady rate over the
course of each year, savings would equal about $600 million in FY2011, $1.8 billion in
FY2011, $3.0 billion in FY2012, and $3.6 billion per year in subsequent years. As an
aside, the total workforce, by that calculus is about 257,000, so eliminating 30,000 jobs
would reduce the workforce by about 12%.
• The amount that might be saved from information technology (IT) consolidation is hard
to estimate, even roughly, with available information.
• Savings of about $2.4 billion a year might be obtained from cutting in half the increase
since 2000 in personnel in the Office of the Secretary of Defense (OSD), combatant
commands (COCOMs), and defense agencies. A Defense Business Board (DBB)
briefing of June 2010 shows an increase in those organizations of about 40,000
1 Department of Defense,
Overview: FY2011 Defense Budget, February 2010, on line at:
http://comptroller.defense.gov/defbudget/fy2011/FY2011_Budget_Request_Overview_Book.pdf. I am indebted to my colleague,
Amy Belasco, for pointing out these figures.
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personnel, from 200,000 in 2000 to 240,000 in 2010.2 Most of the increase, according to
the DBB, has been in defense agencies. A reasonable question is to what extent that
increase is due to the growth of intelligence spending since 2001.
• There appears to be some significant overlap in the proposals, so their impact may not be
cumulative. The reduction in contractor personnel in initiative 1, for example, may
overlap with reductions in OSD, COCOMs, and defense agencies in initiative 2.
Initiative 7 calls for an immediate 10% cut in intelligence related advisory and assistance
services, which might be a significant part of the number of support contractors cited in
initiative 1. The scrub of intelligence funding in initiative 7 may also overlap with
changes in the size of defense agencies that would be needed to achieve the bulk of
anticipated savings in initiative 2. A freeze and then reduction in OSD personnel would
clearly overlap with the elimination of the office of the Assistant Secretary of Defense for
Network Integration and Information (ASD NII) and the Business Transformation
Agency (BTA) in initiative 8. The elimination of the Joint Forces Command (JFCOM) in
initiative 8 also would clearly overlap with potential savings from initiative 2. Savings
from consolidating IT, recommended in initiative 4, might also overlap with initiatives 2
and 7.
• Aside from the overlaps, several of the initiatives involve only relatively small amounts,
including changes in OSD, the elimination of ASD NII, BTA, and JFCOM, the reduction
in reports, and the reduction in boards and commissions.
• Also, many functions of ASD NII, BTA, and JFCOM will, as Secretary Gates said, have
to be managed elsewhere, so net savings from those measures are very hard to estimate.
• Many of the potentially larger savings appear to involve scrubbing the recent very large
increases in intelligence spending. Much of the increase appears to have been through
increased use of contractors, which is a focus of scrutiny in the initiatives, and perhaps of
IT systems, another focus.
• Secretary Gates also said that he had “authorized each of the military departments to
consider consolidation or closure of excess bases and other facilities where appropriate.”
This is also a new initiative that the Defense Department has not discussed earlier.
The description of each initiative in the table below is taken verbatim from a Department of Defense fact
sheet entitled “Efficiencies Initiatives Key Points.”3
2 Available on line at: http://dbb.defense.gov/MeetingFiles/presented.pdf, accessed August 11, 2010.
3 Available on line at: https://dap.dau.mil/policy/Documents/Policy/Efficiencies%20Key%20Points.pdf, accessed August 11,
2010.
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Comments on Department of Defense Efficiency Initiatives, August 9, 2010
(revised, August 12, 2010)
Initiative (wording from DOD fact sheet)
Comment
First, SECDEF directed a reduction of funding for
DOD budget overview of February 2010 implies a current
support contractors by 10% a year for each of the next
support service contractor workforce of 100,200.
three years.
Assuming $120K per position, phasing in elimination of
10,000 positions per year would save about $600 million
in FY2011, $1.8 billion in FY2012, $3.0 billion in FY2013,
and $3.6 billion per year in subsequent years.
This appears to be the largest source of savings among
those proposed, but also may overlap with other
measures.
Second, to address the personnel growth in OSD, the
According to the DDB briefing, p. 20, OSD = 2,636
defense agencies, and COCOM staffs, SECDEF has
personnel in FY2010. Adding part-time reserves,
directed a freeze in the number of OSD, defense
contractors, etc. total is 5,100
agencies and COCOM billets at the FY10 levels for next
three years.
• DOD Defense-Wide Budget Justification book (DW
J-book) shows: OSD Budget = $2,050 million
• With regard to in-sourcing, no more full-time OSD
FY2010; $2,245 million FY2011; 2,043 civilian + 408
positions will be created after FY10 to replace
active + 39 reserve milpers FY2010; 2,307 civilian +
contractors except for critical needs.
402 active + 39 reserve FY2011.
• These measures are part of a comprehensive re-
• DW J-book also shows $413 million for services &
baselining of OSD, defense agency and COCOM
studies in FY2010; $544 in million FY2011; amount
staffing and organization. Starting essentially from
for “other contracts” = $124 million FY2010, $399
scratch, we will conduct a clean sheet review to
million FY2011. These may pay for contractors.
determine what our people should be doing,
where, and at what level of rank in light of this
OSD + COCOM + Defense Agencies = 240,000
department’s most urgent priorities by November
personnel in FY2010 (DBB brfg p. 17)
1st.
• OSD total too smal to show up on the graph
• As a result of the re-baselining, a minimum
• Largest number is in Defense Agencies – especial y
reduction of 50% of total growth in billets since
civilians
2000. This reduction in civilian senior executive
and general and flag officer billets shall be achieved
• Next largest number is COCOM military
over two years.
According to DBB slides, p. 17, increase in OSD +
COCOMS + Defense Agencies since FY2000 = about
40,000. A 50% reduction would = about 20,000. If savings
= $120K per billet, total = $2.4 billion per year.
Third, SECDEF directed a freeze at FY10 levels on the
Gates briefing: “I expect this effort to recommend cutting
number of civilian senior executives, general and flag
at least 50 general and flag-officer positions and 150 senior
officer, and PAS positions. By November 1st, we will
civilian executive positions over the next two years. These
also assess the number and locations of senior positions reductions would represent 50 percent of the total
as well as the overhead and accoutrements that go with
growth in senior military and civilian positions since
them.
2000.”
200 positions at $150K per = $30 million
Fourth, to achieve greater benefits in cost and efficiency For comparison: IBM points to significant savings due to
through economies of scale, SECDEF directed the
IT consolidation of more than 50% – from 7% of revenue
consolidation of our IT infrastructure facilities. This
to 3.4% over 1998-2007 (fact sheet distributed by IBM
action will allow the increased use by the Department
executives at a private meeting, May 2010). For a $25
of common functions and improve our ability to defend
billion a year company savings of 3.6% = $900 million.
defense networks against growing cyber threats.
Baseline for potential savings in DOD unknown.
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Fifth, to combat the enormous amounts of taskings for
Gates briefing: 200 ful time and up to 700 total
reports and studies both from Congress and from OSD, contractors work on reports. Assume $120 K per
SECDEF directed starting now:
person, cost = from $24 million to no more than $84
million for contractors to prepare reports. Additional
• Freeze in the number of all DoD-required
amounts for reports prepared internal y not available.
oversight reports;
• Immediate cut in the dollars allocated to advisory
studies by 25%;
• Track and publish the actual cost of preparation of
each reports and studies prepared by DoD in the
front of each document; and
• A comprehensive review of all oversight reports
and use the results to reduce the volume
generated internally while engaging the Congress
on ways to meet their needs while working
together to reduce the number of reports by
October 1st.
Sixth, al told, OSD funds 65 boards and commissions at Amount of savings = some percentage of $75 million.
an annual cost of $75 million. Therefore, SECDEF
directed a review of all outside boards and
commissions, for the purpose of
• Eliminating those no longer needed;
• Focusing the efforts of those that continue to be
relevant;
• Cutting overall funding available for studies tasked
by remaining boards and commissions by 25% in
FY11.
Seventh, SECDEF directed a zero-based review of al of
Announced National Intelligence Program = $49.8 billion
the department’s intelligence missions, organizations,
FY2009; $47.5 billion FY2008; $43.5 billion FY2007;
relationships, and contracts with the goal to eliminate
needless duplication to be completed by November 1st. Overall intell estimated at $75 billion today by recent
In addition, SECDEF directed an immediate 10%
articles in the Washington Post and by others;
reduction in funding for advisory and assistance
A briefing by an official in the Office of the Director of
contractors in this area and a freeze of the number of
National Intelligence (ODNI) implied a total intell budget
senior executive positions in defense intelligence
of about $60 billion in FY2007 – it said $40 billion was for
organizations.
contractors, which amounted to about 70% of the total;
Note: Overall intell budget announced as $26.6 billion in
FY1997, $26.7 billion in FY1998
DOD has not provided a total for advisory and assistance
contracts in intelligence. OMB “Object Classification”
report for FY2011 shows total of $15.9 billion for
advisory and assistance services in FY2010, $12.7billion in
FY2011
Eighth, in addition to flattening and trimming structures,
SECDEF over the next 6-12 months will eliminate 2
organizations and recommend the closure of another
that perform duplicative functions and/or outlived their
original purpose.
• Elimination of the Assistant Secretary of Defense
Networks Integration and Information, and J6
• ASD NII: $115.7 million FY2010; $95.8 million
function, which deal with enterprise IT and
FY2010 (DW O&M J-Book, p. 778 pdf)
hardware issues. Their essential missions will be
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performed by other organizations. A re-fashioned
Defense Information Systems Agency will perform
the department’s CIO function.
• Elimination of the Business Transformation Agency Gates briefing: BTA = $340 million budget and 360 people
(BTA), which performs day-to-day oversight of
DW O&M J-Book differs:
individual acquisition programs, a function largely
performed by a number of other organizations.
• $116.6 million FY2010, $143.4 million FY2011;
BTA’s essential responsibilities will be shifted to
the DCMO.
• 255 civilian + 7 military FY2010; 283 civilian + 7
military FY2011
• Recommend the Closure of Joint Forces Command
(JFCOM) which was established to infuse jointness
Gates briefing: JFCOM = $240 million budget; 2,800
into everything the military does, especially the
military and civilian personnel; 3,000 contractors
training and providing of forces for operations.
JFCOM fact sheet differs on budget, close on personnel
Overtime it has created an unneeded extra layer
and contractors
and step in the force management process.
JFCOM’s force management and sourcing functions •
$703 million budget
will be assigned to the Joint Staff while the
•
remaining responsibilities will be evaluated and
1,491 military personnel
those determined to be essential will be re-
• 1,533 civilian
assigned to other entities.
• 3,300 contractor
• 6,324 total
• As a result of closing or consolidating these three
organizations, a number of civilian employees and
(http://www.jfcom.mil/about/economic.htm)
contractors will no longer work in the
Department.