Defense Issues: Volume 12, Number 42-- Managing the Pressures to Cut With fewer and fewer veterans and champions of a strong national defense in Congress, DoD must be prepared to face increasingly stronger challenges to reduce costs and improve efficiency.
Volume 12, Number 42
Managing the Pressures to Cut
Prepared remarks by Alice C. Maroni, principal deputy undersecretary of defense (comptroller), to the Defense Agencies Comptrollers Conference, Wintergreen, Va., July 8, 1997.
Thank you. ... I am delighted to be here to help launch this important conference, which comes at a time of tremendous pressure and opportunity for the defense agencies represented by all of you.
In my remarks tonight I would like to talk about where we are going as a department. First, I would like to focus on the budgetary and political climate in which our department will be operating for the foreseeable future. Then, I want to suggest some key actions that we need to take to respond to these challenges. And "we" means all the DoD organizations whose primary mission is support for our fighting forces. I mean defense agencies, headquarters staffs and OSD [Office of the Secretary of Defense]. I want to make clear that most of the challenges facing the defense agencies also confront other support organizations.
Let me begin by highlighting the budget and political climate in which our department will be operating. I know everyone in this room has been involved in the numerous departmentwide reviews of defense infrastructure. I am reminded of the pilot who told the passengers in flight, "Ladies and gentlemen, I have good news and bad news. The good news is that we have a tailwind of 110 miles per hour. The bad news is I have no idea where we're going." The truth is that we know we're going to do things differently and, for the foreseeable future, the Department of Defense will be operating under very demanding and sometimes conflicting pressures.
With respect to our budget, we are being whipsawed between the defense hawks and the deficit hawks. We were very lucky in the budget agreement. Deeper budget reductions were spared partly by the remarkably favorable economic assumptions underlying projected government revenues and expenditures. The bipartisan budget agreement provides for a balanced budget by 2002 without cutting defense spending below levels called for by either congressional Republicans or the White House.
Of course, those economic assumptions may prove to be faulty, plus other developments can cause DoD's good fortune to be short-lived. I believe that the deficit hawks will carry more influence than defense hawks in the years ahead. It has taken years, but finally balancing the federal budget has become the prevailing ideology of our national government.
Even if the DoD top line remains as favorable as it now appears, we who are part of the DoD support structure should expect to be under tremendous pressure to streamline, reform and reduce costs. It is not a question of our top line. It is a question of the funding mix. We are going to spend more for weapons modernization. We need to spend less on infrastructure.
A major source of pressure this year could come from legislative mandates like the Defense Reform Act of 1997, which is part of the House version of the FY [fiscal year] 1998 defense authorization bill. Among other things, the act requires deep reductions in the DoD acquisition work force and in our department's management headquarters and related support staffs. The act also includes several provisions aimed at specific defense agencies.
Pressure on the DoD support structure will be especially intense if Congress remains intent on retaining legislative floors under active duty and reserve military end strength. DoD leaders will continue to work for removal of these floors. But if we remain prohibited from carrying out planned military personnel reductions, we will need to look elsewhere for savings to fund weapons modernization and other requirements.
Pressure on us to cut costs will be even greater as well if, as seems likely, Congress rejects our proposal for two more rounds of base closure and realignment and for more depot maintenance to go to the private sector. The department's senior leadership will continue to push for these compelling cost-savings measures, but I am not optimistic.
We have to remember that the Department of Defense has fewer allies in Congress than it used to. Nowhere near as many members are armed forces veterans. National defense is a less engaging issue than in the past. And retirement has deprived the Congress of some strong and articulate champions of prudent defense. As a consequence, there are many members of Congress who just don't know what we do every day.
I think that it is evident that we face a time of great pressure on our DoD support structure. That pressure is bound to make our work more difficult.
We have an obligation to manage this pressure as an added incentive for reform and cost-cutting, which we already know we need. We have no choice but to do our utmost to make our DoD support structure work better and cost less. To do that, I believe that we must take especially vigorous action in three crucial areas. We must truly re-engineer our business processes, emphasize new management values and invest in people.
Let me then elaborate on each of these three areas for action.
First, re-engineering how we do business. What I'm talking about here is scrutinizing our business processes for ways to redesign them to work better and cost less. It is not enough to try to execute the same business practices with fewer people, calling that reform. Instead, we must look at our practices for duplication and unnecessary complexity. We must identify actions which either do not need to be done or simply are no longer affordable. And we need to stop doing them.
Sometimes, of course, the only way to get a process changed is first to cut the resources allocated to that process. Only then can we sort out what actions are really essential. This almost amounts to reverse engineering. I have no doubt that that is what [former Secretary of Defense] Dr. [William] Perry had in mind when he imposed the limits in the [Edwin] Dorn [former undersecretary of defense for personnel and readiness] memo. In the private sector, there are numerous instances of deep budget and personnel cuts designed to force streamlined processes. Necessity can propel re-engineering. But it's hard to do when the rules won't allow you to shed yourself of excess.
Our preferred course of action should be to re-engineer our processes first, then advance such reforms to produce personnel and budget savings as rapidly as is achievable.
I recognize that sometimes it may take a few years before savings are achieved, because re-engineering and reform can require new capital investments and retraining of personnel. But putting off re-engineering doesn't improve your choices as a general rule.
We in the comptroller community have been pursuing substantial re-engineering of our financial management systems and activities. Most notably, under the leadership of DFAS [Defense Finance and Accounting Service], we are consolidating and redesigning our finance and accounting systems, making possible a streamlining of our facilities and personnel.
Defense acquisition is another area in which we are trying to transform the process rather than simply slashing the resources spent on flawed business practices. The department is working hard to adopt acquisition reforms that will in turn enable us to make major personnel and cost reductions without crippling the ongoing development and procurement of military systems. We have had substantial success so far and can do much more, especially with strong congressional backing.
What would really sabotage our reform plans as well as our ongoing weapons modernization are the arbitrary and excessive acquisition work force cuts mandated by the House version of the FY 1998 authorization bill. This concern was articulated by John Hamre [then undersecretary of defense (comptroller); now deputy secretary of defense] and Noel Longuemare [principal deputy undersecretary of defense for acquisition and technology] in their testimony to the House National Security Committee in mid-June. Our position is that we should continue our acquisition work force streamlining in a vigorous, but careful way. We need to ensure that personnel cuts are carried out such that:
- Ongoing and essential missions are not undermined;
- Re-engineering and reform are advanced, not retarded; and
- Our personnel are managed with the appropriate due process required by law and with an eye toward the long-term morale and quality of our work force.
Besides transforming how we do business, another crucial area for action is adopting "innovative management values." What I have in mind primarily are the values or principles that have been the foundation of the Clinton administration's reinventing government initiative.
Most notable among these "reinvention" principles are a strong focus on the customer of our support services, renewed trust of the personnel who run or use our services and greater reliance on the private sector either to actually perform "non-core" support services or to be the competition against which our government operations can be measured.
A good example, applying all three of these reinvention principles, is the department's travel re-engineering initiative. For temporary duty travel by DoD personnel, our aim is to ease the burden on the honest traveler while using more cost-effective processes to prevent abuse. By designing a streamlined system built on the premise that the traveler is honest, we expect that DoD processing costs will be cut in half and customer service will improve substantially. Our new system will rely on the private sector for most travel-related services -- except for the obligation and approval of funds, final accounting and random audit.
The streamlining and improvement of virtually all DoD support activities will require receptivity to greater reliance on the private sector. We need to look aggressively at every activity for which the private sector alternative may be better or helpful in improving our operations. We should look to adopt existing commercial products, rather than trying to develop our own products -- which in the past ended up being too slow and too costly.
Of course, outsourcing isn't always the answer. To be approved to produce goods and services for DoD, a private firm must be able to do so more cost effectively than we can. We need to work hard to determine what mix of public and private sector participation is best for a given functional area.
Besides re-engineering how we do business and adopting innovative management values, a third crucial area for DoD reform is investment in people.
People are the most important component of this or any other high-performance organization. That reality becomes at least as important when an organization undergoes downsizing or re-engineering. And here there is much we can learn from our department's consolidation and redesign of its finance and accounting activities.
As DFAS has progressed in this exceedingly complex endeavor, it has proven to be crucial that we invest heavily in the training of our people. In some cases, training was clearly needed to prepare people to work on new systems. However, also compelling was the training of people to become more productive on existing systems. To achieve the productivity and savings that it has and seeks in the future, DFAS has increased its training budget roughly tenfold.
In weighing the importance of investing in its people, DFAS looked for lessons from the private sector. It found that among companies undergoing downsizing or other extreme pressures, training is absolutely essential to staying afloat. Moreover, for successful organizations, personnel training is one of the most important strengths with which they can recruit and retain a high quality work force.
Closely related to training is the need for professional development. We must pursue a multitude of measures to upgrade and expand the leadership and management skills of our people. We must cultivate depth in our leadership ranks. You and others with extensive government experience will not be in government service forever. We have an obligation to those who come after us.
Professional development is a constant challenge for all our organizations. And to succeed it requires the attention of senior leaders like all of us here. Professional development has always been a strength of America's armed forces and the Department of Defense. And as we streamline and re-engineer our department's support structure, it will remain at least as important as it the past. Our future will be only as good as the people we train and develop for tomorrow.
On that hopeful note, let me wrap up.
As all of you know well, one of the most important challenges laid out by the QDR [Quadrennial Defense Review] is to streamline and improve our defense infrastructure. We simply have to plan on having less. With heavy pressure on our defense support structure, we face a choice: either to hang back and become subject to mandates that may or may not be helpful or to take action to try to guide reform along a productive course. I urge you and your organizations to continue to strive to lead the way toward genuine reform.
I don't believe that we can do more with less without true reform.
During this conference you will have the chance to explore in detail some of most promising avenues for progressing toward a better DoD support structure. I wish you well in this tremendously important challenge that we share.
Published for internal information by the American Forces Information Service, a field activity of the Office of the Assistant Secretary of Defense (Public Affairs), Washington, D.C. Parenthetical entries are speaker/author notes; bracketed entries are editorial notes. This material is in the public domain and may be reprinted without permission. Defense Issues is available on the Internet via the World Wide Web at http://www.defenselink.mil/speeches/index.html.