Efficiency Drive Faces Four Big Challenges
(Source: Lexington Institute; issued September 14, 2010)

(© Lexington Institute; reproduced by permission)
Pentagon acquisition chief Ashton Carter today unveiled guidance that will help drive the Pentagon's $100 billion efficiency drive over the next half-decade. The guidance is distilled from insights provided by hundreds of professionals both inside and outside the defense department, and seems to be well thought through. In essence, it recommends changing the structure of incentives for both contractors and government workers to reward enhanced productivity over bureaucratic process.

If the efficiency drive works out as planned, savings will be plowed back into military modernization -- enabling spending on new training and technology to keep increasing at the rate of about three percent annually after inflation despite relatively flat military budgets. At least, that's the plan.

But there are four big impediments to success that could doom this latest productivity drive to the same disappointments seen in previous such initiatives.

-- Flawed fiscal assumptions. Secretary Carter remarked in his press conference today that "We are not in an era when the defense budget is going to decline -- this is not the 1990s!" Darned right it's not the 1990s, because back then the economy was growing fast and the federal budget was in surplus. This year, over 40 percent of the federal budget is being borrowed, and the projected deficit is $1.4 trillion. That's about 10 percent of the entire economy.

The notion that defense spending will remain relatively stable in such circumstances is simply wrong. If it did remain stable, entitlements like Social Security and Medicare would have to be cut in half to balance the budget. So if the Pentagon's efficiency plans require stable military budgets to be implemented, then policymakers will soon need to go back to the drawing boards.

-- Mismatched tech-political cycles. Political appointees come and go at the Pentagon with startling frequency. A typical tenure for a senior policymaker like Ash Carter is 2-3 years. New technology, on the other hand, takes a decade or longer to field. For example, design of the next-generation ballistic missile submarine that Secretary Carter referenced today will require six years, and the full development cycle stretches well into the decade after next. It's a little hard to see how any decisions made today with regard to affordability or competition can remain intact over a period during which several different administrations will serve. Past experience suggests the more likely outcome is that any plans made today will be repeatedly rewritten, obliterating the intentions of today's policymakers.

-- Embedded bureaucratic values. The folkways and values of the defense acquisition system have evolved over three generations, and will only change gradually if at all. Whatever rewards and punishments are given out to industry under the new guidance, the bureaucracy has its own structure of incentives that is largely beyond the capacity of political appointees to change. For instance, career civil servants almost never get fired, no matter how mediocre their performance may be. They also never get rich the way top performers in the marketplace often do.

So to the extent that waste and redundancy are caused by the way federal workers operate rather than the behavior of contractors, they will be very hard to root out. Secretary Carter said today he doesn't do culture, he does behavior, but for the acquisition workforce the two are inextricably intertwined.

-- Congressional "interference." Virtually everything the Pentagon does requires some prior exertion by Congress. That certainly applies to the military acquisition system, where federal legislators have long been active in reshaping both funding requests and performance standards. Secretary Carter may hope to promote goals like stable funding and increased competition, but Congress will decide in the end whether such outcomes are even feasible.

Policymakers often complain about legislative "interference" or "meddling" in acquisition plans, however the trend over time has been for Congress to become more involved in shaping military programs and policies, rather than less. That isn't going to change just because some proposals are designed to achieve greater efficiency -- especially if they eliminate the jobs of politically connected constituencies.

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