Board calls for $125B in DOD spending cuts over five years

In advance of the scheduled release of the Defense Department’s proposed fiscal 2016 budget, the Defense Business Board has issued recommendations for how DOD could cut $125 billion in spending over five years, through steps including encouraging early retirements and cutting back on contractor services.

The board said its plan represents “a clear path” to those savings from fiscal 2016 to 2020, and would leans on what it calls productivity gains from its recommendations to continue defense operations despite the cuts.

The board’s recommendations, issued Jan. 22 a week ahead of the planned release of the 2016 defense budget, came at the request of Deputy Defense Secretary Bob Work, who in October 2014 asked the board to review DOD spending, according to a report in Defense News.

A task force formed by the board identified more than 1 million people (the equivalent of 40 Pentagons) working in six core lines of business  within DOD—HR management, health care management, financial flow management, supply chain and logistics, acquisition and procurement, and real property management. The board said its proposed spending cuts could come largely through renegotiated contracts and early retirements within those areas.

The projected savings could then be put back into military operations, according to the board. For example, $125 billion would be enough to fund 50 Army brigades (of 4,325 soldiers each), or 10 Navy carrier strike group deployment (with 1 carrier and air wing, one attack submarine and five surface combatants in each), or 33 Air Force 5-35 fighter wings (each consisting of 36 aircraft).

Contract optimization could account for between $46 billion and $89 billion in productivity gains over the five-year period, according to the report, while $23 billion to $53 billion in savings could be netted trough early retirement and attrition. Among other areas, another $5 billion to $9 billion could be gained through IT optimization, which would include steps such as data center consolidation, automating processes and getting rid of obsolete technology, according to the plan.

And although the board is recommending early retirements, it also is recommending retention bonuses in 2016 and 2017 for key employees, as a way to retain institutional knowledge.

In preparing its report, the board said the task force interviewed more than 85 industry executives and current and former military leaders, along with conducting research into business best practices developed by industry, academia and think tanks, along with DOD and other federal agencies.

The key to netting those savings, the board said, is acting quickly: Every $1 billion saved in 2016 would be worth $5 billion over the five-year period because of the compounding effect.

About the Author

Kevin McCaney is a former editor of Defense Systems and GCN.

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