Tag Archives: Pentagon Spending

Tight Government Agency Budgets Bring a Silver Lining

Risk vs. Opportunitiy - alumni.bm.ust.hk

Image:  http://alumni.bm.ust.hk


“Growing funding pressures and uncertainty place a growing onus on agencies to navigate the turbulence in new and innovative ways.

Thus, far from being a market killer, it actually presents opportunity.

For years, the question of when the government might return to “regular order” –that is, a “normal” process in which appropriations are essentially completed by the end of September—has been a prominent one.

Agency leaders, industry, and others, have continually and appropriately harped on the deleterious impacts of the funding yo-yo that has dominated the scene for far too long.
And if there was one thing many hoped for as a result of having one party in control of both the White House and Congress, it was a return to regular order.

Well, it’s probably not going to happen. As virtually all recent reports have indicated, the budget debate within the parties, let alone between the parties, remains fierce and the chances of getting a full year fiscal 2018 funding bill by Sept. 30th are slim indeed.

President Trump’s budget blueprint – the “skinny budget” — generated plenty of debate; the release of his full proposed budget will only turn up the heat further. No  budget resolutions have yet been proposed, let alone passed, and no spending instructions given to the appropriations committees.

Beyond that, consider what else Congress has to deal with over the next four months: the farm insurance bill; the children’s insurance program (CHIP); health care; possibly tax reform; and, of course, the debt ceiling. In other words, while a complex and many-layered debate is virtually certain, it has not yet really begun and one or more continuing resolutions appear almost certain.

To complicate matters further, the Senate cannot even take up the budget until after it finishes with health care, because as soon as a budget bill is passed the rules change previously instituted by the Democrats (requiring only a majority vote) will revert back to the standard rule under which 60 votes will be needed.

Thus, the betting is that another continuing resolution, or a series of them, will be needed.

And that is never a good thing for smart planning and program execution.

Nonetheless, it would appear that over the years most agencies have actually gotten pretty good at adjusting to the external dynamics and finding a way to do their jobs. Even as agencies struggled with the White House’s early budget instructions, most continued to operate relatively normally. And that has mostly carried over to the market as well.

Unlike what we saw with sequestration—the impacts of which were seen and felt months before it went into effect—the impacts of the potential or expected spending reductions are not reflected in a broad market slow-down. In fact, with the exception of State and EPA,  just the opposite seems to be happening.

Through the first two quarters of fiscal 2017, civilian agency spending on professional services and IT both grew by double digits over the same period last year. At the Defense Department, for which we only have data for the first quarter, the pattern was the same (16 percent for professional services; 10 percent for IT).

And while it may seem counter-intuitive, this is actually consistent with what we’ve seen in recent years. Often, those agencies under the toughest budgetary pressures have also been those in which the market has performed best.

Again, this is in part the result of agencies having learned to operate amidst the chaos. But more importantly, it appears to validate another key market dynamic: as agencies are forced to be more and more selective with their funding, their highest priority missions, and thus those most fully funded, tend to be highly tech-centric (cyber, analytics, automation, etc.).

Almost by definition, those missions require more private sector support than other, more routine operations. Thus, market growth in a constrained environment is not only possible, it is likely.

Going forward, aside from major reductions in mission or service, agencies’ best hopes and strategies for dealing with the budget realities largely lie in aggressively expanding the degree to which they capitalize on opportunities to substantially reduce costs (and improve service) across the board, driven by the emergence of the digital economy.

It’s happening across the commercial sector; and this budget could well catalyze a similar transition in government.

This is not to say that predictability and stability should not still be a goal. It absolutely should be. Nor is it to suggest that some budget cuts won’t have very real negative impacts on segments of industry. They will.

But as the data and other trends suggest, stability may not be the holy grail it once appeared to be. ”


About the Author

Stan Soloway

Stan Soloway is a former deputy undersecretary of Defense and former president and chief executive officer of the Professional Services Council. He is now the CEO of Celero Strategies.


We Need to Audit the Pentagon




“In 1994 Congress passed legislation requiring every federal agency to be auditable.

Since then every agency has complied—except for the Department of Defense.

“We have known for many years that the Department’s business practices are archaic and wasteful, and its inability to pass a clean audit is a longstanding travesty,” Chairs John McCain (R-AZ) and Mac Thornberry (R-TX) of the Senate and House Armed Services Committees said recently in a joint statement. “The reason these problems persist is simple: a failure of leadership and a lack of accountability.”

The Department’s… inability to pass a clean audit is a longstanding travesty

Increasing Pentagon spending under these circumstances is the opposite of fiscal responsibility. In fact, giving the Pentagon $54 billion and finding out why later is bad budgeting.

Both the Republican and Democratic party platforms included the need to audit the Pentagon, and Congress should resist calls to give more money to an agency they know to be irresponsible with taxpayer dollars.

You can learn more about the seemingly endless saga surrounding the Pentagon’s utter failure to get a clean audit opinion here.”







Bringing Pentagon Efficiency and Effectiveness to the Forefront


Image:  “The Project on Government Oversight”



“It is time to explore what can be achieved by bringing business considerations up front to help us navigate the treacherous national security waters ahead.

Archaic and inefficient, the Defense Department’s processes used to acquire and manage resources have ultimately become counterproductive in supporting the military’s war fighting mission.

In James Mattis’ confirmation hearing before the Senate two weeks ago, most of the questions directed at him appropriately focused on threats to the United States. There were thoughtful exchanges on Russia and Iran. And discussions about sequestration. However, one of the greatest threats not receiving appropriate attention is the Pentagon’s current business processes. Archaic and inefficient, the Defense Department’s processes used to acquire and manage resources have ultimately become counterproductive in supporting the military’s warfighting mission.

National defense too often is only discussed in context of size and cost in relation to external threats. While those are unquestionably important considerations, more emphasis must be placed on internal efficiency and effectiveness. Processes that monitor and reward output as opposed to processes that focus exclusively on inputs illuminate opportunities for dramatic improvements in our military posture.

As a former business leader, Donald Trump is well suited to prioritize business processes. And as president, he can direct Defense Secretary James Mattis and his staff to explore what can be achieved by elevating the primacy of efficiencies and effectiveness within the Pentagon.

Reconsidering how the Pentagon collects and uses data to make decisions will be particularly important. Indeed, better and more proficient employment of existing business process technologies and associated data has the potential to enable new capabilities, drive efficiencies, and promote more informed management decisions. Advanced analytics can provide insight into effects of even micro-level changes on readiness, with hope that current reporting could forecast how today’s decisions impact future military readiness.

Defense acquisition – historically the symbol of the slow-to-decide-and-act defense bureaucracy – is another area worthy of review. Pentagon procurers must have the opportunity to embrace and expand on the principles of rapid innovation. Rapid innovation has been adopted by Silicon Valley start-ups through some of our largest corporations, and its model would better attract existing and future military suppliers while providing our military world-class capability at lower costs.

The president and secretary of defense should also pursue measures that shed uniformed military responsibility of non-core services. The Pentagon has already seen success of such measures when they privatized military housing decades ago. There have been several studies over the years identifying other non-core military services that can be done more efficiently.

To move the Pentagon toward best-in-class processes and practices, the president must begin by outlining his support for efficiency and cost-savings reform in his budget. Notably, the budget must advance progress on auditability.

Under the current  plan, all four services must be audit ready by the end of September, with independent auditors in 2018 determining whether they passed or failed. Few are optimistic that the services will return a clean opinion, but the process is vital for prudent fiscal oversight while shedding light on how senior Pentagon leaders can run their organization more effectively. What is more, it provides a step toward full cost accounting which would provide even greater insight by capturing direct and indirect costs, driving decision making accordingly.

Another key provision would be support for eliminating, consolidating or repurposing excess infrastructure and facilities; to include requesting a new round of Base Realignment and Closure (BRAC). While unpopular in Congress, divesting unneeded infrastructure is basic best business practice and another BRAC round is well overdue. The last round occurred over a decade ago.

Our military and defense leadership is trained to operate in ambiguous and uncertain conditions — and that is necessary and appropriate for the battlefield. But we can and must do better when it comes to process, management, and generally keeping our own house in order. Indeed, a key rationale of strengthening business processes is to reduce the frequency of decision-making-by-gut-feel.”




It’s Time to Stop Stuffing the Defense Budget




“When it comes to Pentagon spending, lawmakers in Washington prefer “pork”, which is unfortunate for taxpayers.

This summer the Department of Defense acknowledged that half of its OCO spending— [Overseas Contingency Operations] about $30 billion—went to “enduring requirements” that should be funded out of the base budget.

In order to enhance our national security without increasing spending and deficits, this Thanksgiving Washington should take out the pork by reducing programs unrelated to national defense and pet projects not requested by the Pentagon. Nonetheless, the political environment from the past years has been conducive to increasing the pork, rather than forcing fiscal restraint—this needs to change.

The 2011 Budget Control Act brought a pause to the Washington dysfunction and disagreement and provided a period of some restraint in federal spending. The act set limits for defense and non-defense discretionary spending through the federal government. For the most part, each side of the equation got equally sized slices of the pie—creating a unique political environment in which, in order to raise defense spending it became necessary to increase non-defense spending to muster a strong enough coalition to reach sufficient votes.

However, not long after the ink was dry, spending-happy lawmakers started to devise ways to break the caps. With the Democrats controlling the executive branch and the Republicans controlling the House, the parties mostly pushed for their preferred side of the equation. The result, a recent Congressional Research Service (CRS) report found, was spending above the caps on both sides of the equation.

On the defense side of the equation, the Overseas Contingency Operations account became the preferred tool to dodge the budget caps. The Pentagon claims this account is needed to ensure war fighting operations are not impacted by the constraints of the 2011 budget caps, but  a CRS report found Congress and the president “have designated as ‘OCO/GWOT’ funds for a variety of activities that had previously been contained in the base budget.” The report went to say, “by designating ongoing activities not directly related to contingency operations as ‘OCO,’ Congress and the President can effectively continue to increase topline defense, foreign affairs, and other related discretionary spending, without triggering sequestration.” Essentially, this action by the Pentagon, Congress, and the President transformed OCO, or a better term would be Pentagon slush fund, into the an ever-expanding turkey that gradually lost its shape.

The transformation of OCO into the annual Thanksgiving turkey involved two important steps. First, there was a considerable expansion of what was considered to be part of the expenses necessary to execute the operations overseas. Initially, there was a relatively narrow definition, such as deployment bonuses to troops overseas.

The passage of the Budget Control Act prompted the Pentagon to backslide on its progress on fiscal responsibility, starting to more aggressively move programs from the base budget back to the slush fund. Congress has also gotten in on the act, using the slush fund to pay for childcare centers, barracks improvements, and aircraft the Pentagon never requested. In fact, and estimated $81 billion of OCO funding was not directly related to the wars in Iraq or Afghanistan.

The second expansion was what Congress could make the Pentagon pay for. This elasticity on what was considered defense spending turned the Department of Defense into what former Senator Tom Coburn (R-OK) infamously called “The Department of Everything.” Coburn found the Pentagon used taxpayer money to hire brew-masters and developing apps to determine when it was a good time to have a cup of coffee. Since his retirement Senate Armed Services committee Chair John McCain (R-AZ) and Senator Jeff Flake (R-AZ) found millions in defense dollars going to jazz playing robots and empty buildings in Afghanistan.

In other instances, the Department of Defense is being asked to duplicate efforts either already done by or more effectively performed by other agencies. For example, Congress has earmarked billions for medical research to be performed at the Department of Defense that would almost certainly be better managed and overseen by the National Institutes of Health.

Just like each Thanksgiving side dish, many of these programs and gimmicks don’t cost much in isolation; but when they’re added together, they result in significant wasted money for the Pentagon and the need for a long nap after Thanksgiving dinner. Worst yet, in the Pentagon’s case of overstuffing, the defense budget partially loses what defines it as a defense budget by ignoring budget limitations and adding non-defense projects.

Lawmakers are responding to incentives from their constituencies and the system at large, so when they can expand the definition of the defense budget to satisfy parochial interests they will take it. It is up to the public to force Congress and the President to make decisions and consider tradeoffs on how taxpayer’s dollars are distributed. You have to balance your Thanksgiving dinner calories between mashed potatoes and pie, Congress should be no different and stop trying to stuff everything it can into the defense budget.”



“Crowd-Funding” the Pentagon




“About 85% of Americans have access to a computer, far more than the roughly 55% who actually pay federal taxes.

Let’s just fight the wars we think are worth fighting by going online to a place, let’s call it WebWars.com (the domain name is available for a paltry $5,000), and deciding how much we’d like to contribute.

If the Smithsonian can raise$300,000 in a week for the ruby slippers Dorothy wore inThe Wizard of Oz, why can’t the Pentagon take the same approach when it comes to raising armies to wage the nation’s wars?


It may sound goofy, but it makes about as much sense as allowing the nation’s physical infrastructure to rot amid the current $3.6 trillion maintenance-funding shortfall, or relying on a billionaire to patch the cracks in the Washington Monument following D.C.’s 2011 earthquake.

Crowd-funding apps—like GoFundMe, Kickstarter (the one the Smithsonian used to buff up those ruby slippers) and Indiegogo—are popping up all over the Web. So why bother writing (how quaint!) a check (how 20th Century!) to mail in with your IRS Form 1040 every April to send off to Uncle Sam (how archaic!)?

After all, it’s not like Congress takes seriously the requirement that only it can declare war; heck, they haven’t done that since World War II. Why should hard-working Americans fork over money to fund conflicts that the nation’s lawmakers feel can be fought without their declaration? Bottom line (pun intended): if they don’t need to declare it, we don’t need to pay for it.

Practically speaking, there’s not much wrong with the scheme. The Pentagon and its allies on Capitol Hill have been doing something similar since 9/11. They have been cramming extra dollars into the military’s budget to wage the wars in Afghanistan and Iraq, even though much of that spending has nothing to do with the conflicts. They’re doing this because such purported war-fighting funds aren’t subject to the budget ceilings passed by Congress in 2011. It has become Washington’s favorite way of lifting that ceiling while complying (wink-wink) with the law that set the ceiling.

And in a grim reminder of war’s real cost, associates of those killed in action have begun setting up crowdsourcing web pages for their families.

Of course, if you want to get technical, there are a host of problems associated with the idea. First of all, it takes time to build up a military. It can’t be turned on like a light, to be used only when it’s needed. Even when it’s stored away safely on the national shelf, it needs to be ready to go at a moment’s notice. So maybe there could be sustaining memberships, for those Americans who believe a strong defense is worth investing in and paying for. Kind of like supporting an orphan overseas with a monthly contribution.

So how much would that cost you? For simplicity’s, let’s assume the $573 billion the nation is spending this year on defense boils down to the 2.6 million combat boots worn by the 1.3 million members of the active-duty military. That works out to about $440,000 per soldier, sailor, airman and Marine.

But if you assume the boots last for two years, they’re a steal at $220,000 a pair.”

Paying for the Military Like the Ruby Slippers



Sample the Arsenal Inside the Pentagon’s Weapons Programs


pentagon_cropped21“WASHINGTON POST”



The F-35 $400,000 Helmet

“Like the plane, the helmet is enormously expensive. The cost of each custom-made helmet is more than $400,000. And like the plane, which is years behind schedule and millions over its original budget, the helmet has encountered problems.

Earlier versions were jittery when the plane hit turbulence. There was a latency in the video, which caused pilots motion sickness. The night vision technology didn’t work as well as it should have. There was a “green glow” that obscured the pilots’ view. Things got so bad that in 2011 the Pentagon hired BAE Systems to build a back-up helmet in case the one in development couldn’t be rescued.”



The $55 Billion Mystery Plan

“Highly classified, the program is one of the Air Force’s top priorities — and its most expensive. The service estimates it will cost $55 billion to build as many as 100 of what it calls the Long Range Strike Bomber, which is designed to fly deep into enemy territory undetected until the mushroom cloud begins to bloom.

In the coming months, the Air Force is expected to award a contract for the next-generation bomber, which would begin flying in the mid-2020s, have the potential to fly manned or unmanned and give the military the ability to hit any target “at any point on the globe.”