The Report of the Quadrennial Defense Review: Section VIII

1997

Section VIII: Achieving A 21st Century Defense Infrastructure

Our military forces and operations are changing dramatically in response to the changing security environment and advances in technology. The way we support the warfighter must also change. The Department must be leaner, more efficient, and more cost effective in order to serve the warfighter faster, better, and cheaper. We not only have the opportunity to change, we have the requirement to change. The forces envisioned in Joint Vision 2010 will require a radically different support structure. Achieving those forces will also require steadily increasing investments. To afford these investments, the Department will need to achieve offsetting efficiencies in support operations. The best source of funds for those investments is within the Department’s support operations. Consequently, the search for new ways in which DoD could improve its support operations was sweeping and deep.

The DoD infrastructure includes a diverse set of activities carried out by an even more diverse set of organizations. Foremost among them are installations for the operating forces, training programs for military personnel, logistics support, central personnel services, and headquarters functions. The organizations that performed these functions accounted for 48 percent of total DoD employment (military and civilian) in FY 1997. In addition, 7 percent of DoD employees provide medical care for active duty and retired military personnel and their family members, and another 6 percent perform functions related to science and technology programs and central command, control, and communications services. In sum, 61 percent of people employed by the Department in FY 1997 are performing infrastructure functions.

During the post-Cold War military drawdown, DoD attempted to reduce the defense infrastructure—including military bases and personnel associated with them—as it reduced the force structure. However, infrastructure reductions—which require separate actions—have lagged behind force structure reductions.

Specifically, from 1989 to 1997, the Department reduced total active duty military end strength by 32 percent, a figure that will grow to 36 percent by 2003 as a result of the QDR. In comparison, even after the completion of four rounds of base realignment and closure (BRAC), the world-wide (overseas and domestic) base structure will have been reduced only 26 percent. The reduction in domestic-only facilities has been 21 percent.

By the same token, civilian and military personnel employed in infrastructure activities have been reduced only 28 percent since 1989. The plans developed before the QDR were projected to yield a total reduction to infrastructure employment of 33 percent by 2003. These reductions will be achieved even though some critical infrastructure activities, e.g., the science and technology program and military quality of life programs, will be reduced only modestly or even enlarged.

To close the gap between force structure and infrastructure reductions and begin to reduce the share of the defense budget devoted to infrastructure, the QDR is proposing the following four actions:

Make a further reduction of 109,000 civilian and military personnel associated with infrastructure beyond the initiatives in the DoD budget for FY 1998. These further reductions will bring the total reduction to infrastructure employment since 1989 to 39 percent.
Request authority for two additional rounds of BRAC, one in 1999 and the second in 2001.
Improve the efficiency and performance of DoD support activities by adopting innovative management and business practices of the private sector. These include “reengineering” or “reinventing” DoD support functions, e.g., streamlining, reorganizing, downsizing, consolidating, computerizing, and commercializing operations.
As a critical part of this reengineering, consider far more non-warfighting DoD support functions as candidates for outsourcing—inviting commercial companies to compete with the public sector to undertake certain support functions. DoD’s experience with outsourcing thus far demonstrates that it can enjoy many of the benefits that private industry has gained from outsourcing—tighter focus on core tasks; better service quality; more responsiveness and agility; better access to new technologies; and lower costs.

Reducing the DoD Base Structure

As DoD implemented the post-Cold War BRAC reductions, savings came slowly after initial up-front costs. These reductions are now about half complete. Beginning in FY 1996, DoD began to accumulate significant savings from these reductions, and the savings will continue to grow. However, the QDR found that DoD has enough excess base structure to warrant two additional rounds of BRAC similar in scale to those of 1993 and 1995. Included in our plans to reduce infrastructure through BRAC must be not only bases and other supporting facilities, but also the laboratories and test ranges which support research, development, test, and evaluation.

First Steps Toward Reengineering the DoD Infrastructure

Because the size of the defense infrastructure received considerable attention in the Bottom-Up Review and earlier evaluations, the QDR placed a great deal of emphasis on the operations of the Defense infrastructure. This part of the assessment was motivated by the similarity between large portions of the DoD infrastructure and business activities, and the recognition that American business practices have undergone a revolutionary transformation. The Department must adopt and adapt the lessons of the private sector if our armed forces are to maintain their competitive edge in a rapidly changing global security arena.

Defense Agency/Defense-Wide Infrastructure. Defense agencies and defense-wide activities carry out service and supply functions common to more than one DoD component. Currently, there are 24 defense agencies and about 80 defense-wide programs. These centralized organizations and programs provide services ranging from intelligence operations to commissaries, and from health care to research and development activities. In FY 1997, defense agency and defense-wide infrastructure account for 22 percent of the Department’s total infrastructure funding and employ 117,000 civilian and 128,000 military personnel.

Before the QDR, the Department had planned to reduce personnel levels in defense agencies and defense-wide infrastructure by more than 16,000 civilian and 6,000 military billets over the period FY 1997-2003, a reduction of 9 percent. The QDR reviewed all Defense agencies and defense-wide activities to determine whether they could be outsourced, reengineered, or consolidated. As a result, initiatives have been adopted that will further reduce defense agency and defense-wide infrastructure personnel and costs:

Outsource selected Defense Logistics Agency functions, including cataloging, and increasing competition for disposal and physical distribution.
Reengineer Defense Financial Accounting Service operations by consolidating and outsourcing accounting functions and streamlining vendor pay.
Outsource selected patient care, medical training, and installation support in the Defense Health Program.
Consolidate the 16 large information processing centers run by the Defense Information Service Agency into six centers.
Reengineer business processes at the Defense Investigative Service by streamlining the security investigative process and implementing service fees.
Combine operational commands and outsource monitoring activities at the On-Site Inspection Agency.
Reduce funding for most other defense agencies and defense-wide activities not discussed above by 6 percent, as a down payment until a detailed follow-up review is completed by November 30, 1997.

By implementing these QDR initiatives, more than 18,000 civilian and nearly 2,000 military positions will be eliminated in defense agencies and defense-wide activities by FY 2003. Together with reductions already built into the defense budget, there will be 18 percent fewer personnel assigned to defense agency and defense-wide infrastructure activities in FY 2003 than there are in FY 1997.

Military Department Infrastructure. Most of DoD’s infrastructure is in the military departments (medical and some logistics functions are the major exceptions). This infrastructure, organized along functional lines, furnishes resources for the management of defense forces, facilities from which defense forces operate, non-unit training, and personnel support. Military department infrastructure also consists of acquisition support (including science and technology efforts as well as testing and evaluation) and C4I programs (command, control, communications, computer, and intelligence systems). In FY 1997, military department infrastructure represents 78 percent of the Department’s total infrastructure funding and employs 572,000 civilian and 557,000 military personnel.

Before the QDR, the military departments had planned to reduce infrastructure-related personnel by 58,000 civilian and 20,000 military positions over the FYDP, a total reduction of about 7 percent. By adopting “best business” practices, streamlining management oversight, eliminating redundant functions, and outsourcing or privatizing where appropriate, the military departments will be able to reduce infrastructure costs and personnel further. Specific proposals include:

Reduce logistics support costs by integrating organizations and functions (supply, financial, automated data processing, transportation, maintenance, and procurement) now being performed at multiple locations in a common geographic area. Each military department will reduce inventories and operating costs by sharing and linking consumer-level inventories and by eliminating redundant facilities and operations.
Conduct public-private competitions for depot maintenance work that does not contribute to core capability when other appropriate outsourcing criteria are met. In addition, we will partner in-house facilities with industry to preserve depot-level skills and utilize excess capacity. Savings will be achieved as a result of these competitions and the reductions in excess capacity.
Reduce layers of oversight at headquarters and operational commands and eliminate management and support positions no longer required because of improvements in communications and information technology. The Department will also consolidate some support infrastructure outside the United States. These actions will eliminate 10,000 military and 14,000 civilian positions.
Compete, outsource, or privatize military department infrastructure functions that are closely related to commercial enterprises. Most of these actions involve logistics and installation support functions. The military departments expect that these initiatives will eliminate 25,000 military and 30,000 civilian positions between now and FY 2003.

By implementing these QDR initiatives, an additional 53,000 civilian and 35,000 military positions in the military departments will be eliminated by FY 2003. This translates into a 15 percent total reduction between FY 1997 and 2003 (including initiatives adopted before the QDR). There will be a slight further reduction of about 7,700 personnel by FY 2005, after all the effects of the QDR have been achieved.

Continued Reengineering of the Dod Infrastructure

The initiatives outlined above will reduce infrastructure employment by about 109,000—about 72,000 civilian and 37,000 military positions—more than the substantial reductions already included in the defense budget submitted to the Congress in February 1997. (When the QDR initiatives are fully implemented in the years beyond 2003, the additional civilian reductions will total approximately 80,000.) As a result, by the end of FY 2003, QDR initiatives plus those actions submitted with the budget will shrink infrastructure employment to 1.2 million people, which is 39 percent below the FY 1989 level. These reductions, nevertheless, fall short of what might be achieved by comprehensively reengineering the defense infrastructure.

Recognizing the need for continued reengineering of the defense infrastructure, the Secretary of Defense has commissioned a Task Force on Defense Reform to examine the Office of the Secretary of Defense, Defense agencies, DoD field activities, and the military departments. This panel will review the history, missions, resources, operations, and requirements of these organizations in order to reengineer the way they operate. The panel will begin its work in the spring of 1997 and will report its findings by November 30, 1997.

In addition, a special study of headquarters and cross-Service occupational specialties has been initiated. This internal assessment will provide a comprehensive review of all headquarters activities (except most operational commands) and is aimed at streamlining administrative command and control operations, eliminating redundancy, and flattening excess layers of organizational hierarchy. A report and recommendations will be provided to the Secretary of Defense by August 29, 1997.

DoD also will seek legislation revoking statutory provisions that preclude actions that would lower infrastructure costs without sacrificing military capability. Viewed from an economic perspective, these statutory provisions are comparable to regulations governing private industry. The regulations on DoD infrastructure activities are not classic regulatory controls over prices or rates of return, but they are similar to regulations of airlines, railroads, and trucking companies—largely removed during the late 1970s and early 1980s—that required firms to serve some markets and precluded them from entering others.

Two sorts of statutory relief are particularly important to DoD:

DoD needs the flexibility to reduce physical capacity through a process like the base realignment and closure legislation used to reduce excess base structure associated with the post-Cold War drawdown of U.S. forces.
DoD is required by statute (10 USC Section 2466) to perform 60 percent of depot maintenance activities in public depots. Relief from this provision would enable DoD to contract out functions that do not support core capabilities and that can be performed less expensively by private-sector firms.

The Department faces other statutory barriers to increased use of competitive procurement of services provided by infrastructure activities. Subsequent legislative proposals will be made to allow further streamlining and increased efficiency.

The Way Forward

The most stressing requirement for the U.S. military is fighting and winning the nation’s wars. To perform this role, the Department requires robust and modern infrastructure activities. Although recent reductions will restore the Department’s infrastructure to its historical proportion relative to the size of the total force, it is clear that further reductions are possible, and must be made in order to support training, modernization, and operational requirements at less cost.

Working with Congress, the Department can eliminate the inefficiencies imposed by outdated regulations and procedures and institute modern, cost-effective business practices. If we are able to do so, our support activities will greatly enhance the combat power of our forces at less cost.