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I. INTRODUCTION

I.

INTRODUCTION

A. OFFICE OF SECRETARY OF DEFENSE OVERVIEW

The mission of the Department of Defense (DOD) is simply to deter war and, if deterrence fails, to conclude any conflict on terms favorable to the United States.

The Office of the Secretary of Defense (OSD) Task Force is in full accord with the need for a strong national defense posture. All recommendations are made with full appreciation for this overriding need.

The Task Force did not attempt to assess the appropriate budget level required for DOD to fulfill its mission, nor was any attempt made to assess relative merits of weapons systems. Rather, the Task Force sought to identify cost saving opportunities that would enable DOD to fulfill its mission in a more cost-effective manner.

Since DOD's prime responsibility is preparedness, it is tempting to conclude that the high cost of preparedness is not subjected to rigorous challenge by DOD. This would be a simplistic judgment. Task Force interviews and analyses revealed a keen level of concern for the overall cost of the national defense.

At the same time, the Task Force noted that there is a predisposition to avoid any cost savings move that might be vulnerable to either political opposition or to a charge of weakening national preparedness. Readiness is too often given as a reason for continuing a practice when the logic of the practice is challenged. This atmosphere may create a disincentive to implementation of some of our recommendations.

Because of the focus on preparedness, particularly in the military services where the bulk of the dollars is spent, it is essential that continuing emphasis be placed upon cost-effectiveness.

Preliminary research by the OSD Task Force indicated that many cost saving opportunities are not initiated because DOD's culture and structure inhibit the decisionmaking process. For this reason, a study team was added to determine whether organizational changes could facilitate the cost management process without impairing preparedness. This report makes a number of suggestions to this end.

The OSD Task Force Report avoids confusing cost control with budget slashing. The suggestions made are intended to strengthen military readiness by more efficient use of those dollars which are made available for the national defense. It is up to the Administration and Congress to determine the appropriate budget level for DOD.

Private sector experience can more readily be applied to defense decisions than some might conclude. Both sectors must deliver a product or service at a price that the public is willing to pay. In order to keep the price at acceptable levels, it is necessary to review constantly the cost of delivery of the product or service. Neither the private sector nor the defense sector can afford to let its costs outrun its revenue base, whether that be selling price or taxes.

Competition and the profit motive combine to spark the drive for cost control in the private sector. The risk of confrontation worldwide needs to be balanced against the limited resources available from public taxes to spark a similar drive for cost control in defense.

The premise underlying all OSD Task Force recommendations is that the preparedness level should be maintained or improved, while unnecessary costs of delivering that level of preparedness should be eliminated.

Pervading Atmosphere

War is an undesirable act. Nevertheless, the American people stand ready to support their country when outside threats confront them.

Perceptions of the threat weigh heavily in the decisions made regarding our national defense needs. These perceptions change over time, playing a major role in determining how much of the Gross National Product (GNP) is dedicated to national defense.

But there are other attitudes, rooted in history, which influence defense decisions and hence cost:

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while the

Military versus civilian control
free world has virtually always opted for
civilian control at the highest levels, the
desire for military decision-making by the
military is understandable.

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The traditions of the services and the consequent
competition for limited resources -- as an April
1982 Report to the Chairman of the Joint Chiefs
of Staff stated, "It is unrealistic to expect the
Service Chiefs as a corporate body to help resolve
joint issues involving the allocation of limited
resources among the four Services."

Disdain for centralized control -- despite its 35year existence, it appears that OSD has not yet been fully accepted by the services. While no intellectual arguments to this effect were presented to the OSD Task Force, it is evident that the emotional undercurrent exerts a constant tug. Lack of incentives for cost control -- although cost control is considered a noteworthy goal, it seems to get more attention when budgets are set, rather than at the time operational decisions are made.

Patriotism and its rewards Americans who have contributed to the national defense, in whatever way, take pride in their contribution. Over time this pride is accompanied by a feeling of entitlement.

Entitlement

"Entitlement means that a group is to be rewarded at damn-the-cost for service to the nation." So wrote Theodore H. White in his recent book America in Search of Itself (Harper and Row, 1982, page 125).

"Entitlement" is frequently applied to social programs , that have been created in the last half century. Whether one thinks of them as good or bad usually depends upon whether one is entitled.

In seeking to determine why cost saving opportunities had not been implemented when they appeared self-evident from a private sector viewpoint, the OSD Task Force realized that there is a pervasive feeling throughout DOD that many areas of the defense budget are hostage to provisions for groups and institutions that regard themselves as

"entitled":

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Weapons programs, once started, are seldom curtailed even in the face of unwarranted cost escalation or performance deficiencies. Project

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