Because of the rapidly escalating defense commitment, it is particularly necessary to effect economies where possible. Not only is total spending escalating, but the trends in defense appropriation are changing. From FY 1974 to FY 1983 the following categorical increases are noted: Personnel costs Operations and maintenance Research, development, test, and evaluation up 111% up 175% up 202% up 369% Procurement, which is the largest component of the FY 1983 budget, is also growing at the fastest rate. Clearly, it is an area in need of constant scrutiny for management efficiencies. The huge out-year costs of weapons now being developed will exacerbate this trend, as illustrated in the chart below. Weapons procurement the nine recommendations. made to improve the weapons acquisition process would save about $18.2 billion in the first three years. Annual savings of about $10 billion (1983 dollars) would be realized following full implementation of the recommendations over a five-year period. We recommend consolidating the weapons acquisition function since many of the problems noted are rooted in the organization structure. Further, we recommend steps to reduce instability in the weapons acquisition process. This alone could produce annual savings of $5 billion or more if properly managed. Instability will also be curbed if DOD exercises discipline to reduce the number of major system new starts each year, to allow for affordability constraints. Discipline in limiting overly rigorous military specifications and encouraging greater use of common parts will also yield very significant savings. So, too, will a simplification of existing regulatory constraints. Logistics - fourteen recommendations are made which produce $12.0 billion in savings in the first three years in which savings would be achieved. Annual savings of about $4 billion (1983 dollars) would be realized following full implementation of the recommendations. Beyond these savings, there is the potential to reduce inventories by more than $4 billion if appropriate investments are made to upgrade computer systems and other controls. Recommendations are made to improve traffic procedures and depot operations, and reduce the cost of demilitarization of ammunition. Two recommendations will reduce the cost of providing services and support to military bases. Another suggestion will significantly reduce the cost of petroleum products by establishing a realistic bidding procedure to which sellers will respond. We feel that special steps will have to be taken by the President or the Secretary of Defense to reduce the military base structure in the United States. Congressional barriers erected in the past ten years render it almost impossible to close or realign significant military bases. Even the mention of consideration of a base closure generates adverse reaction from the affected Congressional delegations, community leadership, local private sector vendors, and base employees. Yet the cost of maintaining unnecessary bases ranges from $2 billion to $5 billion annually. We recommend that a special commission be established to tackle this thorny problem. Retirement -- retirement pay for military personnel is rapidly becoming unaffordable for the Nation. A system that starts retirement pay as early as age 37, with benefits equal to half of terminal base pay or more, generates an Our four retirement recommendations would generate about $6.9 billion in savings during the first three years that any savings could be achieved. (For our preferred retirement recommendation, savings would not be achieved until eight years after implementation.) We propose to modify the retirement systems by delaying full entitlement to retirement income until 30 years after service entry date, or through an earned income offset so that full military retirement pay would go only to those actually retired from the active work force prior to age 62. Health DOD's health care costs have risen significantly over the past few years, without sign of abatement. DOD runs three separate service health care systems and a Civilian Health and Military Program of the Uniformed Services (CHAMPUS) program for civilian dependents and retired personnel and dependents. These systems are not satisfactorily coordinated to provide incentives for efficient use of health care dollars. Those incentives which are in place tend to drive costs up, rather than down. We recommend consolidated management of the entire military health care system. Only in that way can needed efficiencies be introduced. CHAMPUS users should be shifted to direct care facilities, where such facilities are locally available. Greater cost sharing should be required by users, in order to induce cost containment actions. Our four health care recommendations would generate approximately $3.2 billion in savings during the first three years. Personnel there are four recommendations which address personnel-related issues and would generate savings of approximately $2.2 billion in the first three years. Almost half of this amount would be realized by closing virtually all commissaries in the continental United States, thus eliminating the commissary subsidy from the DOD budget. The commissary system is no longer required to meet its historic mission. In fact, 59 percent of those who use it today are retired military personnel. The private sector provides adequate and affordable access to food and staple items in almost all areas. In those very few areas where it does not, the exchange system could meet such needs without a Government subsidy. ! Finance approximately $2.3 billion in three-year annual savings and revenue enhancements could be achieved through implementation of the five recommendations made in this area. Financial issues addressed include foreign military sales, Government-furnished material, freight bill auditing, and procurement auditing. A key recommendation is to establish a public audit committee to advise the Secretary of Defense and to instill tighter controls and increased efficiencies in operation from a stronger internal management audit function. Organization -- the Task Force has analyzed previous studies of the relationship of OSD to the services and the Joint Chiefs of Staff. We have made our own analysis from both an operational and a cost savings perspective. We recommend that a Defense Executive Office be established, comprised of the Secretary of Defense, the Deputy Secretary of Defense, the three Service Secretaries, and the Chairman of the Joint Chiefs of Staff. We recommend the elimination of separate staffs reporting to the Service Secretaries. In addition, we recommend that the position of Undersecretary of Defense for Acquisition be created, and that this new position and function be separated from the Undersecretary of Defense for Research and Engineering. Implementation More than eighty percent of the savings dollars can only be achieved if there is Congressional concurrence. In some cases, affirmative legislation is required. In others, successful implementation of a recommended change can only take place if Congress refrains from blocking DOD's actions. For example, while legislation is not necessary to close a base, too many examples exist where such action has been blocked to say that implementation is in the hands of the Secretary of Defense. The Secretary of Defense is urged to initiate administrative actions to effect change where he already has such authority and to recommend legislation where such is required. As the Report clearly indicates, implementation requires dealing with knotty issues like tradition, interservice rivalries, institutional resistance, and Congressional interposition. It is not an easy task, but it is an important one. All parties should cooperate in effecting the spirit of these recommendations. It is far too costly to the country as a whole, and its Government and people, not to do so. THE REPORT RECOMMENDATIONS A PERSPECTIVE As the product of an unprecedented and wide-ranging survey performed in a political atmosphere by private sector executives and specialists, the recommendations in this Task Force report must be placed in perspective. Our volunteer staff had the formidable task of bringing its expertise to bear on complex Federal operations in the short span of a few months while holding down other full- or part-time employment. Despite these challenges most of which were anticipated at the outset valuable analysis and issue development were achieved. The recommendations contained in this report will result, if implemented, in real and significant savings and other benefits to American taxpayers whose hard work and personal sacrifices financially support these Federal programs and operations. We believe that the majority of our recommendations are fully substantiated. However, it would be misleading to allege that each and every recommendation is rooted in a uniformly high level of research, analysis and substantiation. Various time limitations, business resources, and other constraints did not permit achievement of the desired uniformity objective. We have evaluated, therefore, the "supportability" of the recommendations on their management merits and have grouped them into the following three categories. o Category I o Category II Fully substantiated and defensible. Recommendations in this category are, in the opinion of the Task Force, convincing and deserving of prompt implementation. Substantially documented and supportable. Recommendations in this category may not be fully rationalized or documented in the report, but all indications point to the desirability and defensibility of proceeding with their implementation. |