Gates Calls for Significant Cuts in Defense Overhead

By Jim Garamone
American Forces Press Service

May 8, 2010 - Defense Secretary Robert M. Gates used the occasion of the 65th Anniversary of the Victory in Europe to declare war on duplicative overhead, bloat and needless spending in the Defense Department.

In a speech at the Eisenhower Library here today, Gates called for a reduction in overhead for the department, and said he wants the department to take a hard, realistic look at what defense capabilities America really needs in the 21st Century.

The Defense Department must take a hard look at every aspect of how it is organized, staffed and operated, Gates said in the speech.

"In each instance we must ask: First, is this respectful of the American taxpayer at a time of economic and fiscal duress?" he said. "And second, is this activity or arrangement the best use of limited dollars, given the pressing needs to take care of our people, win the wars we are in, and invest in the capabilities necessary to deal with the most likely and lethal future threats?"

The secretary called for a two to three percent reduction in overhead costs in the fiscal 2012 budget request. The money saved can be dedicated to force structure – the formations that fight our nation's wars.

Gates noted that Dwight D. Eisenhower, who served as president from 1953 to 1961, led the Allied armies to victory over Nazi Germany in 1945 and confronted the Soviet Union in some of the coldest days of the Cold War. Given his prestige as a five-star general, Gates said, Eisenhower was able to make the tough choices needed for the U.S. military to be balanced and ready.

Still, Gates continued, Eisenhower maintained "his passionate belief that the U.S. should spend as much as necessary on national defense – and not one penny more," Gates said. "And with his peerless credentials and standing, he was uniquely positioned to ask hard questions, make tough choices, and set firm limits."

The secretary said he doesn't see that willingness inside or outside the Pentagon anymore.

"Looking back from today's vantage point, what I find so compelling and instructive was the simple fact that when it came to defense matters, under Eisenhower real choices were made, priorities set and limits enforced," he said. "This became increasingly rare in the decades that followed, despite the best efforts of some of my predecessors and other attempts at reform over the years."

Since the terror attacks of 9-11, the Defense base budget – not including money for the wars in Iraq and Afghanistan – has nearly doubled, Gates said. The gusher of money has ended, and given America's difficult economic circumstances, military spending on things large and small can and should expect closer, harsher scrutiny, he said.

The secretary is not advocating wholesale cuts. He said the nation is still at war and some for of growth must be maintained to fight the battles. Maintaining the brigades, regiments, wings and ships will require real growth in the defense budget ranging from two and three percent above inflation.

"In this year's budget request, the Defense Department asked for, and I hope will receive, just under two percent – roughly that level of growth," Gates said. But without change, this isn't realistic for the long run.Any change will have to overcome opposition inside the Pentagon and on Capitol Hill.

Gates pointed to the alternative engine for the F-35 Joint Strike Fighter and the C-17 airlifter programs as examples. The department does not want or need these programs, and they were not included in President Obama's defense budget request. Yet Congress may put both programs back in the budget at a potential cost of billions.

"I have strongly recommended a presidential veto if either program is included in next year's defense budget legislation," Gates said.

Regular military health care is another budget breaker. Defense Department health care costs have risen from $19 billion in 2000 to about $50 billion today. During that time, the premiums for TRICARE, the military health insurance program, have not risen.

"Many working age military retirees – who are earning full-time salaries on top of their full military pensions – are opting for TRICARE even though they could get health coverage through their employer, with the taxpayer picking up most of the tab as the result," the secretary said.

Both Gates and former Defense Secretary Donald H. Rumsfeld tried to implement modest increases in premiums and co-pays to help bring costs under control. Congress and veterans groups opposed these increases and they "the proposals routinely die an ignominious death on Capitol Hill," Gates said.

The secretary said he understands these political and fiscal realities, but says there has to be real reform in the way DoD does business.

"For the better part of two years I have focused on the Pentagon's major weapons programs – to make sure we are buying the right things in the right quantities," he said. "Last year, the department made more than 30 tough choices in this area, cancelling or curtailing major weapons systems that were either performing poorly or excess to real world needs – about $330 billion dollars worth as measured over the life of the terminated programs. We also began to overhaul the Pentagon's processes for acquisitions and contracting."

Reforming budgeting practices and contracting is a first step, and the department has begun this process, he said. The department is hiring more contracting professionals.

"Another category ripe for scrutiny should be overhead – all the activity and bureaucracy that supports the military mission," Gates said. Overhead makes up roughly 40 percent of the defense budget.

"During the 1990s, the military saw deep cuts in overall force structure – the Army by nearly 40 percent," Gates said. "But the reduction in flag officers – generals and admirals – was about half that. The department's management layers – civilian and military – and numbers of senior executives outside the services grew during that same period."

While private sector businesses have flattened and streamlined the middle and upper echelons, the Defense Department continues to maintain a top-heavy hierarchy that more reflects 20th Century headquarters superstructure than 21st Century realities.

"Two decades after the end of the Cold War led to steep cuts in U.S. forces in Europe, our military still has more than 40 generals, admirals or civilian equivalents based on the continent, Gates said. "Yet we scold our allies over the bloat in NATO headquarters."

This has bred a bureaucracy with its hands in everything, he said. A request for a military dog-handling team for Afghanistan, for example, must be processed and validated through five four-star headquarters before being approved.

"This during an era when more and more responsibility – including decisions with strategic consequences – is being exercised by young captains and colonels on the battlefield," Gates said.

He gave an example of how difficult it is to make even modest adjustments in the Pentagon. "The Department commissioned a study a few years ago to assess the flag-officer requirements of the services," he said. "The study identified 37 positions – out of more than 1,300 active and reserve billets – that could be reasonably converted to a lower rank. None were downgraded."

Gates said he has a few questions: How many of these jobs, headquarters or secretariats are actually doing a needed mission and how many are supervising other headquarters and secretariats? How many of the general and flag officer positions or those in the civilian senior executive service could be converted to a lower grade?

How many commands or organizations are conducting repetitive or overlapping functions – whether in logistics, intelligence, policy, or anything else – and could be combined or eliminated altogether?

Finally, these changes have to be done with a realistic look at the threats. "Before making claims of requirements not being met or alleged 'gaps' – in ships, tactical fighters, personnel or anything else – we need to evaluate the criteria upon which requirements are based and the wider real world context," he said.

"For example, should we really be up in arms over a temporary projected shortfall of about 100 Navy and Marine strike fighters relative to the number of carrier wings, when America's military possesses more than 3,200 tactical combat aircraft of all kinds?" he asked.

"Does the number of warships we have and are building really put America at risk when the U.S. battle fleet is larger than the next 13 navies combined, 11 of which belong to allies and partners? Is it a dire threat that by 2020 the United States will have only 20 times more advanced stealth fighters than China?"

Gates said Eisenhower, with his five-stars and lifetime of experience in military affairs, asked these same questions and made these choices, and he was able to make them stick.

"Therefore, as the Defense Department begins the process of preparing next's years Fiscal Year 2012 budget request, I am directing the military services, the Joint Staff, the major functional and regional commands, and the civilian side of the Pentagon to take a hard, unsparing look at how they operate – in substance and style alike," he said. "The goal is to cut our overhead costs and to transfer those savings to force structure and modernization within the programmed budget."

The secretary wants money taken from the "tail" part of the defense dog to the "tooth." He said he wants enough savings to provide the equivalent of the roughly two to three percent real growth. This would give the department the resources needed to sustain America's combat power in a time of war and make investments to prepare for an uncertain future.

"Simply taking a few percent off the top of everything on a one-time basis will not do," Gates said. "These savings must stem from root-and-branch changes that can be sustained and added to over time."

It is time to act, the secretary said. "What is required going forward is not more study, nor do we need more legislation. It is not a great mystery what needs to change. What it takes is the political will and willingness, as Eisenhower possessed, to make hard choices – choices that will displease powerful people both inside the Pentagon and out."