Defense Secretary Robert Gates needs to leave his successor with a game plan for keeping the Pentagon on the path to a leaner budget, a Pentagon advisory board says.
Gates last year launched an internal DoD cost-cutting drive, an effort that has unearthed $150 billion in savings so far.
But since Gates began the efficiencies drive, allies and critics asked the same question: Even if it works, what happens after Gates leaves the Pentagon?
With the nation facing a dire financial outlook, the influential Defense Business Board approved on Thursday a report with a few suggestions.
“The ‘Houston, we have a problem’ moment is upon us,” said board member Fernando Amandi, adding the Pentagon is headed for an era of “constrained resources.”
That means, as senior defense officials are stressing, the DoD will need to wring out savings annually from within and transfer those monies to projects like next-generation vehicles, aircraft and ships, board members said during a meeting at the Pentagon.
The board will recommend to Gates that he leave for the next defense secretary a “governance process … around every transformation initiative taking place or scheduled,” states the report, approved unanimously.
Without such a process waiting for the next Pentagon leadership group, “we won’t be able to build on the efficiencies initiative,” said Amandi, who led the group that crafted the DBB report. He also has been a senior executive with corporations such as American Express and Motorola.
“A well-led and planned institutional cultural change process is essential to consolidate, build on, and sustain this efficiency objective,” states the report.
The board, which is largely credited with hatching the idea to shutter U.S. Joint Forces Command, also suggests the defense secretary designate a single DoD official to oversee all efforts designed to change how the department does business.
As of now, the deputy defense secretary is the Pentagon’s acting chief management officer. Several board members expressed concern with that arrangement, saying that position has too many other responsibilities. The board recommended that the Pentagon consider making another senior official the chief management officer.
The panel also suggested creating a new program office within DoD to oversee all efforts aimed at altering how it does business.
Such moves would allow the defense secretary and deputy secretary to improve their personal relationships with Congress and industry, as well as other federal agencies, according to the board.
Meanwhile, the DBB also announced it will restart a study into whether the military could reap savings if it started hedging fuel purchases.
Large companies like airlines do this by entering into long-term fuel contracts, assuming future fuel prices will be higher.
The business board tried this before in recent years, but that effort “was a failure,” declared DBB member Denis Bovin, who also is an executive with an investment banking firm.
That extinguished study was halted, Bovin said, because other federal agencies loudly objected to even exploring the idea. He said the White House Office of Management told the board “there’s no need to hedge fuel prices because the U.S. government owns huge stocks.”
But now that there is evidence hedging would have produced savings, Bovin said a DBB study team will examine the idea again.
The U.S. military is the federal government’s largest fuel consumer. Business board members said the Pentagon buys about as much jet fuel each year as a major airline.