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Report: U.S. Last in Combat Gear Output Per Spent Dollar

Mar. 15, 2010 - 03:45AM   |  
By JOHN T. BENNETT   |   Comments
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The United States scored last in a new study that examined how 33 major militaries spend funds on weapon systems - while potential U.S. rival Russia ranked third.

In a study due out March 15, consulting firm McKinsey & Co. examined how efficiently 33 nations that account for 90 percent of worldwide defense expenditures perform a range of functions. The study looked at how these militaries go about doing certain tasks in three key areas: personnel, maintenance and weapon buying.

"In general, countries that make it a point to support their domestic defense industries have higher procurement costs than those that rely on imports. Countries that procure older equipment from the global market tend to have very capable fleets for less money," according to the report.

"The United States and Australia are the lowest performing countries with regard to equipment output for every dollar spent," McKinsey concludes.

Washington and its Down Under ally both tallied scores of 17, worst among the 33 nations McKinsey examined.

Brazil gets the most military output per dollar spent, racking up a study-best 330 points, followed by Poland's 287 and Russia's 253.

The average score was 100 points, according to the report, which will be published as a special defense issue of the firm's "McKinsey On Government" publication, which focuses on government management practices.

John Dowdy, head of defense and security for McKinsey, said there is no question, however, which nation's military brings the biggest punch to any given fight: the United States.

"The American military is very high quality, but that comes at a very high cost," he said.

Although the report awarded points for most efficient practices in several areas, including procurement, its chief authors said no one nation can be branded as most efficient.

"Studies have found, in education, Singapore and Finland are the best across the board," Dowdy said. "I'm afraid in defense, there are no Singapores or Finlands."

Best Practices

"There are pockets of best practices that we have identified," Dowdy said. For instance, one nation may be doing tank maintenance the best but has a way to go on helicopter training.

The goal of the study, he said, was identifying best practices that nations can apply in areas where they may be wasting money with inefficiencies.

McKinsey researchers conducted the study by analyzing publicly available records "on the quantity and type of military equipment, number and general classification of personnel, annual defense budgets disaggregated into key spending categories," the report states. Data was then converted into a series of ratios that measured actual outputs in the three areas.

The McKinsey study also determined that militaries that do things across their various armed services scored higher.

Within the 33-military sample, the highest level of "joint spending" was 68 percent (South Africa) and the lowest was 3 percent (Brazil, Portugal and Greece).

The United States ranked toward the low end on a chart in the report, with 16 percent joint spending. France, Taiwan and Australia were all midpack, with about 30 percent.

"Not surprisingly, we found that countries that share more functions across the armed services tend to be more efficient," the report said.


On personnel, the study examined the nations' so-called tooth-to-tail ratios. The tooth is defined as the military strength "in the front lines." Non-combat tasks such as procurement, maintenance, accounting and others were placed in the tail category.

Norway had the largest tooth-to-tail ratio, with its personnel breaking down as 54 percent tooth, 36 percent non-combat and 11 percent combat support. The United States was second-to-last with 84 percent of its personnel in non-combat or combat support positions.

The average was 26 percent tooth, 63 percent non-combat and 11 percent combat support.

The McKinsey report also notes that some nations, such as France, are attempting to bring about a "dramatic reduction of administrative personnel through investment in IT systems and outsourcing of certain non-combat operations to the private sector."

Keeping its focus on best practices, the report points to an unnamed "Northern European" nation that set out a few years ago to increase its tooth-to-tail ratio. When it started, this nation's military personnel were 40 percent tooth and 60 percent tail. The goal was a 60 to 40 ratio.

This nation met its goal, the report said, "by centralizing formerly duplicative support functions including [human resources], [information technology], finance, media and communications, health services, and facilities management."

This nation mapped "the functions' activities and resources - what exactly each function did, who did it, and how many people did it in each regiment - and by comparing itself with other public and private sector organizations, the defense ministry realized that centralization would yield savings of approximately 30 percent per function," according to the report.

On maintenance, the firm found a wide range on how much nations spend to keep their equipment running.

Adopting best practices in certain areas, Dowdy said, could save militaries "up to 60 percent."

One primary way to generate such savings, according to the report, is avoiding placing large numbers of uniformed personnel in nonmilitary jobs.

"Our experience working with a number of defense organizations indicates a 40 percent to 60 percent potential for increasing the quality and productivity of the maintenance, repair and overhaul (MRO) function without increasing costs," the report states. "We have found that the best-performing military MRO organizations make smart use of outsourcing, excel at contracting, and constantly optimize their maintenance processes."

Dowdy said McKinsey researchers have been "testing" the study and its methodology for some time. The firm plans to present its findings to defense officials across the globe.


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