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Panel Says DoD Could Save Billions by Changing Business Practices

Jan. 27, 2014 - 02:16PM   |  
By MARCUS WEISGERBER   |   Comments
A supply warehouse clerk, Combat Logistics Battalion 4, 1st Marine Logistics Group (Forward), takes inventory in Afghanistan. A Pentagon advisory board sees huge savings through logistics improvements.
A supply warehouse clerk, Combat Logistics Battalion 4, 1st Marine Logistics Group (Forward), takes inventory in Afghanistan. A Pentagon advisory board sees huge savings through logistics improvements. (US Marine Corps)
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WASHINGTON — The US Defense Department could save $27 billion to $37 billion annually over the next four to five years by instituting business practices commonly adopted by major corporations in cash-strapped periods, an influential Pentagon advisory board said in a new report.

The majority of the savings could come through a massive overhaul of DoD’s logistics and supply chain, including shuttering military supply depots and warehouses, a Defense Business Board team said in a report briefed to panel members on Jan. 23.

While the panel’s recommendations are not binding, the group of independent business leaders routinely provides advice and recommendations to the defense secretary and other senior leaders across the military. Leaders have acted on previous board recommendations, such as former Defense Secretary Robert Gates’ decision to close US Joint Forces Command in 2010.

Logistics and supply changes alone could save $18 billion to $23 billion, according to the writers. Instituting new financial and cost management practices could save $4 billion to $6 billion.

Reducing layers of management could save DoD $5 billion to $8 billion, according to the report.

The Business Board team that conducted the review also explored changes to military compensation and benefits — historically a third-rail area since millions of people are affected, and there are numerous passionate parties involved. Changes here could yield $1 billion to $2 billion in savings in the near term, but $250 billion to $270 billion over 20 years, the panel’s report states.

There has been no shortage of advice for areas DoD could target as it prepares to unveil a 2015 budget plan in the coming weeks. DoD faces budget caps that are tens of billions of dollars lower than planned spending figures for each year through the remainder of the decade.

DoD has implemented hundreds of billions of dollars in efficiency improvement initiatives since 2010.

“In this constrained budget environment, we will continue to look for ways to reduce overhead, improve efficiency and maximize combat power,” Defense Secretary Chuck Hagel said in December. “But we must do so in a deliberate manner after careful consideration of how best to ensure this department is able to carry out its mission of defending the nation.”

Among the most recent initiatives is reducing DoD headquarters staffs by 20 percent over the next five years. Defense officials hope that specific effort will save them $1 billion over that timeframe.

The Government Accountability Office, in a report released this month, said DoD needs to improve the way it evaluates it efficiency initiatives.

DoD had no immediate comment on the Business Board report, which had not been briefed to senior leaders as of Jan. 24. ■

Email: mweisgerber@defensenews.com.

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