U.S. Firm Tasked To Trim Fat From Israeli Budget
Tel Aviv - Israel's Ministry of Defense is opening up its traditionally opaque and jealously guarded ledgers to outside consultants in a government-mandated attempt to shave billions of shekels from its defense budget over the next decade.
By early next year, specialists in the Tel Aviv office of McKinsey and Co., a U.S.-based international consulting firm, are expected to finalize an efficiency plan aimed at saving the MoD some 30 billion shekels ($8.4 billion) through 2019.
The MoD selected McKinsey in July after a nearly yearlong international competition involving five qualified bidders. The consulting contract is valued at "a few tens of millions of dollars" and will last for three years, with options to extend services if needed, an MoD budget official here said.
"We've retained them to look at our budget from the top down; this is something that has never happened before," said the official, an Israeli Army brigadier general who serves as economic adviser to the Israeli MoD and the Israel Defense Forces (IDF) General Staff.
According to the official, the consultancy-assisted efficiency effort involves an unprecedented amount of transparency and requires "extraordinary" cooperation between McKinsey advisers and Israeli defense budget and planning officials.
"We're in a cultural revolution. At first, some thought it was happening too fast and was too intrusive, but we're now beyond that stage. We have no choice. We now all understand we must go through this process of efficiency … and that our chances for success are much greater with outside expertise," he said.
The official added, "Within six months, they [McKinsey] will have all the data they need to build a serious, executable cost-cutting plan."
In a July 2 announcement, Israel's MoD said the efficiency program marks a concerted effort by MoD and the IDF to implement government-approved recommendations to trim 30 billion shekels from national defense outlays over the coming decade. According to the announcement, McKinsey will provide a team of Israeli experts, who will be assisted by the firm's database and international experts qualified for the Israeli project.
"McKinsey is an international company with an Israeli office that has operated in Israel for a number of years. The company has implemented until today efficiency programs for a variety of large organizations in countries around the world, including defense ministries and militaries of Western nations," the MoD announcement said.
Retired Brig. Gen. Pinhas Buchris, MoD director-general, and Maj. Gen. Dan Harel, deputy chief of the IDF General Staff, will oversee a steering committee consisting of McKinsey specialists, representatives of IDF service branches and departments, and senior MoD civilian officials.
"It's appropriate to note that the director-general of the MoD and the deputy IDF chief of General Staff view implementation of this mission as a qualitative improvement that will enable us to deal more effectively with the heavy national missions that await us over the coming decade," the statement said.
John Cheetham, a McKinsey spokesman from the firm's London office, declined to comment on the Israeli program. "As a matter of policy, McKinsey does not speak publicly about its clients or the work it performs around the world," he said.
MoD's defense budget for 2009 is pegged at 51.6 billion Israeli shekels, which includes more than $2.5 billion in annual U.S. military grant aid. Both the Israeli and U.S. portions of the national defense budget are slated to grow incrementally over the decade to meet Israel's expanding security needs. ■
E-mail: bopallrome@defensenews.com.
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