Defense Reform in a New Administration

Within the span of one week in December, President-elect Donald Trump turned the defense establishment on its head with three tweets. The first tweet threatened to cancel Boeing’s Air Force One replacement program, the second affirmed a Washington Post story on billions of dollars in waste within the defense budget, and the third targeted Lockheed’s F-35 program as a way to save “billions.” After several weeks of euphoria within the defense establishment, these tweets helped bring expectations back down to Earth. A change in the White House may mean a larger military and growing defense budget, but it does not mean that “the spigot of defense spending” former Defense Secretary Robert Gates began to close in 2009 will be opened wide again. As the President-elect has indicated since winning the election, defense reform is likely to remain a high priority in the new administration, albeit in a different way. President-elect Trump seems to understand that making the military stronger is not just a matter of spending more money—how you spend it is just as important.

Issue

Despite the cuts mandated under the Budget Control Act of 2011, the defense budget today is nearly 50 percent higher (adjusting for inflation) than it was at the bottom of the last drawdown in FY 1998. Yet the force is smaller by nearly every measure—the number of brigades, aircraft, ships, and military personnel. The military is getting less for more. While the capabilities of the force may be improving—a subjective assertion that is difficult to test—size still matters for many types of military operations. To arrest the trend of growing budgets and declining force structure, the Trump administration will need to consider some major defense reforms.

The President-elect’s public shaming of defense contractors (rightly or wrongly) and his targeting of acquisition programs by the size of their costs (and cost overruns) will not deliver the reform that is needed. What the Pentagon needs—and what the Trump administration is well positioned to deliver—is a bottom-up portfolio review of major acquisition programs that focuses on the return on investment each program delivers. The costs and performance of programs should rightly be part of that calculus, but the value these programs deliver to the nation must also be a key consideration.

In defense, the “return” on an investment is the qualitative military advantage an investment provides. An acquisition program may be expensive—the acquisition costs of the F-35 alone are projected to reach $379 billion—but the capabilities each weapon provides and how important these capabilities are in Trump’s defense strategy are also a factor. For example, stealth is important if you want to be prepared to penetrate sophisticated enemy air defenses (e.g. Russia and China), but it is not as critical for close air support needed in counterterrorism and counterinsurgency operations. Range and payload are key considerations if you want to be less reliant on forward bases that are vulnerable to attack. Alternative weapon systems should also be considered if they can provide some or all of the capabilities needed at a lower cost. And just as in business, sunk costs should not be a factor—only future costs (in terms of dollars and time) can be affected by decisions made today.

The new administration should review and rebalance DoD’s portfolio of investments in weapon systems to limit its exposure to programs that don’t have a return (i.e. needed capabilities) commensurate with their costs. Likewise, it should expand investments in programs that have capabilities critical to its defense strategy and make some small but high-risk bets on new technologies with the potential for high payoffs, such as directed-energy and advanced unmanned systems.

But the new administration’s rebalancing shouldn’t stop with acquisition programs. It should also reassess the other two-thirds of DoD’s budget used for pay, benefits, training, and readiness. If the new administration does not get control of these costs and improve the efficiency with which the military operates, its ability to grow the force will be limited and money could be siphoned away from investments in key weapon systems to pay for operations and sustainment. In particular, the Trump administration should consider the following reforms:

• Use the new authority granted in Section 1101 of the FY 2016 National Defense Authorization Act to conduct a reduction in force (layoff) of DoD civilian employees based on performance. Cutting just the bottom 5 percent of DoD civilian workers would save roughly $3 to 4 billion annually.
• Rebalance military pay and benefits to make it more competitive with the private sector by investing more in the forms of compensation troops value most (cash compensation) and less in those they value least (non-cash and deferred benefits).
• Reform the DoD civilian personnel system by moving workers out of the General Schedule (GS) personnel system to a new system uniquely structured for DoD that empowers managers with greater flexibility to recruit highly skilled workers and dismiss low performers.
• Modernize and decentralize the military personnel management system to give commanders more authority to hire and fire and to give service members more control over their careers.¹
• Change the way the military measures readiness to focus on the outputs desired not the inputs required.

The office within DoD charged with producing and implementing personnel and readiness policies is the Office of the Under Secretary for Personnel and Readiness. For the past eight years, this office has arguably been in a state of disarray and has failed to deliver the innovative reforms the military desperately needs. It has chewed through 10 leaders in either a confirmed or acting capacity, and it has not had a Senate-confirmed Under Secretary for more than four years. In his memoir, former Defense Secretary Gates’ wrote, “Virtually every issue I wanted to tackle … encountered active opposition, passive resistance, or just plain bureaucratic obduracy from P&R [the Office of the Under Secretary of Defense for Personnel and Readiness]. It makes me angry even now.” Given its current state of dysfunction, the Trump administration should work with Congress to eliminate this office and divide up its responsibilities among the Services, DoD Comptroller, and Cost Assessment and Program Evaluation (CAPE) office.

Conclusion

The Trump administration is inheriting a military that is ripe for reform. The military cannot be allowed to continue down the path of increasing budgets and decreasing force structure in perpetuity. Increasing the defense budget without reform is simply throwing money at the problem and will not fix the underlying inefficiencies driving many of the issues the military is experiencing today. Instead, the new administration should rebalance the defense budget with an eye toward the future and restore a sense of fiscal discipline that has been lacking for the past 16 years. The decisions the new administration makes over the coming years will shape the military in which our children and grandchildren will one day fight and serve. Will they inherit a military that is bloated and inefficient with a personnel system from the 1950s and weapon systems ill-suited for the threats they face? Or will they inherit a force with modernized weapons, a modernized personnel system, and an efficient and revitalized civilian workforce? The new administration will help decide.

Footnote

1. For more details on this recommendation, see an upcoming publication (scheduled for February 2, 2017): Tim Kane, Total Volunteer Force: Blueprint for Pentagon Personnel Reform (Washington, DC: Hoover Institution, TBD).

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