According to interviews and confidential memos obtained by the Washington Post, the Pentagon last year produced — and quickly suppressed — a study that, according to one person familiar with the report, was akin to "[turning] on the light in a very dark room," revealing $125 billion in waste in its administrative bureaucracy.
According to the Post, the Pentagon ordered the Defense Business Board, an outside federal advisory panel made up of corporate executives and consultants from McKinsey and Company, to analyze and report on the agency's business operations. The report was completed in January 2015 and showed, for the first time, "the Pentagon was spending almost a quarter of its $580 billion budget on overhead and core business operations such as accounting, human resources, logistics and property management." It further identified a "clear path" for the Defense Department to save $125 billion in five years.
Senior defense officials, despite calling for the report, decided instead to bury the findings fearing it would contribute to the perception that the agency was bloated and was not a victim of the austerity it had claimed for years. Further, they worried the findings could result in calls for deeper cuts to defense budgets.
The report was reportedly commissioned at the request Deputy Defense Secretary Robert O. Work, the Pentagon’s second-highest-ranking official. Work was originally optimistic and comfortable speaking publicly about the effort. That changed, the Post reports, once the study was conducted and the results were revealed. Work never disputed the findings but indicated that the $125 billion savings proposal was “unrealistic” and that it had failed to understand the challenges in "restructuring" the public sector.
Work said the board fundamentally misunderstood how difficult it is to eliminate federal civil service jobs — members of Congress, he added, love having them in their districts — or to renegotiate defense contracts.
The Post goes into detail about how the report was conducted, using analysis from databases that tracked both civilian and military personnel, as well as labor costs for contractors. Work was cited as noting the push to streamline the business and administrative side of the world's largest bureaucracy lost steam after former Defense Secretary Chuck Hagel was replaced with Ashton B. Carter in February 2015. Here are some of the findings:
- Almost half of the Pentagon’s back-office personnel — 457,000 full-time employees — were assigned to logistics or supply-chain jobs. That alone exceeded the size of United Parcel Service’s global workforce.
- The Pentagon’s purchasing bureaucracy counted 207,000 full-time workers. By itself, that would rank among the top 30 private employers in the United States.
- More than 192,000 people worked in property management. About 84,000 people held human-resources jobs.
- The average cost to the Army for each contractor that year: $189,188, including salary, benefits and other expenses.
- The Navy was not much better. It had 197,093 contractors on its payroll. On average, each cost $170,865.
- In comparison, the Air Force had 122,470 contractors. Each cost, on average, $186,142.
While some in the Pentagon feared the report may be used as a weapon against the Defense Department, others were vocal that the department had a real problem:
On June 2, 2015, Navy Secretary Ray Mabus delivered a speech at the American Enterprise Institute, a conservative think tank. He complained that 20 percent of the defense budget went to the Fourth Estate — the defense agencies that provide support to the armed forces — and called it “pure overhead.”
Under the 2011 Budget Control Act, the Pentagon is facing $113 billion in automatic cuts over four years. President-elect Donald Trump and Congress can mitigate those cuts if they can agree to a long-term spending deal by October. Trump’s choice for defense secretary, retired Marine Gen. James Mattis, will play a role in those negotiations, according to the Post.