Are We Confusing Budget Cuts with Savings?
by Bill Anderson
Recently, I had the pleasure of visiting one of our larger U.S. military installations. As I spoke to the men and women charged with the tough line responsibility of maintaining readiness in this challenging budget environment, I immediately noticed two things.
First, these patriots are working hard trying (and largely succeeding) to accomplish the immediate tasks on their plate even with the financial pressures placed upon them…though certainly the long-term readiness of the force…under current (and upcoming) austere conditions…weighs heavily on their minds.
The second observation is the truly troubling one. Our base-level leadership is being forced into decisions under the guise of cutting budget that will not, in the long run, cut costs at all. Indeed these cuts will, in fact, increase the cost of doing the military’s business and chip away at military readiness.
I’ll share a story as an illustration. As immaterial and inconsequential as this might seem, it paints a picture of shortsightedness forced down to the base level and an unwillingness to address tough and potentially lucrative real cost savings at the Pentagon level.
The result? Actions at the margins that might appear to save a few dollars in a budget line item on a score keepers tally are celebrated. At the same time true systemic…and yes, difficult and politically uncomfortable actions that would significantly and permanently reduce costs are ignored.
Getting back to my story. Budget pressures had forced operating managers at the base to cut/eliminate service contracts like the ones for personnel who clear snow, empty waste cans and cut lawns. Well, the snow still falls and it must be cleared, budget cuts or not.
So the facility manager was forced to redeploy highly compensated technical personnel to shovel enough snow to make sidewalks passable.
The building services account budget certainly was reduced but was money really saved? Of course not.
The story gets worse. As the manager expressed his further concern…slip and fall injuries. Technical personnel have their assigned duties to perform, so snow removal is done to a bare minimum. This may leave slipping hazards on parking lots and sidewalks that might take a valued employee off the job and drive a very expensive worker’s compensation claim.
Penny wise and pound foolish maybe? A budget line item has been reduced so a bureaucrat somewhere can check a box but I’m not sure the American taxpayer should jump for joy.
Only one example…and the financial impact…a nit.
What this illustrates, however, is a flawed process that on paper looks like progress is being made while, just below the surface, the reality is quite different.
This approach is somewhat understandable…cut funding for activities that appear low priority and costs will go down, right?
In fact, private industry drew the same incorrect conclusions decades ago during frantic budget reduction exercises. But, what has been learned by the private sector over those decades is that you really need to look at end-to-end implications of these rather “inconsequential” decisions.
Intended versus actual results can vary dramatically.
What is not understandable here is that the Pentagon failed to learn from the hard learned lessons in private industry and maybe they never bothered to ask.
If Pentagon leadership had benchmarked against industry, they would have quickly understood that a very different and much more prudent path must be taken.
Now, that more prudent path is a much harder road.
It requires true leadership and the courage to stand against the critics who don’t want the tough decisions to be made.
Actions as noted above impact minimal numbers of lower paid workers scattered around the country…so things kind of fly under the radar screen.
But, those blue collar jobs lost by drawing a red line through a budget category really hurt those who we all agree have been most impacted by the current recession.
Real leadership would go after sacred cows and pet projects where huge…and real…savings could be realized.
Systemic and long term actions would be proposed and these actions would drive efficiency. Leaders would ask tough questions about redundancy, value and effect. And waste would stand front and center as a targeted effort.
Now, actions on this part of the ledger will result in intense pushback from powerful interests and they have the power to protest vigorously where that hourly employee shoveling snow at the base does not.
But, we all know where the real savings lie. Shakespeare warned us of these inevitable protests to come…”The lady doth protest too much, methinks”. Hold on…here it comes.
The fact is the most fertile ground for effective and immediate REAL cost savings lies in waste, fraud, abuse and lack of accountability.
Nothing new here…we’ve all known this for decades.
What would be new is focused execution by leaders with real accountability that really gets at these issues in an effective and immediate way.
Adding to the urgency is that apparently while so much effort is being expended to find budget savings within DoD, new reports identify rampant military waste and cost overruns in the trillions of dollars.
Could this be one reason why as most of the country continues to struggle towards a financial recovery, the counties surrounding the District of Columbia continue to post sharp gains in affluence? The identified cause…the lack of oversight in the Pentagon. The list of examples of lack of financial stewardship and lack of oversight grows larger by the day.
Here, just a short list of such examples:
- $100 million of wasted airline charges. Refundable tickets that were unused by travelers where no refunds were ever sought…really? Also, identified incidents where DoD reimbursed employees for travel expenses where those costs were directly paid by the Department. The first…sloppy financial management…the second…just plain fraud.
- Waste of $2.5 billion on purchase of unreliable body armor. The money squandered is unacceptable…the increased risk to life and limb of America’s brightest and best is unconscionable.
Not so long ago, former Chairman of the House Armed Services Committee Ike Skelton stated that military waste was spiraling out of control. He expressed his belief that savings of up to $135 billion could be saved over 5 years by rooting out waste, a rather sizable amount that would go a long way to cover DoD’s share of budget cuts. A 2009 GAO study outlined process flaws that have led to this ever growing problem and it all boils down to accountability and proper stewardship:
- DoD commits to more programs that its resources can support.
- The Services don’t coordinate needs, so duplication of efforts significantly runs up costs.
- The Pentagon regularly accepts unreliable and unrealistic cost estimates based on overly optimistic assumptions and kicking the can down the road and burdening successors and the taxpayers with problems years later.
- DoD officials are rarely held accountable for poor decisions or poor program outcomes.
A path for immediate and substantive progress seems pretty apparent and initial steps can be accomplished with no impact on military readiness. As a matter of fact, these steps would likely increase readiness in the short term. The three initial actions should be as follows:
- Immediate Attack on Identified Fraud and Waste: The list of examples of fraud, waste and abuse is long and well-known. The only real question is why, with all the information at the fingertips of Pentagon leadership, these issues have remained unaddressed. The numbers are huge…the actions necessary to make an impact are pretty self-evident. The action desperately needed? Immediate stand down of organizations/programs where fraud, waste or abuse have been identified. Assignment of a “turnaround leader” with clear direction and authority to change policies, procedures, personnel and suppliers in order to correct identified issues. Then, reboot and remain accountable for performance until a steady state of performance is reached.
- Leadership Turnover…Reward Prudent Risk-Taking…Promote Visionaries/Change Agents: An organization accountable to shareholders experiencing the level of financial turmoil as is the Pentagon would be under incredible pressure to make immediate and substantive change. The first step would be leadership change. Fresh eyes, fresh ideas and those not beholden to the status quo are the ones who can right the ship. It’s true in private industry and it is true in government.
- Hold Military Leaders Accountable…Consequences for Mismanagement and Missing Targets: A bipartisan effort in the Spring of 2010 pushed for two reforms within DoD specifically targeted at accountability and performance-based pay/promotion:
- Establishment of individual performance assessments tied to pay, promotion and scope of authority.
- Align DoD financial management practices to be more in line with those of the private sector. It is very hard to argue that auditable financial statements would have a huge impact on reducing waste, fraud and abuse…and this has been known for years…yet this basic building block of financial stewardship and accountability still remains elusive in the Pentagon.
There is nothing groundbreaking here and the lessons relearned during the recent financial meltdown should be fresh in everyone’s mind.
When leaders are not held accountable and where extraordinary and fearless leaders are not at the helm and where financial controls are not in place, the wheels fall off. And, it happens every time without exception.
So, until drastic measures are taken to effectively address identified and real opportunities to reduce costs without impacting readiness, should America sleep well tonight?
Maybe we can drift off, secure in the knowledge that our current budget woes will be solved by the elimination of snow removal, janitorial and grounds maintenance contracts at military bases and be happy that their hard earned tax dollars go to redeploying skilled technical and managerial personnel to cover duties previously covered by appropriate service contract arrangements?
I just hope that when a destroyer captain and his crew are ordered to sea, those tasked with preparing and maintaining his ship aren’t busy shoveling the latest snowfall.
Will our national security requirements have to wait for the spring thaw?
The Honorable William C. (“Bill”) Anderson served as Assistant Secretary of the Air Force for Installations, Environment and Logistics and the Air Force Senior Energy Executive under President George W. Bush from 2005-2008. He can be contacted at [email protected].