Original Post Date: Wednesday, September 29, 2010

In May of this year the Washington Post published an editorial article on the need to reduce waste in the Defense Department. The byline of the article was “Defense Secretary Gates’s war of necessity against wasteful spending.” In this article the writer points out that the secretary is taking on the challenge of maintaining our military force [at reasonable level of effectiveness] during a time in which the President and Congress are seeking cost savings / reductions based on the decrease in our presence in Iraq.  Mr. Gates goal is to look for efficiencies in the tooth (combat) to tail (support) ratio. In an era in which industry and private business has flattened their organizations the Defense Department has grown its bureaucratic levels of staff. In some case the levels between the secretary of defense to the line soldier- sailor – airman has grown from 17 under Secretary Rumsfeld to as much as 30 under Secretary Gates.


What are the implications of this need upon the cost estimating community? Clearly there is a requirement to make choices between competing priorities. The defense budget has nearly doubled since September 11, 2001. However, this increase has not been mostly tied to combat forces and force generation but to non-military purposes. For example military Health-care costs have gone from $19 billion to $51 billion in the same time period now accounting for almost 10% of the entire defense budget. Given this situation the department of defense will need to justify every allocation of resource both old and new. PEOs, / PMs will be required to make a business case for their programs. However, unlike the cold war era, in which this case is made only against the need to create a combat capability, these initiatives will need to show value added over such things as family quality of life, MILCON, or pay increases. This prioritization between disparate goals will require a more robust set of data and costing tools. It will also require a well defined, effective, and agile Business Case Analysis capability.

Bob Koury
Senior Cost Research Analyst, PRICE Systems