Pentagon hides study showing billions in waste

Officials feared Congress would use results to cut budget.

The Pentagon has buried an internal study that exposed $125 billion in administrative waste in its business operations amid fears Congress would use the findings as an excuse to slash the defense budget, according to interviews and confidential memos obtained by The Washington Post.

Pentagon leaders had requested the study to help make their enormous back-office bureaucracy more efficient and reinvest any savings in combat power. But after the project documented far more wasteful spending than expected, senior defense officials moved swiftly to kill it by discrediting and suppressing the results.

The report, issued in January 2015, identified “a clear path” for the Defense Department to save $125 billion over five years.

The plan would not have required layoffs of civil servants or reductions in military personnel.

Instead, it would have streamlined the bureaucracy through attrition and early retirements, curtailed highpriced contractors and made better use of information technology.

The study was produced last year by the Defense Business Board, a federal advisory panel of corporate executives, and consultants from McKinsey and Company.

Based on reams of personnel and cost data, their report revealed for the first time that 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.

The data showed that the Defense Department was paying a staggering number of people - 1,014,000 contractors, civilians and uniformed personnel - to fill back-office jobs far from the front lines. That workforce supports 1.3 million troops on active duty, the fewest since 1940.

The cost-cutting study could find a receptive audience with President-elect Donald Trump. He has promised a major military buildup and said he would pay for it by “eliminating government waste and budget gimmicks.”

For the military, the major allure of the study was that it called for reallocating the $125 billion for troops and weapons.

Among other options, the savings could have paid a large portion of the bill to rebuild the nation’s aging nuclear arsenal, or the operating expenses for 50 Army brigades.

But some Pentagon leaders said they fretted that by spotlighting so much waste, the study would undermine their repeated public assertions that years of budget austerity had left the armed forces starved of funds.

Instead of providing more money, they said, they worried Congress and the White House might decide to cut deeper.

So the plan was killed. The Pentagon imposed secrecy restrictions on the data making up the study, which ensured no one could replicate the findings. A 77-page summary report that had been made public was removed from a Pentagon website.

“They’re all complaining that they don’t have any money. We proposed a way to save a ton of money,” said Robert “Bobby” Stein, a private-equity investor from Jacksonville, Florida, who served as chairman of the Defense Business Board.

The missed opportunity to streamline the military bureaucracy could soon have large ramifications. Under the 2011 Budget Control Act, the Pentagon will be forced to stomach $113 billion in automatic cuts over four years unless Congress and Trump can agree on a long-term spending deal by October.

Playing a key role in negotiations will likely be Trump’s choice for defense secretary, retired Marine Gen. James Mattis.

The Defense Business Board was ordered to conduct the study by Deputy Defense Secretary Robert Work, the Pentagon’s second-highest-ranking official. At first, Work publicly touted the efficiency drive as a top priority and boasted about his idea to recruit corporate experts to lead the way.

After the board finished its analysis, however, Work changed his position. In an interview with The Post, he did not dispute the board’s findings about the size or scope of the bureaucracy.

But he dismissed the $125 billion savings proposal as “unrealistic” and said the business executives had failed to grasp basic obstacles to restructuring the public sector.

“There is this meme that we’re some bloated, giant organization,” he said. “Although there is a little bit of truth in that ... I think it vastly overstates what’s really going on.”

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.

He said the Pentagon is adopting some of the study’s recommendations on a smaller scale and estimated it will save $30 billion by 2020.

Many of the programs he cited, however, have been on the drawing board for years or were unrelated to the Defense Business Board’s research.

Work acknowledged that the push to improve business operations lost steam after then-Defense Secretary Chuck Hagel was replaced by Ashton Carter in February 2015.

Carter has emphasized other goals, such as strengthening the Pentagon’s partnerships with high-tech firms.

“We will never be as efficient as a commercial organization,” Work said. “We’re the largest bureaucracy in the world. There’s going to be some inherent inefficiencies in that.”

Former defense secretaries William S. Cohen, Robert M. Gates and Hagel had launched similar efficiency drives in 1997, 2010 and 2013, respectively. But each of the leaders left the Pentagon before their revisions could take root.

“Because we turn over our secretaries and deputy secretaries so often, the bureaucracy just waits things out,” said Dov Zakheim, who served as Pentagon comptroller under President George W. Bush. “You can’t do it at the tail end of an administration. It’s not going to work. Either you leave the starting block with a very clear program, or you’re not going to get it done.”

Arnold Punaro, a retired Marine general and former staff director for the Senate Armed Services Committee, said lawmakers block even modest attempts to downsize the Pentagon’s workforce because they do not want to lose jobs in their districts.

Without backing from Congress, “you can’t even get rid of the guy serving butter in the chow hall in a local district, much less tens of thousands of jobs,” he said.