The Defense Business Board (DBB) has completed a study that demonstrates how the Department of Defense (DoD) can achieve savings of over $125 billion in the next five years through a series of productivity improvements. The study was directed by Deputy Secretary of Defense Bob Work.
The DBB report suggests that these savings could be used to help fulfill modernization plans or fund warfighter needs. Savings of $125 billion could fund operations for either 50 Army brigades, 10 Navy Carrier Strike Groups deployments, or 83 Air Force F-35 Fighter Wings, according to studies cited by the DBB.
In completing its work, the DBB interviewed more than 85 officials from private industry, DoD, and civilian experts in business process redesign and enterprise architecture. The panel also researched the best business practices with the private sector, academia, DOD, and other federal agencies.
The report leans heavily on the private sector assumption that productivity gains are driven by improvements in technology, processes, and innovation. The DBB points out that such productivity gains are considered “business as usual.”
The DBB identified recommendations for DoD productivity gains in four areas: 1) Contract Spend Optimization; 2) Labor Optimization; 3) IT Modernization; and 4) Business Process Re-engineering. Implementing these recommendations, according to the DBB, could achieve $75 to $150 in savings over the period 2016-20.
The bulk of the savings would come from contract optimization and labor optimization. The implementation of more vigorous vendor negotiations, gaining economies of scale, reducing contract fragmentation, increasing productivity in labor contracts and eliminating unneeded spending could achieve $46 to $89 billion over five years.
Optimizing the labor footprint by removing unnecessary or excess organization layers and increasing spans, reducing areas of complexity and redundancy, and optimizing the civilian-contractor mix could produce between $23 and $53 billion.
In addition, the DBB estimates that between $5 and $9 billion could be saved in Information Technology (IT) from application rationalization and consolidation, prioritizing requirements and eliminating programs with low return on investment (ROI), process redesign, and data center consolidation and cloud migration.
Successful implementation of best business practices starts with strong leadership and governance structure, the report asserts. This is best achieved by active and visible leadership at the highest level. Governance committees are led by senior leaders and functional leaders. The report stresses that priority accountability is the responsibility of all members and all efforts should be supported by the necessary budgetary resources and expertise.
The DBB asserts that “early mobilization” of these recommendations is the key to achieving these savings. “Every billion saved in 2016 is worth 5 billion [in] FY16-FY20 due to the compounding effect,” the briefing stresses.
Along with the importance of getting started on these recommendations now, the DBB cites several factors that are critical to the success its recommendations. Among these are: committed and visible leadership; a powerful vision statement; clear targets and metrics; implementing an early retirement program and incentives to retain critical talent; and organizational restructuring to create permanent efficiencies.
The final DBB report will include detailed discussion of the points made in the briefing parts.