Cutting from the tail

To lower its support costs by billions, the Defense Department needs to replicate outsourcing efforts like the Navy Marine Corps Intranet and the Army Wholesale Logistics Modernization Program, according to a three-year study conducted by former members of Congress, retired military leaders and former Defense secretaries.

The Tail-to-Tooth Commission report, released last week, also called on DOD to outsource its long-haul communications, except for the most sensitive transactions. That would mean an end to the Defense Information Systems Network, which is managed by the Defense Information Systems Agency. The armed services use DISN for long-haul voice, video and data.

Retired Sen. Warren Rudman (R-N.H.) and Josh Weston, the retired chairman and chief executive officer of Automatic Data Processing Inc., led the commission on behalf of Business Executives for National Security and helped write the 17-page report.

The commission took its name from the metaphor used to describe the relationship between DOD's spending on war readiness — the "tooth" — and the costs supporting DOD's infrastructure — the "tail." DOD spends at least 60 percent of its budget on support costs — $744 billion between 1997 and 2001. That's an excessive amount, according to the report.

DOD can save as much as $30 billion by adopting modern business practices, such as opening non-inherently governmental tasks to private sector competition, according to the report.

Political pressures and bureaucratic red tape have stymied some of the Pentagon's efforts to open more than 227,000 jobs for possible outsourcing under the Office of Management and Budget's A-76 guidelines, the report stated.

The report lauded the Navy for outsourcing voice, video and data, as well as the Army for outsourcing the management of its depot-level logistics systems. The report's authors noted, however, that a lot of work remains to be done.

For example, when the Defense Finance and Accounting Service was looking for a vendor to manage its retiree pay system, it released a statement of work more than 2,000 pages long. The agency later reduced the document's length by 90 percent. DFAS has also invited vendors to bid against government teams for the DOD civilian payroll functions.

Commission members also called on DOD to abandon its five-year budgeting cycle and replace it with a two-year cycle.

The report seemed to give support to the Defense Travel System, which has been without a top-level advocate since John Hamre left his job as deputy secretary of Defense in January 2000. DOD spends more than $2 billion each year out of a $7 billion travel budget on administrative overhead, and the report said the DTS could help DOD save in its temporary duty travel expenses.