Newspaper's Expose on Pentagon Waste Draws Mixed Reviews

With the words “exclusive” and “Bob Woodward” on top of its story, The Washington Post’s Tuesday expose on a “buried” Pentagon study that identified an $125 billion in waste over five years drew considerable attention.

Several lawmakers, the Defense Department’s chief union and at least one anti-waste advocacy group greeted the story as vindication of their past critiques of military contacting bloat. But the department itself and former officials told Government Executive that the alleged value of wasted money was overstated.

Woodward and veteran investigative reporter Craig Whitlock’s story, headlined “Pentagon buries evidence of $125 billion in bureaucratic waste,” described a McKinsey & Co. study commissioned by the Defense Business Board at the behest of Deputy Defense Secretary Robert Work.

A version was released in January 2015, but only after officials attempted to hide the data from the public—efforts the Post documented. The study, which was covered at the time by Defense News and other major defense publications, “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 Post wrote.

The data showed that Defense is “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 reporters wrote, supplying new numbers such as 457,000 in supply chain and logistics and 207,000 people in acquisition and procurement.

The response on Capitol Hill on Tuesday was quick. Armed Services Committee chiefs Sen. John McCain, R-Ariz., and Rep. Mac Thornberry, R-Texas, joined in a statement calling the findings “not a surprise . . . We have known for many years that the department's business practices are archaic and wasteful, and its inability to pass a clean audit is a longstanding travesty. The reason these problems persist is simple: a failure of leadership and a lack of accountability.”

Which is why, they continued, the committees over the past two years have mandated a 25 percent cut in the Pentagon’s administrative support and headquarters staff, along with a 12 percent reduction in flag officers and civilian Senior Executive Service employees.

Sen. Claire McCaskill, D-Mo., who in January will become the top-ranking Democrat on the Senate Homeland Security and Governmental Affairs Committee, reacted more strongly. “If this is true, the Pentagon played Congress and the American public for fools,” she said. “It would mean that while some in Congress were busy debating cuts to vital services, furloughing employees, and threatening working people's’ pensions, the Department of Defense literally knew it could save the American people billions and billions of dollars in bureaucratic waste, and instead, they buried it. I vow to get to the bottom of this.”

American Federation of Government Employees President J. David Cox Sr. said in a statement to Government Executive that the report “confirms what we have known for decades: that the Pentagon is flagrantly wasting taxpayer money by hiring costly and less accountable contractors to do support work that civilians can do for far less. By insourcing much of this work, the Pentagon could free up tens of billions of dollars a year to invest in our troops.”

Cox added, “We are glad that this long-suppressed report has seen the light of day and hope it spurs action in Congress to curb the Pentagon’s wasteful spending on service contracts,” but

AFGE actually commented on the report back in January 2015, expressing surprise that the Defense Business Board had changed its past leanings and called for cutting the civilian workforce.

In the Post story, Work highlighted savings reforms already underway at the Pentagon, adding that the Defense board’s reforms for saving $125 billion were “unrealistic on the intended timeline given the defense program, budgeting procedures and the unique impediments facing the department that do not apply in the private sector.”

Pentagon press secretary Peter Cook on Tuesday told the Associated Press that senior managers at the Pentagon concluded that the study, "while well-intentioned, had limited value" because it didn't take into account existing programs to improve efficiency and because it lacked "specific, actionable recommendations appropriate to the department."

Also skeptical was Robert Hale, the former Pentagon comptroller who left in June 2014 (before the Defense Business Board study) and is now a fellow at Booz Allen Hamilton. “There is no question that there is waste and inefficiency at DOD,” he told Government Executive. “And a number of items the board mentioned—such as getting rid of low-priority contracts and optimizing labor contracts—are things the department has tried and has achieved some progress.”

But the projected savings of $125 billion in five years “appears based on some assumed productivity gains, 9 percent savings in the first year, 3 percent to 5 percent per year after that, but in my experience you don’t get those kinds of savings.”

The study’s own private-sector comparisons, he noted, showed that only 17 percent of optimization efforts achieve their full potential. Also, “the department is busy fighting wars, which does take away the time they have to spend” on efficiency reforms, said Hale, who recently laid out his own 10 efficiency recommendations in a paper published by Center for New American Security.

Plus, Defense employees’ “incentives are not the same as in the private sector, where if you save money and keep customers, you’re happy to get a big bonus,” Hale said. “In DOD, some comptroller like me is likely to grab savings for some other purpose.”

Mark Cancian, an alumnus of the Pentagon and the Office of Management and Budget who is now senior adviser at the Center for Strategic and International Studies, noted that the Post’s phrasing of the story as “bureaucratic incompetence” will have impact because the paper has influence in Washington. But the study “doesn’t actually specify any actions for savings,” instead calling for “a committed leadership to stand up cross-functional teams that will look at contracts and the workforce and apply the best commercial practices.”

Cancian said he can see why Deputy Secretary Work would be frustrated that the study “threw $125 billion around as if it were on the table,” he said. “You have to talk about specifics, not just paint with a broad brush.”

As a veteran himself, he added, “applying commercial practices that identify specific areas of savings often cause people to recoil and push back.” The example he gave is the often-offered proposal to shut down commissaries. “No company has its own grocery store, but to many in the military community, they are a symbol of a commitment made to them,” Cancian said. “It’s part of what makes the military culture so distinctive.”

Danielle Brian, executive director of the nonprofit Project on Government Oversight, called the Post story “a perfect illustration of the three biggest problems affecting the Defense Department: a contractor workforce that costs too much; a culture of secrecy; and a fear that exposing waste will lead to cuts in defense spending. It and other reports also show there are plenty of opportunities to cut Pentagon spending and the next administration should be skeptical of anyone who tells them otherwise.”

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