Rumsfeld gives Defense a corporate makeover

In a move designed to shake up the status quo at the Pentagon, Defense Secretary Donald Rumsfeld on Monday imposed a new, more corporate management structure that gives the service secretaries much greater responsibility for improving Defense operations than has been the case in the past. The civilian secretaries of the Army, Navy and Air Force have traditionally been advocates for their services in the bureaucratic battles for limited resources, generally leaving the management of day-to-day operations up to the generals and admirals who are the service chiefs of staff. To improve both business practices and military operations, Thomas White, Gordon England and James Roche, secretaries of the Army, Navy and Air Force, respectively, will work closely together to reform the military services for the good of the entire department, even if such reforms work against the more parochial interests of the services they represent, according to Defense officials. All three secretaries have extensive corporate management experience--White at Enron Energy Services, England at General Dynamics and Roche at Northrop Grumman Corp. All have been regarded as savvy businessmen with management skills only rarely before seen in service secretary appointments. The challenges they face are myriad. Runaway health care costs, excess infrastructure, billions of dollars in deferred maintenance and unfunded training have hindered military readiness, hurt morale and jeopardized modernization plans. "We were all willing to take on these challenges as long as we weren't here to work at the margins," said England. "We recognize that the Defense Department is different from commercial business, so we cannot run [the services] as our businesses." Among the most daunting challenges the secretaries will face is the lack of financial accountability throughout the Defense Department. None of the military services is able to produce auditable financial statements, and there are few instances were managers fully understand the costs of their operations. While financial management reform is a top priority of the Bush administration, the problems are so entrenched, and the solutions so complex, it's not clear that the new secretaries will soon see improved financial accountability. "There will be measurable cost savings," insisted Roche. But instead of returning savings to the Treasury, as has happened in the past, any savings will be put toward unmet needs of the department, providing added incentive to the services to streamline operations. While Congress will ultimately decide whether the department can retain such savings, Roche said he is confident it will happen. The secretaries will participate in two new management councils that will guide the department in improving business practices and military operations, said Deputy Secretary of Defense Paul Wolfowitz. A senior executive committee, composed of Rumsfeld, Wolfowitz, the service secretaries and acquisition chief Edward "Pete" Aldridge, will function as a business board of directors for the department. A second group, the Business Initiative Council, will be comprised of Aldridge and the service secretaries. Among the things the secretaries are not planning are more studies on how to reform the department. "There have been shelves full of studies recommending reform," said Wolfowitz. "The challenge is the implementation."