Secretary of Defense Chuck Hagel delivered his first major policy speech as Pentagon chief at the National Defense University in Washington, D.C., April 3, 2013. The speech outlined potential departmental changes in acquisition, personnel, and organization, especially with the sequester, and addressed U.S. responses to North Korean threats.
"My goal in directing this Strategic Choices and Management Review – which is being led by Deputy Secretary Carter, who is working with General Dempsey – is to ensure that we are realistically confronting both our strategic and fiscal challenges. It is not to assume or tacitly accept that deep cuts – such as those imposed by sequester – will endure, or that these cuts can be accommodated without a significant reduction in military capabilities. At the same time, we cannot simply wish or hope our way to carrying out a responsible national security strategy and its implementation. The Department must understand the challenges and uncertainties, plan for the risks, and, yes, recognize the opportunities inherent in budget constraints and more efficient and effective restructuring.
This exercise is also about matching missions with resources – looking at ends, ways, and means. This effort will by necessity consider big choices that could lead to fundamental change and a further prioritization of the use of our resources. Change that involves not just tweaking or chipping away at existing structures and practices but where necessary fashioning entirely new ones that are better suited to 21st century realities and challenges. All of this with the goal of ensuring that we can better execute the strategic guidance set out by the President.
In order for this effort to succeed, we need to be steely-eyed and clear-headed in our analysis, and explore the full range of options for implementing our national security strategy. We need to challenge all past assumptions, and we need to put everything on the table.
For example, it is already clear to me that any serious effort to reform and reshape our defense enterprise must confront the principal drivers of growth in the Department's base budget – namely acquisitions, personnel costs, and overhead.
In many respects, the biggest long-term fiscal challenge facing the Department is not the flat or declining top-line budget, it is the growing imbalance in where that money is being spent internally. Left unchecked, spiraling costs to sustain existing structures and institutions, provide benefits to personnel, and develop replacements for aging weapons platforms will eventually crowd out spending on procurement, operations and readiness – the budget categories that enable the military to be and stay prepared.
If these trends are not reversed, former Chief of Naval Operations Admiral Gary Roughead warned, DoD could transform from "an agency protecting the nation to an agency administering benefit programs, capable of buying only limited quantities of irrelevant and overpriced equipment."
Thanks to the efforts of my predecessors and other DoD leaders, we have made strides in addressing some of this internal "crowding out" in the budget. Much more hard work, difficult decisions and strategic prioritizing remains to be done. Deep political and institutional obstacles to these necessary reforms will need to be engaged and overcome.
I'm concerned that despite pruning many major procurement programs over the past four years, the military's modernization strategy still depends on systems that are vastly more expensive and technologically risky than what was promised or budgeted for. We need to continually move forward with designing an acquisition system that responds more efficiently, effectively and quickly to the needs of troops and commanders in the field. One that rewards cost-effectiveness and efficiency, so that our programs do not continue to take longer, cost more, and deliver less than initially planned and promised.
With full recognition for the great stresses that our troops and their families have been under and been under for nearly twelve years of war, and for the essential contributions civilian employees make to the Department's mission, fiscal realities demand another hard look at personnel – how many people we have both military and civilian, how many we need, what these people do, and how we compensate them for their work, service, and loyalty with pay, benefits and health care. This will involve asking tough questions.
Tough questions such as:
- What is the right mix of civilian and military personnel across the Department and its various components?
- Within the force, what is the right balance between officers and enlisted?
- Without necessarily accepting the oft-stated claim that there are more than 300,000 service members performing civilian and commercial functions, what is the appropriate distribution of troops performing combat, support and administrative duties?
There will likewise have to be close scrutiny of DoD's organizational chart and command structures, most of which date back to the early years of the Cold War. The last major defense re-organization, Goldwater-Nichols, was drafted at the height of the Reagan defense buildup and focused on improving jointness and establishing clear operational chains of command. Cost and efficiency were not major considerations.
Goldwater-Nichols succeeded in its purpose by strengthening the Joint Staff and the Combatant Commands, but it went about doing this by layering joint organizations and processes atop service organizations and atop processes. The elevation of the former did not automatically lead to the diminution of the latter.
Today the operational forces of the military – measured in battalions, ships, and aircraft wings – have shrunk dramatically since the Cold War era. Yet the three and four star command and support structures sitting atop these smaller fighting forces have stayed intact, with minor exceptions, and in some cases they are actually increasing in size and rank.
More broadly, despite good efforts and intentions, it is still not clear that every option has been exercised or considered to pare back the world's largest back-office. Prior efficiency campaigns yielded substantial savings from the services, and some from the DoD-elements known as the "Fourth Estate," which consists, as you all know, of the Office of the Secretary of Defense, the Joint Staff, the Combatant Commands and the defense agencies and field activities – the Missile Defense Agency as well as those that provide health care, intelligence, and contracting support.
We need to relook at funding for these activities, which won't be easy. With respect to the fourth estate, former Secretary of Defense Gates compared the process of looking for savings to "going on an Easter Egg hunt" – an image for this time of year. Secretary Panetta was more blunt – he called the Pentagon quote a "big damned bureaucracy." It doesn't sound like Panetta at all! Wherever you are, Leon, know that we are quoting you.
The military is not, and should never be, run like a corporation. But that does not mean we don't have a good deal to learn from what the private sector has achieved over the past 20 to 30 years, in which reducing layers of upper and middle management not only reduces costs and micromanagement, it also leads to more agile and effective organizations and more empowered junior leaders.
In light of all these trends, we need to examine whether DoD is structured and incentivized to ask for more and do more, and that entails taking a hard look at requirements – how they are generated, and where they are generated from.
It could turn out that making dramatic changes in each of these areas could prove unwise, untenable, or politically impossible. Yet we have no choice but to take a very close look and see how we can do all of this better.
In order to address acquisition, personnel, and overhead costs in smart ways that have not been done before we need time, flexibility, and the support and partnership of Congress. We also need long-term budget certainty.
One of the biggest problems that sequester has brought is that it is requiring immediate, deep and steep cuts. This means that the Department will by necessity have to look at large cuts to operations and modernization to find savings that can be quickly realized.
The kinds of reforms the Department needs in other areas would take some time to implement, and take longer for significant savings to accrue. If we get time and flexibility to implement savings, we could limit the impact of spending reductions on force structure and modernization while still making a significant contribution to deficit reduction.
By contrast, the cuts required by sequester afford neither time nor flexibility. These quick and dramatic cuts would almost certainly require reductions in what have long been considered core military capabilities and changes in the traditional roles and missions among the uniformed services.
Regardless, we will need to take a critical look at our military capabilities and ensure that our force structure and modernization plans are directly and truly aligned with the President's strategy. That includes taking a new look at how we define and measure readiness and risk, and factor both into military requirements. It also includes balancing the competing demands of capacity and capability – how much of any given platform we need, and how much capability it needs to have to fulfill real-world missions.
The size and shape of the force needs to be constantly re-assessed, to include the balance between active and reserve, the mix of conventional and unconventional capabilities, general purpose and special operations units, and the appropriate balance between forward stationed, rotationally deployed, and home-based forces. We also need to re-assess how much we can depend on our allies and partners, what can we anticipate from them in capabilities and capacity, and factor these calculations into both our short and long-term planning.
A thorough examination of the way our military is organized and operates will also highlight our inherent strengths. Our strategic planning must emphasize these strengths, which include leader development, training, mobility and logistics, special operations forces, cyber, space, and research and development."