Pentagon calls for $100 billion in savings over five years

////Pentagon calls for $100 billion in savings over five years

Pentagon calls for $100 billion in savings over five years

In a press conference late last week, Deputy Secretary of Defense Bill Lynn described the process and approach DoD will take to implement Secretary Gates’ call for efficiencies initiatives and overhead reductions (see Highlights, May 14, 2010) in DoD budgets.  DOD expects this process to identify $100 billion in savings over five years that the Services can use to fund force structure and modernization needs.  Lynn described these efforts as taking place in three tracks.  In the first track, DoD expects to reduce nonessential programs and shift resources (about 2 percent in real terms) into force structure and modernization accounts.  The second track, which actually began in earlier budgets, is to develop efficiencies inside the force structure and modernization accounts.  Lynn cited action taken last year to end production of the F-22, cancel the VH-71 presidential helicopter, and end the C-17 program buy as examples of the department’s efforts to reduce program redundancies, stop nonperforming programs, and end programs when capacity is reached.  In the third track of the overall process, DoD will strive to improve efficiencies in headquarters operations through flatter organizations, fewer headquarters, and smaller headquarters' staffs.  According to Lynn, the first two tracks involve realigning funds to use for higher priorities, while they third track may yield savings, but it is focused on operating and managing DoD more efficiently.  Lynn emphasized that these efforts were not aimed at reducing the DoD budget, but to enable DoD to operate within the current budget levels.  By these efforts DoD hopes to be able to “maintain war fighting capability of the forces and to continue advances in capabilities.”  To achieve the savings goals of these efforts, the Secretary will provide each military department and defense component and agency with dollar targets for the new FY2012-16 budget cycle.  The FY2012 target will be $7 billion, $2 billion for each military department and $1 billion for all defense components and agencies.  The five-year total will be $100 billion.  Two-thirds of this amount is expected to come from the transfer of overhead savings to the force structure and modernization accounts and one-third from efficiencies within the force structure and modernization accounts.  Unlike some savings efforts in the past where the Services’ budgets were cut in the beginning of the budget process for anticipated savings, the military services and components will be allowed to keep and redirect savings the identify.  The first chance to determine how effective the Services are in their efforts to identify savings will be when they submit their program estimates to OSD on July 31st. 

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