Defense to weigh merging 'overhead' operations

The Defense Department will look at consolidating personnel, information technology, public affairs and other operations, and experiment with new financial management techniques as part of an ongoing effort to overhaul the military's business operations.

Defense's Business Initiative Council (BIC) has picked 11 new initiatives for its sixth round of reforms, according to a Sept. 13 memorandum from E.C. "Pete" Aldridge, undersecretary of Defense for acquisition, technology and logistics and BIC chairman. Reforms from the previous five rounds are still under way, and Defense plans to formally announce its latest initiatives next week.

Under the latest round of proposed reforms, Defense agencies and field operations will seek to consolidate functions described as "overhead." These include resource management, human resources, technology, legal, contracting and public affairs.

Another reform will use the Marine Corps' approach to financial management as a prototype to help change budgeting techniques at all Defense installations.

All 16 Marine Corps installations are now using activity-based costing, an accounting method that helps managers break down the costs of all of the activities in their organizations. The Marines have also begun linking the cost of certain activities-such as running cafeterias-to performance targets. This allows them to see what it costs to achieve certain results. The BIC initiative aims to apply lessons from the Marines' effort to installations in the other services.

The initiative may help the services stretch limited budgets, says Dale Geiger, an accounting professor at The George Washington University who has studied activity-based costing efforts. "Management is not needed when resources are plentiful, but clearly we have entered an era where DoD resources are tight and management is essential," he said.

The BIC also weighed in on Defense's ongoing review of "core" and "non-core" functions throughout the department, a process that could result in outsourcing of "non-core" jobs. The council has devised a "two-phased approach" for meeting competitive sourcing targets set by the Office of Management and Budget and the military services, Aldridge wrote.

"The BIC also discussed the outsourcing of civilian and military positions that perform non-core functions," Aldridge wrote. "In addressing the question of how to allocate the competitive sourcing study target among the components, the BIC decided on a two-phased approach…. My office will publish detailed instructions to implement this decision."

Other BIC reforms include an effort to upgrade fitness facilities at military installations. Defense will explore different ways to improve such facilities, possibly through the use of public-private partnerships.

Another initiative will study how to improve the overall decision-making process within the department.

The council also approved a proposal to turn an Army project to determine the number of contractors who work for the service into a pilot program for the entire Defense Department.

Click here to see the full list of BIC reforms.

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