Secretary of Defense William Cohen Monday announced a "revolution in business affairs" in the Defense Department that will lead to thousands of civilian job cuts, force Defense agencies to compete with private firms, increase electronic commerce for procurement, and restructure DoD's organizational chart. Cohen also reissued his call for two additional rounds of base closures by 2005.
Cohen was joined by Vice President Al Gore at a press conference announcing the reform plan, which was drafted by a task force led by Deputy Defense Secretary John Hamre. Gore praised Cohen for calling on DoD to adopt private sector practices in its infrastructure operations. Last week, Gore released the annual report of the National Performance Review, which challenged federal agencies to become more businesslike.
"Today, Defense Secretary Cohen will unveil his plans for businesslike Defense management, management that is not only up-to-date, but management that will bring America's defense into the next century--efficient, effective, the strongest in the world by far," Gore said.
The plan calls for a 33 percent reduction in personnel at the Office of Secretary of Defense over the next 18 months. Personnel in Defense agencies will be reduced by 21 percent over the next five years, and DoD field activities personnel will be reduced by 36 percent in the next two years. By 2003, military department headquarters staff will be reduced by 10 percent, Joint Staff personnel by 29 percent and combatant command staff by 7 percent.
By 1999, the department will identify functions that could be performed by the private sector and open many of them to competition. A number of functions have been targeted already, including civilian and retiree payroll systems and other personnel services, surplus property disposal, national stockpile sales, property management and drug testing laboratories. Depot maintenance has also been slated for more competition, but current law allows only 40 percent of depot work to be contracted out. The 1998 Defense Authorization bill, which is awaiting President Clinton's signature, would increase that to 50 percent.
Public-private competition results in 30 percent cost savings on average, the department says, and about half of competitions are won by the government.
In addition, DoD will privatize all of its utilities by Jan. 2000 and seek legislative authority to privatize all military housing construction, Cohen announced.
The plan also calls for further acquisition reforms, including making major weapons systems procurements paperless by the year 2000. To combat criticism of DoD's inventory management, Cohen said the department will order supplies only when they are needed, rather than keeping large stocks in warehouses.
Cohen also called for two additional rounds of base closures, one in fiscal 2001 and another in 2005. Each round will save the Pentagon $1.4 billion a year, the department estimates. A similar proposal earlier this year ran into strong opposition on Capitol Hill.
To implement the reforms, Cohen has created the Defense Management Council, which will be headed by Hamre. The council will negotiate performance contracts with Defense agencies and hold senior managers acccountable to those contracts. It will also oversee public-private competition. Cohen said he is eliminating 22 other boards and committees to prevent the council from becoming an additional layer of management oversight.
"We need to have this revolution in business affairs if we're going to cut the fat out and really apply our resources to building more and more muscle," Cohen said.
According to Cohen, the reforms will allow the department to divert money from support functions to weapons procurement and military training.
NEXT STORY: Congress Struggles to Adjourn