Dominant Logistics
Transforming Military Spending
There can be no doubt that the United States spends far more than it needs to on defense. Unfortunately, much of this excessive spending is the result of waste and fraud as opposed to legitimate defense expenditures. This raises an obvious question - how can we eliminate the waste and fraud while maintaining a strong military. A variety of options should be explored to get military spending back under control.
Reducing the Federal Debt
The most critical step is to reduce the level of debt currently owed by the Federal Government. Payments towards the national debt are one of the single largest expenditures made in the federal budget every year and past defense expenditures are largely responsible for this. While defense may be a smaller portion of current federal budgets, taking steps to reduce the federal debt will free up money for legitimate defense needs. This can be accomplished in a variety of ways but the military can play a key role here. In particular, if we establish a Department of Logistics, as defined elsewhere, we can use this organization as a vehicle to manage the transfer of excess land and materials to the commercial sector. As defined, the DOL will operate as a profit center and serve as a management entity for the overall logistics needs of the Department of Defense. It will have no operating budget in the traditional government sense; all funds must be generated by providing goods and services.
The establishment of the DOL will include the transfer of current military controlled lands to the DOL at which point this land can be used for other purposes. For example, if a given chunk of field area is not being used by the branches of service, the DOL may choose to either sell the land outright or lease it to a commercial entity to generate revenues. Even in the case of sale, the DOL would retain the right to charge a local tax for activities on the land after the sale, not unlike a property tax since this land is part of federal property and is not included in local land assessments. The basic concept here is to convert existing assets that are currently nothing more than dead weight upon the military into revenues, either through sale or commercial use.
In theory, the DOL could even sell off entire installations and apply the proceeds to the "defense" portion of the national debt. This same approach could be used for eliminating excess systems like used tanks, fighters, and ships - the DOL would be able to broker deals to provide allies and even the current military with refurbished hardware and other used systems. For example, we currently have an entire Air Force base devoted to holding excess aircraft in storage, most of which are entirely unuseable. The DOL would take over this facility and the aircraft being stored. The aircraft may be crushed and recycled for cash, refurbished and sold to an ally or the DOD, or even rebuilt and sold on the commercial market. Commercial groups are now operating to train Air Forces while many freight companies could put a rebuilt C-141 to good use. And because this is mainly a storage base, the DOL could also open up much of the land to commercial projects like power plants or factories, charging lease fees to defray the costs of operating the installation. Revenues from sold items are used to pay down the defense portion of the debt while recurring fees are used to pay for current defense needs.
The DOL as a Taxing Entity
One of the so-called benefits of military life is that you don't have to pay taxes for goods and services on the military installation. The problem with this is that someone else ends up picking up the tab, namely the taxpayer. It would be far more beneficial to the military and society to pay the servicemembers an appropriate wage to begin with and then allow the DOL to become a taxing entity.
In many cases, it would be most beneficial for the DOD to simply sell off their excess land but in some cases, underused facilities may need to be maintained for legitimate defense purposes. A good example would be excess airfields and bases in strategic locations. The Air Force may only run a few flights out of these bases in a typical day but these flights serve legitimate purposes that are needed for defense. Instead of underusing the facility, the facility can be retained by the DOL but be opened to commercial entities with appropriate access fees charged. Maybe Fed Ex or UPS needs another location for shipping or a commercial carrier may need a maintenance facility - the base can be opened for these operations while retaining overall control within the military for defense purposes. As holder of the property, the DOL would be allowed to charge property taxes and service fees for use of the facility.
Similarly, the DOL could charge sales taxes and other user fees for providing general services at all installations. While it is often viewed as a major benefit to military personnel to not have to pay taxes on commissary purchases, the expenses these fees cover still exist and end up being reflected in the overall military budget. It makes no sense to be charging the taxpayers for services that only some servicemembers are able to use. Just as in civilian society, there needs to be a system where those who use the services are charged fees for that use while those who don't use the service get to keep their money. For example, all servicemembers suffer lower pay associated with not having to pay sales taxes at the commissary - but what if you have to live off post and can't necessarily GET to the commissary to do your shopping? Or what if you are a reservist who is authorized to shop on a military installation but don't live anywhere near one? Or what if you simply cannot afford the extravagant purchases that are available through the military PX system? You end up shopping locally and being forced to pay taxes which you aren't given sufficient pay to cover. A more appropriate system would be to pay servicemembers a real wage and then charge sales and other taxes at on-post facilities, with these fees providing revenues to the DOL for providing the services.
The CX Buy Concept
Some time back, Carlton Meyer proposed what he referred to as a "CX Buy" of commercial aircraft to support military needs. In essence, Meyer suggested that because major aircraft require so much lead time to construct, we arrange a flexible purchase agreement with Boeing where they would be able to produce a given quantity of aircraft every year and deliver these to either a commercial customer or the military to meet the needs of their market. If there is a high demand in the commercial sector in a given year, more aircraft can go there; if the civilian market is slumping, the Air Force would receive more planes instead. This concept can, and SHOULD, be applied in a variety of ways. The reality is that most military procurement could benefit from applying these concepts.
For example, let's say that the Air Force big wigs grew brains and realized that there is no reason to replace the F-16 in the near future. Instead of engaging in some massive, short-term block purchase of aircraft, they could negotiate a 20-year flexible deal with an average of 100 fighters per year at a discounted price indexed to inflation and upgrades. Some years, the Pentagon may only get 80 fighters while other years it may receive 120, depending on the market for F-16s and their respective parts. Ships can be built under the same type of arrangement, particularly the HSV or similar designs that will need to be purchased in significant quantities. As with large aircraft, ships can take years to construct and locking in a long-term contract of steady production and purchases will result in lower purchasing costs.
But as Meyer points out, the key problem with the concept is that it would wreak absolute havoc on the budgeting process as every year, billions of dollars would remain in flux. But here is where the DOL can provide a buffer between the military and defense industries to resolve this problem. Since the DOL will be responsible for managing war stocks and attrition reserves, they will have quantities of these systems and materials in addition to the actual military branches. Using our F-16 example, the first batch of 100 F-16s would go to the DOL for reserves. The following year, if the contractor exercises their option to only provide 80 to the US force, these 80 aircraft as well as 20 from the DOL can go to the Air Force; if the contractor can kick out 120, then 100 would go to the Air Force while the excess 20 would be purchased by DOL. If the DOL already has sufficient aircraft to meet reserve needs plus account for production shifts, they can take the excess aircraft and offer them through lease agreements to other nations or to civilian groups that provide training to military forces.
With this approach, most of our reserve systems could be offered to allies or other organizations under lease agreements where the systems would be returned to US forces if needed. For example, excess tankers could be leased to Britain or Japan to support their own forces but these would remain available to the US Air Force in time of war. Fighters could be provided on lease to South Korea or Taiwan. Canada has been requesting nuclear submarines for years - excess subs could be leased to Canada with maintenance and safety personnel contracted through the DOL. Older excess materials could be sold outright to defray current and future costs. Many current systems, like freight aircraft and ships, could be purchased by the DOL and then leased to civilian freight companies during peacetime. Similar programs are currently in place for some types of aircraft, we're merely extending the concept to its logical conclusion.
What this enables us to do is to provide a constant purchasing stream for the defense industrial sector in order to maintain their manufacturing base while at the same time allowing for shifts in the defense budget to meet changing requirements. For example, let's say that we know the Navy will need a new supercarrier at a given time but lacks the necessary funding to pay for it - the DOL can finance the construction and be reimbursed by the Navy. When the Air Force has a sudden lack of a given type of aircraft (a current problem with refuelers) it can lease or purchase them from the DOL until sufficient funding can be budgeted to fill the gap.
Financing Research and Development
One of the bigger financial rackets within the military is the research and development budget. Every year, billions pour into this budget and rarely does anything of significant value come out. While many great advances in society have originated within the military, most of these were not the result of some major program but were instead an idea that originated within a civilian contractor and grew into a military program. There are a number of problems in this aspect of defense spending.
The biggest problem is that there is virtually no incentive for success - quite the contrary, success often means the end of funding for the project and thus, the end of one's job. Another problem is the timeframe over which R&D often occurs - namely, many years. It is not unusual at all for military development programs to spend a decade or more in development and even then to still not produce a useable product (the V-22 and RAH-66 come to mind). Another major issue is the overemphasis on secrecy which drives up costs and results in redundant programs and massive waste and fraud. A simple approach can rectify all of these problems, reducing our overall R&D costs while also obtaining better results. This approach is called competition.
Every year, some concepts should be chosen to be the focus of military research and development efforts. If we develop the proposed Project FutureThink to flesh out these ideas, we can get the needed concepts identified easily and inexpensively. Once we identify the critical technologies we need developed, the competition begins. The way it works is simple - we use a "bounty" method where the creation of a workable solution for a problem results in payment of funds. The exception in this case is that the funds that are rewarded increase on a yearly basis. The program would work something like this:
Every year, an overall quantity of money will be budgeted for "Preparatory Research and Development (PRD - creating new technology)" and for "Active Research and Development (ARD - improving existing technology)". As an example, we may specify $10 billion for PRD funding and another $10 billion for ARD funding.
Using the FutureThink Market, the top ten development priorities will be selected and ranked in order of importance. Each of these items will then be given an account with monetary values based upon their rank, first receiving $1 billion, second gets $0.9 billion, third gets $0.8 billion, etc. An additional 45 developmental concepts will be selected by the FutureThink market as worthy of pursuit, with each receiving $100 million in funding. This will define a total of 55 concepts per year that will be funded for R&D under the PRD program. The ARD program should be divided into a total of 1000 awards of $10 million each for product and system improvements.
Whomever comes up with a design or solution to the given problem that is selected to be produced gets the money from the program. The accounts will grow over periods of years so even relatively small programs can result in a given company being awarded hundreds of millions or even billions of dollars for a winning design. Once a given concept has been selected for funding, that award remains available until anyone comes up with a design that is chosen for the project.
Many issues like small arms development, mine detection, uniform improvements, etc. can be constantly cycled as ARD programs where there isn't necessarily a specific problem being sought for research but if someone comes up with a really good idea that gets adopted, they can receive an award for the idea. These areas typically receive no development funding at all as they aren't deemed "sexy" enough to justify wasting Pentagon resources. A possible option is to divide the 1000 ARD awards into 100 categories, with up to ten awards available in each category.
Instead of a constant stream of defense dollars pouring down ratholes with no results, we get a program where only results get any funding and contractors will typically end up with greater money for a given design. You solve the problem, you get the cash, period. Don't provide a solution and you walk away with nothing. As an example, consider missile defense. We've spent over $100 billion on missile defense since the idea was conceived. If we put up a reward of half that amount to anyone who could come up with a workable design, do you really think it would take over 20 years to solve the problem?
In total, this R&D approach would cost less than $25 billion every year for research and development, with Project FutureThink accounting for about $3 billion of that cost. Additional bonuses can be assigned to specific programs that the Pentagon or Congress want expedited or additional funding can be used for those systems that require greater development funds. For example, if a new fighter design is considered a priority, Congress may authorize some funding to get contractors going while the bounty for the winner would remain in place. But more importantly, this concept will get a lot of smaller organizations and groups involved in developing future military systems in an effort to win the bounty for a given category. In today's military, the little things are often ignored while this program makes improving the little things very worthwhile to contractors and developers. Even the smallest of ideas can be worth tens of millions of dollars.
Redefining Training as Active Research and Development
One of the oldest and most pertinent complaints about our military is that we are always preparing to fight the last war while ignoring future changes in the art. Which brings about an obvious question - why? The answer is sitting right in front of our collective faces and yet no one seems to be able to see. The problem is the overall concept of training. Training is the practice of teaching people a given skill. By default, this skill or technique or tactic must already exist - how can you teach something that doesn't? If it already exists, it is something that has already been done, it's old news, it is the old war we have already fought that is long finished. Consequently, the conventional concept of training is a self defeating process. But what if we could transition to a more open-ended approach, one where new concepts and ideas were the focus instead of the techniques of old? This is the heart of what I refer to as Active Research and Development.
As mentioned previously, we need to divide the budget concept of R&D into two areas, preparatory and active research and development. The ARD budget would not only address development to improve existing systems, it would also address improvements to existing tactics, concepts, and ideas. Hence, current funding for the traditional notions of training should be merged into the new budget item of Active Research and Development.
Instead of having a generic training fund to pay for cookie-cutter training events, we should use the resources of Project FutureThink and the free markets to define a system where funds are disbursed on the basis of what new systems or ideas the the unit will be trying out during the event. For example, let's say someone dreams up a new approach for attacking enemy armor or for clearing a building, a value would be assigned to evaluating the idea and any unit who signs up to try it out can receive funds equal to the value assigned. Or perhaps there is a vehicle modification or new piece of equipment that can be checked out. For that matter, commercial vendors can even join the process offering to pay expenses plus a quantity of money for the right to say their equipment has been field tested with the military. Countless products are advertised as being "mil-spec" or "military-grade" or what have you and this could be a requirement for the vendors in order to make those claims - they would pay something like expenses plus $100,000 for a unit or multiple units to take their product to the field and work with it.
Units are already required to complete training schedules months in advance and submit them for approval so there will be ample time for a unit to go to a website, sign up for various testing regimes, and for everything to be brought together in time for the unit to hit the field and conduct testing and evaluation. For that matter, many testing concepts wouldn't even require going to the field - for example, a unit may test out new radios or tools or such and then the money collected from the tests can finance a future field exercise. We can also define a standard test grant where the units would be free to come up with their own ideas, submit them and if approved would receive funding of say, $10,000 or $50,000 or what have you (I'm just grabbing those numbers out of the air). While this may seem like a very convoluted approach to training (and don't get me wrong, it IS convoluted, I won't deny that), there are a number of critical benefits that will be derived from this effort if taken.
Instead of being locked into existing and past practices, units will become accustomed to bringing in new ideas and equipment. This will result in a thinking approach to warfare instead of the existing mind-numbed, follow the book and only the book approach.
Existing units dedicated to testing and evaluating can be disbanded as this process will become a total force effort.
Results, in the form of After Action Reviews, can be built into a database to serve as a store of institutional knowledge. When a unit trys something and it works, the entire force can obtain that data immediately - and just as quickly if its a bad idea.
Servicemembers will become accustomed to adapting on the fly and bringing new products and equipment into their operations. The U.S. military shops at their unit supply room - the enemy shops at Walmart and Gander Mountain. We need to know what these folks have and what it can do.
Officers up for promotion can be evaluated based upon the information in the AAR database. We can use this data to recognize who the leaders are, the thinkers, the do-ers, and who should spend their career behind a desk. The leaders will be out there evaluating every new idea, the thinkers will be coming up with the ideas themselves, the do-ers will be playing follow-the-leader, while the future desk jockeys will be requesting funding to evaluate post-it notes and refillable pen performance or similar such nonsense.
Significant portions of existing "training" costs will be defrayed by performing product testing for the commercial market. For example, how much would a company like Timex be willing to pay for the right to say their new watch was field-tested by the Marines? Or what about a knife or weapon manufacturer that wants to win a government contract? This program would allow them to prove to the Pentagon that their product is worth buying and better than what we currently have. Instead of waiting for the Pentagon to define a need, the contractor can offer to pay some ARD funds and get this product into the troops hands.
At this stage, the concept is still a little rough around the edges and will probably be expanded upon in the future. There are many other factors that will need to be addressed but this should give a general understanding.
Restructuring the Overall Pentagon Budget
The current structure of the DOD budget makes about as much sense as screen doors on a submarine. As has been determined by the GAO, there is no effective means by which the DODs books can be balanced inside of the given budget structure because it is impossible to accurately track expenses and similar measures. To correct this problem, we can restructure the budget into a shape more consistent with the actual military itself.
Having the personnel section as its own line of the budget is a very effective means for hiding the true costs of operations and programs. It is also effective in preventing servicemembers from being paid an appropriate wage and benefits package. In the real world of accounting, these costs are included in the areas of the budget where these personnel are employed. For example, the personnel costs of deployable line units should be part of the operations and maintenance budget, whereas personnel expenses for garrison units (and the operational costs of those non-deployable units) should be merged along with housing, construction, logistics, and other expenses into a single line item to accurately reflect our true costs of overhead.
It also makes no sense to separate product development expenses from the procurement expenses. Creating a product goes hand in hand with purchasing the product and the costs should be combined to give an accurate picture. Current budget practices allow the Pentagon to spread the costs of a given program over various budget lines to hide the true costs of the program. All pre-production testing and development (preparatory research and development) should be merged into the procurement line of the budget. This gives us a total value that will reflect where we are as far as purchasing existing equipment or developing future materials because we need to remain in a constant state of one or the other. If we aren't purchasing what is already available, then we need to be working towards the future replacement design. As mentioned previously, a distinct line in the budget should represent our Active Research and Development expenses which is basically the remainder of the RDT&E line of the current budget and this will more accurately reflect our efforts to prepare for war.
All remaining expenses should be merged into a single budget line called Overhead. This line should include all of the following items:
This restructuring will result in findings that will leave many peoples' jaws on their respective floors. Namely, the overwhelming majority of military spending does not go towards expensive combat systems and high tech weapons nor does it go to peacekeeping, nationbuilding, or warfighting. The vast majority of current DOD expenses are overhead costs from maintaining a bloated force by writing the Pentagon a virtual blank check every year. But since most members of Congress are lawyers and not accountants by trade, we apparently need to spell things out a little better for them.
There are many other means by which we can more effectively manage defense expenditures but these are perhaps the most novel and critical approaches to resolving the problem. This will require radical changes within the DOD but nothing less will solve what ails the current military.