Allyson Versprille, National Defense
2 June 2015
As the Navy's top line shrinks, those looking to make budget cuts should consider taking the fat out of the Defense Department bureaucracy as opposed to taking equipment from war fighters, Navy Secretary Ray Mabus said June 2.
"If you want to look at real money, 20 percent of the Pentagon budget, one dollar out of five, is spent on the Fourth Estate," he said during a discussion at the American Enterprise Institute, a conservative-leaning think tank in Washington, D.C. The Fourth Estate comprises the office of the secretary of defense, defense agencies and the organizations run by the undersecretaries, he said. All of that money spent is "pure overhead."
Mabus pointed to several agencies that should be scrutinized moving forward.
The Defense Logistics Agency (DLA), which provides supplies to military forces, was one. In theory DLA can buy fuel for the services at a cheaper, bulk rate, Mabus said. However, the Navy uses different fuel than other services because of the maritime environment it operates in. The Navy can buy its own fuel and pay less for it than what DLA charges, he asserted.
"In theory, we ought to be able to do stuff DoD-wide, and it should save" funds, he said. "In practice it doesn't work very well." The world is getting smaller, quicker and cheaper with the exception, too often, of the Defense Department, he added.
He also pointed to the Defense Finance and Accounting Services (DFAS), the agency that oversees payment to service members, employees, vendors and contractors.
DFAS writes the Navy's checks after receiving information from the service regarding recipients and payment amounts, Mabus said. "Last year they charged us $300 million to write the checks," he said, adding that the service has its own finance and accounting systems in place that could perform the task.
In addition to the high cost, the agency's methods have proven ineffective, Mabus said. As the service begins its 2014 audit, "we may not even have a shot at a clean opinion because DFAS cannot tell us how they spent our money," he said. "Nine out of 10 of their internal controls have been found not to be effective." It begs the question, "Do we really need this?" he asked.
That should be a question the Navy asks about all overhead functions, including those performed by the service itself, he said.
"I think we've got to look at the Fourth Estate more, but we should look at [ourselves] too," Mabus said. The Navy has a finance arm, an acquisition arm and a personnel arm. These functions should be reviewed, and where there is duplication – whether within defense agencies or the service – cuts should be made, he said.
One way in which the service has already begun cutting back on its overhead costs is through "contract courts," he said. Every year, each contracting officer must bring in their contract and defend it, answering critical questions about why each piece is needed, Mabus said.
"We're saving already 10 percent, so $4 billion, doing that," he noted. "That's more than [the cost of] two Virginia-class submarines."
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