Pentagon Covers Up Report Showing $125 Billion in Bureaucratic Waste

An investigative report published in the Washington Post this week details the cover-up of a Pentagon internal study that identified a “clear path” for the Defense Department to save $125 billion in administrative waste over five years.  According to the Washington Post article, written by Craig Whitlock and legendary investigative reporter Bob Woodward, Pentagon leaders requested the study to streamline operations in the Defense Department’s enormous back office bureaucracy and reinvest the savings in combat power.  But, after the study identified far more wasteful spending than expected, senior Pentagon officials squashed the report because they feared Congress would use the findings as an excuse to slash the defense budget.

The Study

The study was produced in 2015 by the Defense Business Board, a federal advisory panel of corporate executives, and consultants from McKinsey and Company.  The report revealed for the first time that the Pentagon was spending almost a quarter of its $580 billion budget on overhead and core business operations such as accounting, human resources, logistics and property management.  In fact, the study revealed that there are nearly as many people in back-office jobs as active duty troops.  The Defense Department pays 1,014,000 contractors, civilians and uniformed personnel to fill back-office jobs.  That workforce supports 1.3 million active duty troops, which is the fewest number active duty troops since 1940.

The Pentagon’s operational structure is notoriously bloated and the senior officials that authorized the study recognized the unforeseen consequences that may arise from actually examining the Defense Department’s unknown administrative spending. Despite this premonition, Deputy Defense Secretary Robert O. Work authorized the study.  The study was presented to the Defense Business Board in January 2015 and plainly stated “We are spending a lot more money than we thought.”  The study then broke down how the Defense Department was spending $134 billion per year on “business operations” – about 50 percent more than the McKinsey consultants guessed at the outset.

The departmental details of the study are equally astonishing.  Almost half of the Pentagon’s back-office personnel — 457,000 full-time employees — were assigned to logistics or supply-chain jobs. That alone exceeded the size of United Parcel Service’s global workforce.  The Pentagon’s purchasing bureaucracy counted 207,000 full-time workers. By itself, that would rank among the top 30 private employers in the United States.  More than 192,000 people worked in property management. About 84,000 people held human-resources jobs. The study also laid out a range of options. At the low end, just by renegotiating service contracts and hiring less-expensive workers, the Pentagon could save $75 billion over five years. At the high end, by adopting more aggressive productivity targets, it could save twice as much. After a discussion, the full board voted to recommend a middle option: to save $125 billion over five years.

The Cover-up

However, when the Board reported the findings and recommendations to Deputy Secretary Robert O. Work, who originally enthusiastically authorized the report, it was met with a chilled response. Work explained he was worried Congress might see it as an invitation to strip $125 billion from the defense budget and spend it somewhere else.  As the report was being circulated among high level Pentagon officials, it was met with increasing resistance founded in the concern that highlighting the astonishing waste in the past would lead to a reduction in the defense budget in the future.  After a series of personnel changes, beginning with the appointment of a new Defense Secretary, Ash Carter, and replacement and  resignation of key members of the Defense Business Board, the $125 billion savings plan was dead.  In a tragic example of “the fox guarding the hen house,” the report simply languished on the desks of leaders of the bureaucratic departments it recommended cutting.

Previous to the Washington Post investigative report, which is based on confidential sources seemingly within the Pentagon, frustration with the Pentagon’s bureaucratic waste and inaction on the recommendations intermittently spilled into the public.  For instance, on June 2, 2015, Navy Secretary Ray Mabus. complained in a speech at the American Enterprise Institute, a conservative think tank, that 20 percent of the defense budget went to support functions for the armed forces and called it “pure overhead.”  Mabus was then reprimanded by senior Pentagon officials for speaking out.

Going Forward

With the Trump administration coming into the White House, there is an opportunity for a new, less wasteful, Defense Department budget.  On the campaign trail, President-elect Trump promised a major military buildup and said he would pay for it by “eliminating government waste and budget gimmicks.”  Conveniently, if President-elect Trump does pursue this goal, there is a road-map for how to cut $125 billion in administrative waste sitting on the desks of Pentagon officials.