Leon Panetta, fresh from his stint as the head of the CIA, became the new secretary of defense as of July 1. Many defense secretaries have tried to make their mark on the Pentagon bureaucracy, but few have been there long enough to change it.
With most secretaries serving fewer than five years, it is much easier to make your mark on current wars or other aspects of foreign policy than it is to get control of the bureaucracy in the world's most famous five-sided building.
There is little doubt that Panetta will be facing all types of policy decisions that have to do with the wars we are currently waging and looking at global strategies with Secretary of State Hillary Clinton and President Obama. He will also be addressing many committees in Congress that will be asking him about the missions of the Department of Defense (DoD), troop withdrawals and the Pentagon's global outreach. He will have a busy agenda. However, because of our looming budget pressures, he will have to tread on the dangerous and rocky shoals of trying to find areas of the budget to cut and attempting financial reform of the Pentagon bureaucracy, arguably the largest bureaucracy in the world.
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Panetta has a similar background to another Reagan-appointed Defense Secretary, Caspar (Cap) Weinberger, as he enters this new office. Both men are from California, both worked as head of the Office of Management and Budget (OMB) and both had top positions in the Health, Education and Welfare (now Health and Human Services) before they became secretary of defense. There was much speculation and trepidation inside the Pentagon when Weinberger was appointed secretary of defense in the beginning of the Reagan administration. When Weinberger was head of the OMB in the Nixon era, he was so tough on cutting deep into areas of the federal bureaucracy, that he was nicknamed “Cap the Knife.” The Pentagon needed not worry because Weinberger, who was personally close to President Reagan, so totally bought into massive increases in the Pentagon budget without any bureaucratic reform, that within a year, he was being called “Cap the Ladle.” Weinberger also resisted any reform of the Pentagon, especially since, at that time, it was a strong sacred cow of the Republican Party.
In the past 30 years as I have worked to expose and reform the deep flaws in the Pentagon bureaucracy, I have seen some defense secretaries and even more undersecretaries stick their toes into the raging waters of waste and fraud to see if they could try to reform the bureaucracy. These efforts usually concentrated on trying to reform the way we buy weapons and also to try to get control of the DoD finances. Whether they were attempting the reform as a public relations effort to calm public outrage over the most recent expose of waste and fraud or because they really did believe that reform was necessary, all of them have been swatted down by the bureaucracy.
As a result, we are buying weapons at a much higher price than needed, and the financial and auditing sections of the DoD are in near total disarray. Whether it is an overall financial audit or weapon program audits, the Pentagon has gotten to such a state that most openly admit that the Pentagon is “unauditable.” Unauditable is a word that the Pentagon invented itself to explain why it can't pass a financial audit or tell the public and the Congress where much of the money went in purchasing weapons.
Another not-so-popular secretary of defense under President George W. Bush, Donald Rumsfeld, did early on, claim to want to get control and reform the Pentagon. Whether he was sincere or not, he gave a powerful and damning speech on the Pentagon bureaucracy and why it needed to be drastically reformed. Some excerpts from that speech:
The topic today is an adversary that poses a threat, a serious threat, to the security of the United States of America. This adversary is one of the world's last bastions of central planning. It governs by dictating five-year plans. From a single capital, it attempts to impose its demands across time zones, continents, oceans, and beyond. With brutal consistency, it stifles free thought and crushes new ideas. It disrupts the defense of the United States and places the lives of men and women in uniform at risk.
Perhaps this adversary sounds like the former Soviet Union, but that enemy is gone: our foes are more subtle and implacable today. You may think I'm describing one of the last decrepit dictators of the world. But their day, too, is almost past and they cannot match the strength and size of this adversary.
The adversary's closer to home. It's the Pentagon bureaucracy. Not the people, but the processes. Not the civilians, but the systems. Not the men and women in uniform, but the uniformity of thought and action that we too often impose on them.
In this building, despite this era of scarce resources taxed by mounting threats, money disappears into duplicative duties and bloated bureaucracy – not because of greed, but gridlock. Innovation is stifled – not by ill intent, but by institutional inertia.
Just as we must transform America's military capability to meet changing threats, we must transform the way the DoD works and what it works on. We must build a DoD where each of the dedicated people here can apply their immense talents to defend America, where they have the resources, information and freedom to perform.
Our challenge is to transform not just the way we deter and defend, but the way we conduct our daily business. Let's make no mistake: The modernization of the DoD is a matter of some urgency. In fact, it could be said that it's a matter of life and death, ultimately, every American's.
Now I may quibble with Rumsfeld that some of the problems in the DoD system do include the people in the system because the DoD has allowed so much revolving door and self-dealing, but it was a remarkable speech for a Republican secretary of defense. However, even if Rumsfeld had been genuine about reforming the Pentagon bureaucracy, all his intentions were washed away the very next day. Rumsfeld delivered that speech on September 10, 2001, one day before 19 men with box cutters totally changed the subject.
Outgoing Secretary of Defense Robert Gates has been hailed as a cost cutter, having eliminated some weapon systems like the F-22 fighter. Gates became a media darling, partly because he served so long under a Republican and a Democratic administration, and many articles and news pieces portrayed him as a straight shooter who already has cut into the Pentagon fat. However, closer inspection showed that some of his cuts were smoke and mirrors and didn't lead to real savings.
Winslow Wheeler, director of the Straus Military Reform Project of the Center for Defense Information and an expert at cutting through all the DoD smoke and mirrors, recently showed how Gates' reforms didn't really save any money:
For months I have been reading in the press about Robert Gates “cancelling more than 30 [defense hardware] programs.” A May 24 Bloomberg article by Viole Gienger (“Gates Says Military Cuts May Protect F-35, Submarines”) came up quick on a Google search. Other articles credit Gates with “saving more than $300 billion” with these – presumably tough – decisions.
In case you are wondering where this imagery of Secretary of Defense Robert Gates as a tough task master for out of control DOD procurement is coming, you need look no further than Robert Gates.
At a May 24 farewell speech to the American Enterprise Institute in Washington, Gates repeated his own claim, made frequently earlier, that “All told, over the past two years, more than 30 programs were cancelled, capped, or ended that, if pursued to completion, would have cost more than $300 billion.” (See the speech here.) A bit later he hammered home the point in case any of the press present missed the legacy Gates seeks for himself: “… when it comes to our military modernization accounts, the proverbial 'low hanging fruit' – those weapons and other programs considered most questionable – have not only been plucked, they have been stomped on and crushed.”
Robert Gates did not reduce the number of hardware programs in the Department of Defense; he increased them. A term he has repeatedly expressed distaste for (“math”) proves him wrong. DOD keeps periodic records on these sorts of things; DOD's Selected Acquisition Reports (SARs) track the number of major hardware programs and their acquisition costs. (Find them here.) They show the following:
In September 2008, just before Barack Obama was elected and selected Robert Gates as his Secretary of Defense, there were 91 Major Defense Acquisition Programs (MDAPs). They were projected to cost $1,648 billion dollars.
In April 2009, Gates announced the termination of various defense programs. The SAR that next came out, in December 2009, showed the number of MDAPs had indeed declined: to 87 programs, costing a little less ($1,616 billion).
Nine months later, after Gates took some more whacks at the defense budget – if that's what you want to call them – the SAR that came out in September 2010 showed the number of MDAPs had increased to 94. Their cost also increased – to $1,679 billion.
The most recent SAR, for December 2010, shows another increase, both in programs (to 95) and money (to $1,720 billion).
So, thanks to Secretary Gates “termination” of more than 30 programs “saving” us $300 billion, we now have an increase of four programs costing an additional $72 billion.
In another article, Wheeler echoes what I have been preaching in this series on what it will take to reform the DoD bureaucracy:
The Audit Problem: The Defense Department does not know how it spends its money. For example, as Gates has acknowledged, he does not know how many contractors work for DOD, what they do and what they are paid. But that is just the tip of the iceberg. Public estimates of the size of the overhead in DOD vary from 40 to 50 percent, if not more. No one knows and no one even raised an eyebrow when a Lockheed executive said recently that overhead for the F-35 fighter-bomber program was 85 percent.
Gates runs a Pentagon that neither knows nor apparently cares. Gates' solution is to pretend to be ready for a superficial-level audit in 2017. That would be 27 years after a deadline for that and more was imposed by the Chief Financial Officers Act of 1990. All the talk now going around about getting the cost of weapons under control is complete drivel unless and until the Pentagon can solve this problem. You can't control costs if you can't measure them accurately and completely.
Panetta has experience in Congress on the Budget Committee and a varied and long history dealing with government bureaucracy, but will he be able to do anything about the Pentagon bureaucracy? Not if he waits until 2017 to get a “clean” audit, a goal that many say doesn't even begin to get to the problem.
A true solution is to get to the base problems of accountability, audit and pricing. Unless one knows how much a weapon should cost and prices it accordingly, unless program managers are held accountable if they allow weapons and other purchases to overrun on their watch and unless auditors are allowed to get tough and withhold money from programs that can't justify their bills from the contractors, things won't really change. (I will have more on true pricing of weapons, a complicated subject, in a future column.)
Leon Panetta recently said:
“We must preserve the excellence and superiority of our military while looking for ways to identify savings,” he said. “While tough budget choices will need to be made, I do not believe in the false choice between fiscal discipline and a strong national defense. We will all work together to achieve both.”
He is wily to the ways of Washington, but most people are not quite ready for the blowback that happens to anyone, whistleblower to secretary of defense, who seriously tries to change the fundamental problems of the Pentagon bureaucracy, instead of just nibbling around the edges.
The Government Accountability Office (GAO), an office that is known for its mild bureaucratic language, cut to the chase in one of its decades of reports on the DoD financial problems:
To continue to make progress toward financial transformation in today's demanding environment and through the long term, DOD needs the sustained commitment of its top leadership, departmentwide and within its components….
Accurate, timely and useful financial management information is essential for sound management analysis, decision-making and reporting within DOD. The resolution of long-standing and deeply entrenched financial management problems facing the department is a daunting challenge.
The DoD bureaucracy has seen new secretaries come and go. They know that they can delay and wait out any attempts of reform that they don't like and that threatens the money flow. Panetta needs to be extra smart about this and find a way to get foundational financial reform that can be done within five years or less, the usual term for a secretary of defense. If it isn't drastic, dramatic and forceful, the bureaucracy will try to swallow him up and spit him out onto the trash pile of all of those who have tried to get a hold of this out-of-control financial beast that eats up a very large portion of our tightening budget. Getting control of the financial problems of the DoD will actually improve our weapons and training of our troops because the black hole of waste and fraud won't continue to buy fewer and fewer weapons and have less and less training.
Secretary Panetta, sometimes you just have to get down to brass tacks and tell it like it is. In the 1980s, I was advising then freshman Sen. Charles Grassley, who had decided to take on DoD fraud and waste. He had been briefed by handlers from the DoD, who told him that they were saving money and getting offsets on future purchases and had “cost avoidance” and saved money. He could tell he was getting rolled and was frustrated that he could not go head to head with them in their bureaucratize. I told him to drill down and ask them three simple questions: Who got fired? Who went to jail for the fraud? And if the DoD said it saved money, where is the check back to the Treasury?
I knew that the briefers in the DoD could not directly answer these questions. Shortly after this conversation and unknown to me, Grassley was called to the White House to have a talk with President Reagan and Cap Weinberger because they were concerned about all his talk of cleaning up the DoD. Senator Grassley told me after the meeting that Weinberger briefed him with the same obtuse excuses. He then asked Weinberger and Reagan the three questions. He said that Weinberger turned a furious red, and Reagan laughed and laughed at his questions. Weinberger knew that he could not answer the questions, and Reagan probably realized that Grassley had cut through the bureaucratic crap that is constantly flying around Washington.
I hope that Secretary Panetta would try and ask these questions every time a DoD staffer briefs him on any progress in reforming the DoD financial and procurement problems. He might have some success if he makes reform a marathon, not a dash, and insists on keeping it real.