Business Management Reform in the Department of Defense in Anticipation of Declining Budgets

Business management reform efforts have been part of the U.S. Defense Department agenda for decades. Current reform efforts have explicitly established the goal of generating, harvesting, and reinvesting savings from business management reform to buy more capital items; that is, they have focused on a measurable reallocation from operating and support costs to investment within a given budget top line. Recent increases in the defense top line, largely related to the war on terrorism, are not likely to persist; in addition, an examination of the factors affecting the top line suggests that a decline in the near term is likely. An examination of current and past defense management reforms suggests that efficiency‐seeking business management reforms are not likely to generate sufficient resources to cover a budget decline. Instead, management reform should be sustained for reasons of stewardship and accountability.     

Transitions in Defense Management Reform: A Review of the Government Accountability Office’s Chief Management Officer Recommendation and Comments for the New Administration

The Government Accountability Office believes the answer to the U.S. Defense Department’s persistent management problems is to be found in the creation of a new position, chief management officer, to oversee defense business transformation. The recommendation for this position is reviewed and used to raise questions and spur inquiry in the areas of evidence‐based reform, the relationship between policy and administration, auditor overreach, and sustaining reforms through transition. The latter portion is expanded in this time of transition, and recommendations are made to the new administration to develop a management agenda, to the defense career executives to facilitate the transition, and to the next comptroller general to consider how the Government Accountability Office’s varied roles produce outputs that align with the desired outcomes in both the policy and administration domains.     

Congressional Delegation of Spending Power to the Defense Department in the Post‐9–11 Period

The advantages of increased delegation of resource management authority by Congress have long been argued by defense leadership. It is an important issue because of its relevance to congressional assessment of defense management, budget priorities, and how to enforce policy preferences. This paper investigates the series of supplemental appropriations for the war on terrorism to determine (a) under what conditions, and how and why Congress delegates budget authority to defense, (b) what happened with respect to the degree of delegation after appropriation during budget execution, and (c) what this case teaches us about the evolving budgetary relationship between Congress and the Defense Department.     

The influence of analysis on U.S. defense policys

Much of the policy literature holds that rigorous policy analysis as practiced in the defense policymaking community has a much greater influence than analysis performed in the nondefense or ‘domestic’ sectors. This argument is examined by, first, offering several examples of quantitatively driven decisions in the U.S. Department of Defense and, second, inquiring more precisely as to the nature of the actual decision variables. The conclusion is that the defense and domestic modes of policy analysis and decisionmaking are not as disparate as they are usually perceived. In practice, both camps share many of the same problems and could benefit from shared solutions. Paper prepared for delivery at the 1985 Annual Meeting of the American Political Science Association, the New Orleans Hilton, August 29–September 1, 1985. Revised for the Seventh Annual Research Conference of the Association for Public Policy and Management, Washington, D.C., October, 1985.     

Defense Business Operating Fund: Description and Implementation Issues

The Defense Business Operating Fund initiative in the Department of Defense (DoD) consolidates existing industrial and stock funds. This initiative is intended to enhance the departmental management of an estimated $81 billion sale of goods and services in fiscal year 1993. Revolving funds have a long history in the department. This article examines the role of revolving funds and their performance in DoD. The potential benefits of consolidation of funds are discussed. Emphasis is given to budgetary, management, and accounting changes intended to enhance management of the funds. The effect of implementation issues on the realization of potential benefits is also explored.     

Strategic Nuclear Forces: Unrealistic Planning

The Department of Defense has embarked on a program of strategic modernization that will demand substantial budgetary growth for strategic forces—roughly 29 percent after inflation—during the 1990s. However, defense funding overall is unlikely to grow during the next several years. This article projects the funding that the Bush Administration's strategic modernization plans would demand, assesses the feasibility of these plans given budgetary limits, and describes some options which would reduce this funding.     

Check Out My Moves

Building on earlier assessments of visual representation in air and missile defenses, and on investigations of the role of representation and perception in warfare more generally, this article offers a semiotic analysis of the signifying practices and processes that are a necessary part of America's Ballistic Missile Defense systems. The argument is made that missile defense – a range of projects aimed at protecting the United States by intercepting enemy missiles in flight – provides a recurrent site of contestation of the image. To illustrate this, examples of the use and testing of missile defense technology to date are analysed from a broadly social semiotic perspective, with specific emphasis on the concepts of signs, codes and modality. Taking this approach indicates that, in the supposedly routine process of representing “threats” in a visual format, even the most sophisticated missile defense systems in use today still encounter severe difficulties, with potentially deadly consequences. This potential for misperception is itself an inherent part of the process of coding and decoding spatial data, represented in a visual format involved herein, which raises significant questions about the vision of nuclear security promised by ballistic missile defense.     

Some evidence of congressional political markets in DOD personnel allocations across states

An empirical analysis of the distribution of Department of Defense (DOD) personnel (both military and civilian) across states is developed with a commonly used Public Choice model of resource allocation in a legislative setting. The model specification employs Congressional seniority, Congressional committee representation, Presidential electoral votes, and the per capita dollar value of prime defense contract awards to explain the variation of DOD personnel across states over time. The empirical analysis is performed over the last three decades, and the results indicate that this particular Public Choice legislative model performs well in explaining the variation in DOD personnel allocations across states. The results also provide some limited evidence of a possible political market between the states for DOD personnel allocations. This analysis has implications for future testing of whether the Base Realignment and Closure Commission (established in 1988 under President Reagan), and the Defense Base Closure and Realignment Commission of 1990 (under President Bush) were effective in significantly decreasing the legislative politics involved in the selection and approval process for base closure and realignment.     

Budgetary Incentives for Retail Activities at Military Bases

The Department of Defense (DoD) operates an extensive system of retail activities at military bases for active duty, retired, and reserve personnel and their families. DoD stores employ 96,000 civilian workers and sell $14 billion of goods and services annually at below-market prices. DoD resists efforts to reduce its role in retail activities, arguing that even within the United States stores with below-market prices are a cost-effective alternative to higher cash compensation for military personnel. This article examines the budgetary incentives that make inefficient, government-operated stores attractive to DoD and describes options that would change those incentives. Because most of DoD's retail stores are controlled by nonappropriated fund instrumentalities of the federal government, reforming those incentives could require changes in the treatment of these poorly understood federal entities.     

Policy Development, Planning, and Resource Allocation in the Department of Defense

The U.S. Department of Defense develops policies, plans, and allocates resources using PPBS—the Planning, Programming, Budgeting System. The system is used to formulate both long-range policies and resource allocation plans. The scope of DoD's activities make this an enormous undertaking. It is also politically charged because of the role of Congress in determining the department's budget and activities. Therefore, complexity and plurality characterize these processes.     

Enactment and Implementation of the National Security Personnel System: Policy Made and Policy Unmade

This case study reviews the enactment and implementation of the National Security Personnel System (NSPS) in the U.S. Department of Defense. Proponents of reform seized the opportunity to enact reform in the aftermath of 9/11, basing their arguments on national security concerns. However, the policy‐making process did not produce a consensus for reform among key stakeholders in the personnel management policy community. Instead, the NSPS angered and alienated the Office of Personnel Management, the public employee unions, and a number of congressional Democrats. Implementation of the NSPS became problematic as Defense Department officials attempted to move quickly and independently to get the new system online, eventually forcing the department to put the system on hold. In the end, Congress imposed limits on its implementation, advocates for the system disappeared, and a new president supported the repeal of NSPS. This case provides useful insights into the formulation of future strategies for personnel management reform.     

Foreign Currency Exposure in the Department of Defense

The Department of Defense (DoD) incurs numerous costs denominated in foreign currencies in fulfilling U.S. alliance and security agreements overseas. Between fiscal years 1993 and 1997, the DoD expended over $10.4 billion in foreign currencies to operate and maintain its overseas facilities, and estimates for fiscal years 1998 and 1999 are $5.4 billion. In line with the government's general, risk-neutral approach to financial risk, the DoD makes no attempt to control its foreign exchange exposure against currency fluctuations. As such, there are inevitable differences in amounts budgeted to fund the DoD's overseas operations and amounts subsequently required to pay them. This paper examines the implications of DoD foreign exchange rate policy and applies an alternative approach to foreign exchange rate risk—one more in line with private-sector practices and overall efforts to reform government operations. The results indicate that forward contracts would inject greater certainty into the budgeting and administration of these programs and might release limited defense funds for use elsewhere.     

When Do Leaders Free-Ride? Business Experience and Contributions to Collective Defense

The logic of free-riding expects that individuals will underinvest in public goods, but people often behave in ways that are inconsistent with this prediction. Why do we observe variation in free-riding behavior? This study addresses this question by examining contributions to an important international public good—collective defense in military alliances. It develops a behavioral theory of free-riding in which the beliefs of world leaders are important for explaining investments in public goods. The argument holds that leaders with business experience make smaller contributions to collective defense because they are egoistic and more comfortable relying on a powerful ally for their defense. An analysis of defense expenditures in 17 non-U.S. members of the North Atlantic Treaty Organization from 1952 to 2014 provides evidence consistent with the theory. The findings suggest that leaders with business experience are more likely than other heads of government to act as self-interested utility maximizers.     

Team-based incremental acquisition of large-scale unprecedented systems

This paper addresses certain shortcomings of traditional acquisition approaches, especially for large-scale, unprecedented systems. Shortcomings in the requirements engineering processes are emphasized. We review incremental acquisition approaches and identify issues essential to successful application of incremental acquisition approaches to overcome these shortcomings.In identifying these issues, cases based on systems being developed by the Air Force Space Command are examined. They are the Granite Sentry (GS), Space Defense Operations Centers (SPADOC), and Mobile Command and Control System (MCCS) programs. Three key aspects of the lessons learned from these efforts parallel the steps suggested by a recent Air Force Studies Board report for reducing risk in developing unprecedented systems. These are team-based development, managing requirements uncertainty and change, and increased use of incremental acquisition approaches.This work was sponsored by the U.S. Department of Defense. Approved for public release, distribution unlimited. The views expressed in this article are those of the authors and do not reflect the official policy or position of the U.S. Air Force, the Department of Defense or the U.S. Government.     

Reform of the Planning,Programming, Budgeting System,and Management Control in the U.S. Department of Defense: Insights from Budget Theory

Resource decision making for the Department of Defense (DOD) is one of the most challenging tasks in all of public financial management. DOD coordinates national security threat assessment, long‐ and intermediate‐range planning and programming with annual budget formulation and execution. Between 2001 and 2004, Defense Secretary Donald Rumsfeld changed the system significantly, simplifying, and synchronizing it with presidential terms of office. We assess Planning, Programming, Budgeting System (PPBS) reform through application of applied budget theory. We review system evolution, document recent reforms, explain why change was necessary, and assess implementation feasibility. Only preliminary evaluation is possible because change implementation will require five or more years.     

Bidding behavior in the department of defense's commercial activities competitions

From 1978 to 1994, the Department of Defense conducted more than 2,000 competitions in which private contractors and the government's in‐house team bid to provide a service performed in‐house before the competition. A three‐equation model is constructed, which is used to estimate the in‐house bid, the minimum contractor bid, and the in‐house team's baseline cost. The model accounts for the fact that the in‐house bid is constrained not to exceed its baseline cost. The estimates are used in simulations of the savings from the completed competitions ($1.55 billion annually, 35 percent of the baseline cost) as well as the savings from various alternative policies, including competitively tendering all the functions on the Department of Defense's list of potential candidates ($7.58 billion annually). © 2001 by the Association for Public Policy Analysis and Management.     

Defense Supplementals and the Budget Process

Supplemental appropriations provide emergency adjustments to the current year, usually for national defense contingencies and natural disaster emergencies. Recently, they have adopted some of the complexities of the regular appropriation process. For example, both the president and Congress may suggest when a supplemental is a dire emergency and thus beyond spending discipline and when it must be offset. Some supplementals have paid for nonemergency activities, others have resulted in funding decreases, and still others have resulted in spending in future years. Compared to the normal appropriation process, supplementals are usually passed expeditiously. Defense supplementals are generally precisely priced, whereas disaster supplementals tend to be lump sum estimates.     

European companies between globalization and localization: a comparison of internationalization strategies of British and German MNCs

This paper assesses the extent of which British and German multinational companies have moved on a continuum between nationally embedded MNCs and globally oriented TNCs. Degree of national embeddedness and implantation into national economic and policy networks is held to influence the internationalization strategy of companies - the degree of FDI undertaken, the kind of competitive advantage they seek to derive from it and the way in which they combine nationally based and globally focused activities. It is shown that the different national business systems of Britain and Germany influence the responses of MNCs in their management of the tensions between pressures for globalization and established, nationally shaped business strategies and patterns of activities. In both cases, however, exaggerated claims about globalization of company activities and assets are shown to be misguided. But the paper also recognizes that some more globalized structures and strategies have begun to emerge in the second half of the 1990s. The study is based on a small number of case studies of British and German companies, complemented by official statistics and secondary data.     

Retention and retirement: The case of the U.S. military

The military retirement system provides an immediate, lifetime, inflation-protected annuity to personnel who complete 20 or more years of service. The cost of this system has risen substantially in the past 15 years, and the system's actuarial costs now comprise almost one-third of total military manpower costs. Because of its importance in the total military compensation system, the military retirement system exerts a significant influence on the age structure of the force and on personnel turnover patterns. This article evaluates the relative efficiency of the current retirement system by comparing it with two recently proposed alternatives, one by a presidential commission and one by the Department of Defense. It estimates the impact of these proposed alternatives on the military personnel force structure and on manpower costs. It is concluded that these alternatives would provide a force as capable as today's force at significantly lower cost.Order of authorship determined alphabetically. This paper presents results of analysis conducted while Enns and Nelson were associated with the Department of Defense and Warner was on the staff at the Center for Naval Analyses. The views presented herein are those of the authors.