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Go Back To Zero: Flournoy & Northrop’s Wes Bush On Coping With Budget Cuts

Posted by Sydney J. Freedberg Jr. on


WASHINGTON: Instead of trying to cram a $500 billion force into a $450 billion budget and hoping Congress passes sequester relief, the Defense Department needs to go back to the drawing board.

That’s the consensus of two top defense experts from either side of the government-industry gap — former Obama and Clinton appointee Michele Flournoy and Northrop Grumman CEO Wes Bush — speaking at the Center for a New American Security’s annual conference.

[The very next speaker was Deputy Defense Secretary Ash Carter, who sketched out  the Pentagon’s alternative budget plans].

Trying to muddle and minimize the pain of cuts will just put the US in worse strategic shape down the road, they argued. If the Department of Defense were to take a proactive approach — and if the Congress lets it — then sequestration can become a forcing function to cut overhead, deregulate procurement and prioritize investment in new technologies.

“If you take a year-by-year shaving-margins approach, I don’t think we’ll end up in the right place seven years from now,” said Flournoy, who’s derided what Pentagon gurus like to call “salami-slicing” in the past. What happens, she and Bush agreed, is that long-term priorities like research and development end up paying the bill for short-term shortfalls in ways that leave America unprepared for new threats down the road.

“The temptation [is] to take this on year by year, do what we have to to live with the sequestration levels we’ve been given, and hope and pray that DoD will be the next FAA and Congress will make the pain go away and absolve us,” Flournoy said, referring to how Congress gave the Federal Aviation Administration some sequester relief after popular uproar over delayed flights. In DoD’s case, Flournoy warned, “judging from the conversation on the Hill, I think that is exceedingly unlikely.”

Instead of reactively trying — and almost certainly failing — to preserve its current programs, Northrop’s Wes Bush said the Pentagon needs to consciously and proactively go back to the drawing board. “Managing in government is very different from managing in industry,” he acknowledged, “but there is a very basic principle when you’re going through a transformation in your cost structure[:] You don’t start with the budget you have and figure out what you can cut, you start at zero and figure out what you need.”

It’s not just the Defense Department’s budget that needs a reboot, Bush added, but its procurement process as well. Pentagon leaders have been working hard on an open, candid, and, at times, brutally frank relationship with industry.

“I’ve been on the industry side of this equation for 30 years,” Bush said, and “I can’t recall a time when I have seen such a hard push, such a very open and direct approach” — but red tape keeps getting in the way. The number of regulations affecting his business, Bush estimated, has doubled in just the last four years. “This is another opportunity,” he said, “to zero baseline.”

All this reset-to-zero talk about the Federal Acquisition Regulation (FAR) sounds a bit like retired Marine general Arnold Punaro’s call to “put a match to it,” as he told us last year. This morning, Flournoy was a bit more restrained.

“I would love to see some mechanism put in place in Congress for a periodic review of regulations,” Flournoy said. “It doesn’t have to be a rewrite of the whole FAR.” But instead of the current “fire and forget” approach — where a specific problem crops up, and Congress or the Pentagon write a new rule to prevent it ever reoccuring, then everyone congratulates themselves and walks away without nary a second thought — there needs to be a systematic relook at regulations a few years on to make sure they’re actually solving the problem they were supposed to, without causing even worse ones.

Beyond regulations and budgets, the assembled experts recommended cutting back the Defense Department’s civilian and contractor workforce as well. There was “tremendous growth” in staff between her Clinton and Obama tours in the Pentagon, Flournoy recalled. “We need to borrow some best practices from the private sector” and prune, she said — if only Congress will let us. “DoD needs some special authorities to be able to offer retirement incentives, to be able to move people….[to] disestablish some positions that are no longer needed,” she said. “These are things DoD cannot do alone.”

And so all roads lead back to Congress, perhaps the one institution in Washington that makes the Pentagon bureaucracy look streamlined and functional. Congress has long blocked such wonk-endorsed efficiencies such as closing bases and increasing servicemembers’ co-pays for Pentagon-provided healthcare. Now, the old bipartisan consensus that supported defense spending has broken down amidst the budget wars, Flournoy said, and “you have so much turnover in the last two election cycles, you have a lot of people on the Hill who’ve really never had to deal with defense issues; you’ve had a lot of what i would call the defense leadership on the Hill retire.”

Watching C-SPAN late at night, Flournoy added, “my frustration is that the debate is at this very tactical and often very ideological level, and people are arguing decisions at that level, failing to understand the strategic and longer term implications.”

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