- The Washington Times - Monday, August 7, 2000

The Pentagon is overestimating billions of dollars in savings from a major privatization program because the four branches refuse to give up troops even if their jobs are eliminated, according to an internal report.
The department is projecting savings of nearly $12 billion in 1997-2000 and has ordered the Navy, Army, Air Force and Marine Corps to reduce their budgets accordingly.
But a draft report by the General Accounting Office, Congress' audit agency, says all that money won't be there, possibly harming combat readiness.
It blames the overestimate on delays in conducting management evaluations, the cost of the evaluations themselves, and the fact the services will not give up about 200,000 targeted positions.
"There are no savings if the military position is converted to contract because the military will still keep its end strength and now it needs additional money to pay the contract," said Jay Spiegel, executive director of the Reserve Officers Association of the United States.
The GAO's warning delivers a blow to the Pentagon's No. 1 management reform, the 1997 Defense Reform Initiative. The GAO looked at two programs within the initiative: one to privatize some combat support jobs and another, called "strategic sourcing," that looks at ways to eliminate or streamline tasks.
The Pentagon plans on saving billions of dollars on those two programs alone. But a draft GAO report, a copy of which was obtained by The Washington Times, concludes:
The Defense Department's "anticipated savings projections have not adequately accounted for the estimated costs of conducting and implementing the studies or the estimated cost for retaining its military personnel, all of which could significantly reduce the anticipated level of savings."
"The department is already reducing future operating budget estimates in anticipation of savings, and such reductions can create operational difficulties for service components."
The GAO compiled the report for the House Armed Services subcommittee on military readiness and will release its findings shortly.
The four branches, especially the Army, are vigorously resisting pressure from some Pentagon civilians to reduce their ranks.
They are also debating how far to carry privatization. The Army, for example, has hired a civilian firm to augment Army truck drivers in the Balkans. Some military officials fear the push to privatize could thrust civilians closer to the battlefield.
"I believe that war is not a commercial function," said Mr. Spiegel. "People on the battlefield should be soldiers, not contractors. If a group of ground contractors is killed in the next conflict, I'm not confident the company will send over another group to do the job. That's not the case with soldiers."
Underlying Mr. Spiegel's concern is a fear the Army may look to cut Guard and Reserve personnel to create budget savings. His organization and members of Congress successfully headed off reductions mandated by the 1997 quadrennial review, the armed forces' strategic road map. But the issues will likely emerge again in the 2001 review.
A July 27 letter from the department's deputy undersecretary for installations said it generally agreed with the GAO's conclusions. The letter said "substantial savings are being realized and sustained, but the exact amount of savings cannot be determined with a high level of precision."
The military already has suffered significant readiness problems in the past 10 years. Shrinking budgets coupled with increased overseas deployments put a strain on training time, spare parts, equipment and retention of key people.
President Clinton and Congress responded by increasing spending. But some parts of the president's projected increases stem from savings that Republicans say may not materialize.
The GAO report does not say by how many dollars the Pentagon overestimated savings. But it says that to stave off readiness shortfalls, the Pentagon should not write budgets based on false estimates.
"Retaining positions will likely increase requirements for the operation and maintenance budget accounts," the report says. "Some military officials expressed concern that this could adversely affect their ability to meet regular operating requirements."

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