DoD Looks to Outsourcing to Improve Combat Edge

That's the gist of the message Deputy Secretary of Defense John P. White sent Congress and told reporters April 5, as he announced the department's plan to improve its combat edge through outsourcing.

White said DoD will look to the private sector to provide an array of goods and services to lower internal costs and improve departmental efficiency.

The decision on what to outsource must be based on three strategic objectives, the deputy secretary said.

"The department is committed to ensuring future modernization, maintaining readiness and improving the quality of life of its forces," he said. "To meet these pressing requirements, we must find more efficiencies and savings in our internal operations through outsourcing."

Focusing on its core competencies and contracting out or privatizing other processes could save DoD billions annually in support costs, White said. An analysis of DoD outsourcing from 1978 to 1994, for example, revealed an average annual savings of $1.5 billion.

Outsourcing won't only reduce operating costs, however. It also will make DoD more efficient, White said, enabling the services to focus on their primary business while improving service quality and responsiveness.

Some specific programs already identified for outsourcing include maintaining software for the Air Force's B-1 and B-2 bombers, upgrading the Army's Paladin howitzer and overhauling the Navy's nonnuclear ships.

White also cited the Defense Logistics Agency as an outsourcing leader. For example, by shipping spare parts directly from contractors to users, the agency cut costs 25-35 percent and improved response times by 75-90 percent, White said.

Prime new outsourcing candidates, White said, include base operating support, property and equipment disposal, distribution and transportation, warehousing, housing, accounting and finance, data centers and depot-level maintenance.

For the latter, DoD will size maintenance depots to provide high-risk, mission-essential capabilities and consider everything else for outsourcing.

To manage depot work efficiently, however, White said DoD has asked Congress to eliminate the 60-40 rule. The rule stipulates federal workers must perform at least 60 percent of maintenance, contractors no more than 40 percent.

White's announcement followed delivery of three reports to Congress.

The reports describe DoD's outsourcing initiative and how the services will establish core depot maintenance requirements. In place of the 60-40 rule, the workload report recommends using DoD's core method to identify minimum essential capabilities that should be retained.

"We're convinced there are major opportunities for savings," White said. "[Outsourcing] clearly is both a source of funding for us to improve modernization and increase our overall capability."