CHIPS Articles: Interview with the Under Secretary of the Navy Robert O. Work

In response to the national economic crisis and the president's directives for a drawdown in the Defense Department budget due to a gradual withdrawal of U.S. military forces in Afghanistan beginning later this year, the DoD and the military departments reduced overhead costs, eliminated duplicative force structures and underperforming acquisition programs, and streamlined processes.

Mr. Work is leading strategic reviews and efficiency efforts across the department in areas of force structure, warfighting capabilities, shipbuilding and acquisition. In December 2010, the Under Secretary issued a memorandum, "Department of the Navy (DON) Information Technology (IT)/Cyberspace Efficiency Initiatives and Realignment," directing the DON Chief Information Officer, Mr. Terry Halvorsen, to find efficiencies and cost savings in how the department delivers IT/cyberspace capabilities and information resources management.

At Naval IT Day in June, in Northern Virginia, Mr. Work discussed how the most recent defense buildup is different than any other U.S. military surge, and why the subsequent restructuring of the naval force and its warfighting capabilities will be challenging. CHIPS asked Mr. Work to discuss his analysis and IT efficiencies Sept. 1, 2011.

CHIPS: Some have said that reductions in the defense budget could reach $1 trillion. Is the DON working on worst case scenarios so the department can still maintain a force and achieve cost savings and efficiencies?

Under Secretary Work: Well, a trillion dollars would be the absolute worst case, and not something we are worried about — yet. Let me explain. We've benefited from a long buildup in defense spending that started back in FY (fiscal year) 99. The buildup first started because there was a consensus that the bottom-up review strategy — which called for a force capable of fighting two regional wars — was being underfunded. The buildup then accelerated and expanded as we fought wars in Iraq and Afghanistan. So we've seen over 10 years of steadily increasing defense spending.

OCO (overseas contingency operations) funding began to go down after FY10, as we started to pull out of Iraq. At that point, Secretary Gates said we needed to prepare for a future in which our base defense top line would also stop growing, and maybe even decline. We all recognized we needed to start tightening our belts. This thinking led to the big effort to find departmentwide efficiencies in our FY12 program and budget.

After the FY12 budget was submitted to the Hill, and in support of his broader deficit reduction effort, the president told DoD that future defense spending would be reduced by $400 billion over a 12-year period. As you might expect, this announcement started a series of 'what if' drills within the department. These efforts were well worth it because our savings target has now stabilized at more than $450 billion over a 10-year period. We are in the process of trying to determine our share of the cuts, how fast they will occur and how we will accommodate them in our program.

The only reason we would take a bigger hit is if the 'Gang of 12' — the Deficit Reduction Committee set up by the president and Congress — decides we need to take more defense cuts to reduce the deficit further. Alternatively, if the Gang of 12 is unable to come up with a plan, a sequestration reduction automatically kicks in which could cut defense spending by as much as a trillion dollars. So a trillion dollars is the absolute worst-case scenario.

Let me be clear, however. We are not focused on the worst case right now. We are focused on working the $450 billion cut. And the only thing we know for sure is that IT will be affected, as will every other major and minor program in the DON. To achieve these types of savings targets, every single program in the DoD and DON is being looked at as a potential source of savings.

CHIPS: What makes the drill different this time? Budgets have been cut in defense before.

Under Secretary Work: Well, it's certainly true we've faced cuts in defense before. In fact, since the end of World War II, and prior to the most recent buildup we just talked about, there were three big buildups and build-downs. The first buildup between FY48 and FY52 saw a big spike in peacetime baseline funding, first because of the onset of the Cold War, and then to pay for the Korean War. This sharp spike was followed by a sharp postwar drawdown, which bottomed out in FY55 — well above the FY48 level. In other words, the requirements for our baseline strategy jumped as we were fighting the Korean War.

A second Cold War buildup started in FY55 to fund the Cold War strategy of containment. It continued until about FY64, and then accelerated because of the Vietnam War. The Vietnam post-war drawdown actually began in FY69 and continued until FY75, when the defense budget reset to FY64 levels. In other words, the requirements for our base strategy basically remained steady as we fought the Vietnam War.

The third Cold War buildup started in FY76 and topped out in FY85, when concerns about national deficits caused a reduction in defense spending. The following build-down was then accelerated by the collapse of the Soviet Union, and the subsequent dramatic reduction in our baseline strategy requirements. In other words, after we won the Cold War, base defense requirements went down.

So now we face another build-down. It's happened three times before. What's the big deal? The big deal is that this build-down promises to be different from those before it, for three reasons. To begin with, this is the first long war fought with an All-Volunteer Force. And, although the Army and Marines grew to fight the wars in Iraq and Afghanistan, Air Force and Navy end strength actually came down. As a result, overall DoD end strength remained relatively flat over the war. In the past, manpower would jump during the war, and you'd save money by quickly shedding wartime draftees once the war ended. But since we didn't grow much in manpower during the most recent buildup, we can't cut personnel without cutting into force structure dedicated to our baseline strategy.

Second, in past wars, wartime production would jump as you bought ships and airplanes and tanks to fight the war, and we'd cut this production upon war's end, saving big money in the process. But with the exception of MRAPs (Mine Resistant Ambush Protected vehicles) and UAVs (unmanned aerial vehicles), we purchased relatively little during this buildup. Consequently, our airplanes, ships and tanks are older and more worn out than they were before the war started, and we should be ramping up in production. So cutting production now would not be wise.

Finally, in the past, we'd save money by cutting direct wartime costs, such as ammunition, supplies, fuel and support contracts. But since we've paid for the wars in Iraq and Afghanistan with supplemental funding, any savings generated as we wind down these wars do not count as part of the president's savings target — all the cuts must come out of the base budget. So, the bottom line is that the entire $450 billion cut will come out of our base — and not wartime — budget, and we will lack many of the levers normally available to accommodate them.

Moreover, did the requirements for our base budget rise during the war as they did in Korea, or stay static as they did during the Vietnam War, or drop like they did after the end of the Cold War? A good case can be made that the demands on our base budget have been rising, and continue to rise. So we are faced with a much different challenge than those faced by past defense planners, and this will require us all to be very creative as we tackle the cuts.

CHIPS: One of the areas that you've asked the DON CIO to focus on is IT efficiencies and cost savings. You've identified 25 percent in cost savings to be achieved over the next five years. What are you anticipating coming out of that?

Under Secretary Work: When we participated in the [Secretary of Defense's] efficiencies drill last year, we were told to try and shift about $30 billion from departmental overhead, or 'tail,' to warfighting capabilities, or 'tooth.' We actually exceeded our target. Altogether we identified $42 billion in efficiencies and were able to divert that money to get all sorts of new capabilities. But it's important to note that IT was not a big part of that first round of efficiencies. It essentially took a pass. So when Mr. Terry Halvorsen came aboard as the DON CIO in November 2010, one of the first things I asked him to do was to look very hard at IT from a strategic perspective, and to reduce overall business IT costs by about 25 percent.

I wasn't really certain that a 25 percent reduction was the right target because I didn't know exactly how much we were spending on IT. You see, there is no budget line that says 'DON Business IT.' Instead, business IT spending is decentralized within both the Navy and Marine Corps budgets and hidden in so many different contracts. All I knew was that we were probably spending a lot on IT business services, easily more than $5 billion a year. So I asked Terry to first figure out what we were actually spending on IT and to then try to reduce those costs by 25 percent. Based on all the literature I read on IT cost reductions in the commercial world, and using IBM's IT cost-cutting program as a model, I thought a 25 percent reduction was a good target to start the IT efficiency train rolling.

The long and the short of it is that Terry has a mandate from Secretary Mabus and me to look at business IT spending from a strategic, enterprise-wide perspective and to save as much money as he can. Terry has the tasking and authority to try to squeeze every dime out of this enterprise. This is a cultural shift that, quite frankly, is meeting some resistance. But the Secretary and I are firm in our belief that there is money to be saved in business IT, and we want Terry to go and find it.

CHIPS: Do these savings targets apply also to tactical IT programs of record?

Under Secretary Work: Tactical IT programs include programs like CANES (Consolidated Afloat Networks and Enterprise Services) and JTRS (Joint Tactical Radio System). For the moment, we plan on keeping tactical IT programs and spending decentralized and tracked by the two services. So when the Marine Corps buys a radio to put inside an MRAP, or the Navy develops a radio that goes inside a new helicopter, it is left to service program managers and ASN RDA (Assistant Secretary of the Navy Research, Development and Acquisition) to manage costs and save money.

Where Terry gets involved on the tactical side is when and where the tactical and business IT systems and networks connect. At these important points, we want Terry to enforce standards across the two services so that they can talk with each other and to joint units. For now, however, we think the real savings to be had are on the business side of IT, and that is Terry's main focus. Business IT includes things like NGEN (Next Generation Enterprise Network), enterprise licensing, data centers, and the like. That is where we hope to achieve 25 percent savings.

CHIPS: I see. Do you want to address what you're doing to focus on business IT now?

Under Secretary Work: Sure. Like I said, there is no single budget line that says: DON Business IT. So the first thing Terry is trying to do is to determine how much we are spending on business IT. To help us figure this out, Terry recommended two key policy changes. First, he asked that any IT spending project that exceeded $1 million have a solid business case analysis (BCA) to support it. This BCA would have to compare alternatives and clearly define expected costs, benefits, risks, and so on. Second, he recommended that only one person in either the Navy or Marine Corps be authorized to approve the BCA. At first, I felt that this was going to be really hard to do, but the more I thought about it, I thought he was exactly right. These two policies would help us get a handle on what we are spending, and they were the right things to do.

So now both the Navy and Marine Corps have a single ITEAA, or Information Technology Expenditure Approval Authority, who approves every business IT project that costs more than $1 million. Business IT spending is no longer decentralized; any service IT expenditure over this threshold has to be approved by either N2/N6 (Deputy Chief of Naval Operations for Information Dominance/Director of Naval Intelligence and Deputy CIO for the Navy), Vice Adm. Kendall Card, or the Marine Corps Director of C4 and Deputy CIO, Brig. Gen. Kevin Nally.

By requiring these IT projects to go through a BCA and by having a single service approval authority, we are soon going to find out exactly what our total business IT bill is. Additionally, as we go through this process, we are going to find what kind of additional policies and safeguards we should put into place.

The second thing Terry did was to strengthen the DON's IT governance. Terry recommended that we establish an Information Enterprise Governance Board, or IGB, as the department's single senior information management/information technology/cyber governance board. It's run by Terry, and includes all of the IT stakeholders in the DON.

When the IGB needs to get an enterprise-wide business operation policy or decision approved, Terry brings it to the IGB's board of directors, which includes me, the Vice Chief of Naval Operations (VCNO) and the Assistant Commandant of the Marine Corps (ACMC). We approve or disapprove everything that Terry or the IGB recommends, so Terry automatically gets the support he needs from both Navy and Marine Corps leadership once a decision is made.

Establishing the IGB for IT governance, using BCAs to evaluate projects before spending, and establishing Navy and Marine Corps ITEAAs are the three key things that Terry has set up to help us get a handle on business IT spending, and I endorse them fully. I think they are working well. If we find we need more safeguards or additional governance bodies, we will establish them as well.

The third, and perhaps most important thing Terry is doing, is reducing DON business IT costs. He's already making good progress. One of the first things he tackled was better managing applications across the department. We've made a half-hearted attempt in the past to keep applications under control. For example, right now we have every single version of Microsoft Office ever made, and we are trying to maintain all of them. That makes no sense whatsoever. So we gave Terry the authority to scrutinize all departmental applications and get them down to a manageable and affordable level.

The second thing Terry is looking at to save money is in data center consolidation. This was one of the areas that IBM tackled aggressively and saved big money on, and it was one of the first things Terry and I discussed at length. Again, because business IT was so decentralized in the department, data centers sprouted up all over the place. Organizations were setting up data centers to store their own data, and it was very inefficient and expensive. Terry is going after this problem hard, and he has established policies aimed at consolidating data centers from a DON enterprise view.

A third area of focus for Terry is enterprise licensing. It turned out that the Marine Corps had the best enterprise licensing for Microsoft [products] in the department. Terry asked why shouldn't we just use the one that is the most advantageous to the department? Simple question, simple answer, big payoff.

CHIPS: I know that the department is also looking at cloud computing and email as an enterprise service by a commercial handler. Are you looking at implementing enterprise email as just a dot-mil email address?

Under Secretary Work: Terry has a lot of ideas about this, and we are still exploring all the different options. For example, OSD (Office of the Secretary of Defense) would like us to look at DISA (Defense Information Systems Agency) as an enterprise email carrier. Terry is exploring whether we could use commercial providers. We haven't made a final decision, but we know this is an area that we might be able to save big money.

Regardless of who ultimately provides the service, we want a strategic, enterprise-wide network. In other words, what we want is for anyone in the DON, no matter where they are, to be able to place their CAC card into a DON computer and pull up their email and be able to get the email address of anybody in the DON, whether it's a Sailor, Marine, or civilian. Right now we can't do that. We've given Terry the tasking to make that vision a reality.

Terry hasn't made a final recommendation yet because there are issues that still need to be worked out. But Terry has carte blanche to look at every single opportunity and to pursue the one that saves us the most money. As he goes through this process, he must look at a variety of issues. For example, if we went to a commercial carrier, there would be some security concerns. Will we be able to satisfy those concerns?

As things stand now, if we went with DISA, it would be a little bit more expensive than going with a commercial carrier. Could we maybe get them [DISA] to bring their prices down? He is looking at all these things. This is a rather long answer to your question, but we are looking at this particular initiative very hard, because we hope to find significant savings.

CHIPS: When you talk about the business IT network, are you talking about NGEN?

Under Secretary Work: Yes, when talking about business IT I am primarily talking about our NIPRNET, which now resides on the NMCI (Navy Marine Corps Intranet) CoSC (Continuity of Services Contract), and in the future the Next Generation Enterprise Network, or NGEN. We consider NGEN and NMCI to be parts of the DON enterprise-wide business IT network, and we are doing everything possible to reduce the costs of providing these networks and services.

CHIPS: When you named Mr. Halvorsen as the IT efficiencies lead he established eight IPTs to examine some areas for savings. Do you have a status on the work they've done so far?

Under Secretary Work: Well, the first thing I can tell you is that for the last eight months they have been very hard at work. I think it's safe to say that Mr. Halvorsen is one of the most data driven CIOs the department has ever had. He demands good data for decisions, and he demands that all IT BCAs be supported by good data. These IPTs are responding to questions he is asking them, and they are becoming very good idea generators for the business IT enterprise.

For example, the DCC (Data Center Consolidation) IPT recommended we set a moratorium on purchasing more data center capacity because they think we have more data centers than we need. It's time to consolidate them and save some big money.

Now there are those inside the department who think we are being too optimistic in our savings projections. But in my view, in this budget environment, you have to set your savings targets aggressively. In essence, we want the burden of proof, that the savings targets are too aggressive, to be on IT managers. And if they can't achieve the savings by doing business the old way, we want them to think of a new way to conduct business that does.

Similarly, the Enterprise Licensing (Enterprise Software/Hardware and Software Commodity Purchases/IT Services) IPT was the one that said, 'Why don't we just exploit the Marine Corps? They've got a great enterprise licensing agreement with Microsoft so let's just use that across the DON to save money.' Made perfect sense, and we are moving in that direction.

The Navy and Marine Corps Portal Environment IPT is looking at all of our Web services and all of our portals and trying to come up with a single standardized Web portal service rather than having customized Webs and portals all over the place. At the very least, we want to have standards for each of them. A perfect example is in our sexual assault prevention and response program. If a young Sailor or Marine is the victim of one of these traumatic events, no matter where they are, we want them to be able to go to a website that has clear and easy links that connect them with the people who can help them.

All of our sexual assault and prevention websites need to be standardized and interoperable so when people need information — they can get it. We are trying to do that throughout the whole department on all of our programs.

The DON Telecommunications Environment IPT is trying to standardize our video teleconferencing (VTC) capabilities. We have video teleconferencing [equipment] all over the place, but it is unevenly spread. Some people have access to exquisite VTC capability, other people don't have access to any; some people have multiple VTC facilities throughout their organization, and other people just have one VTC facility. What IPT members are trying to do is figure out what kind of standardized VTC equipment units should have, and to what degree, and at what cost. We don't want to 'gold plate' it; we want a VTC [capability] across the department that works and is relatively inexpensive to operate.

We are also working on several IT workforce training and education initiatives. We are especially interested in improving our cyber warfare training capabilities. One of the most exciting things in this regard is called the Cyber Range, which is currently in use, as well as under continuing development. We envision it as a training and exercise environment that will provide our Sailors, Marines and civilians with the ability to improve their skills individually and as teams in cyberspace.

This doesn't cover everything we are doing. But I hope it conveys to you that the IPTs have been both busy and productive. We have eight now; we might need more in the future — or we might need less. Regardless of how many we have, they will continue to serve as the idea generators for Mr. Halvorsen and his CIO team. And they will continue to have to prove their ideas have merit before Mr. Halvorsen will present them to the IGB to get buy-in from the VCNO, ACMC, and me.

CHIPS: Will the DON portal environment eventually eliminate the individual portals that commands have?

Under Secretary Work: I don't know if that's going to be the final case, but I believe that in the future, instead of everybody spending a lot of money to customize their own portals, there might be more standardization of portals throughout the department. However, I don't want to say something that would foreclose Mr. Halvorsen's choices in this regard.

CHIPS: When you talked about the Cyber Range, is that tangible right now, sir?

Under Secretary Work: The DoD Information Assurance Range, which simulates the Global Information Grid, and Marine Corps Range are in place and functional right now. The Navy Cyber Range has initial authority to begin operation. DON CIO will be designating the Marine Corps as the DON Cyber Range lead to coordinate and combine Navy and Marine Corps efforts. The goal is a DON Cyber Range comprised of Marine Corps and Navy Cyber Range programs that will serve as the cyberspace training environment within the DON by providing simulated Marine Corps and Navy network environments, which support test and evaluation, education, and major service and joint exercises.

CHIPS: Do you think the BCA templates are applicable outside of IT? Could other programs benefit from them?

Under Secretary Work: Yes, absolutely. I have a deputy under secretary, named Eric Fanning, who is my deputy chief management officer. He demands BCAs for essentially everything that is not a tactical or an operational system that comes up in our budget process. We are trying to use BCAs in as many ways as we possibly can in order to make sure we are getting the best return on every dime we spend and are reducing waste and duplication. BCAs are a great way to do that.

CHIPS: In a brief you gave at the Naval IT Day you mentioned comparisons between costs of personnel in 1998 and personnel costs now, and you said it would be difficult to garner savings from a reduction because the Navy and the Marine Corps didn't really build up. Have you identified any other cost savings related to personnel in the force?

Under Secretary Work: Although we've cut the number of people on active duty since FY98, our manpower costs have gone up by over 20 percent. We need to get a handle on rising personnel costs, or by the 2020s we will be in big trouble. The first thing we are doing in the department — and by this I mean the Department of Defense, led by the deputy secretary — is to review all of the different types of entitlements and pay benefits in a holistic way.

We are then trying to figure out where it might make sense to pursue savings. Our efforts are guided by the SECDEF, who has said he doesn't want to do anything that might be harmful to a strong All-Volunteer Force.

So it gets down to this: Are there areas that we might be able to achieve some savings that have no major negative impact on the recruitment and retention of quality people in the All-Volunteer Force? For any changes we recommend, we have to satisfy ourselves that we aren't going to upset the balance of what we consider to be the finest fighting organization that the United States has ever fielded. This effort is going to continue throughout the fall, and we expect to have some answers by next February when the president's budget is rolled out and made public.

CHIPS: The austere environment that the Defense Department is going to have to operate in can be pretty demoralizing to a workforce that is trying to do its best; should the workforce be encouraged by these reductions? Will they help the department?

Under Secretary Work: Well, first off, if you're ever going to be in government, I think this is the time to be in government. Whenever you have big changes afoot — like in 1993, when we did the first post-Cold War bottom-up review, or now when we are facing a major reallocation of our nation's resources — it's cool to be part of a process that will have big ramifications for a long time. It's a time when good ideas matter, and good people are the source of good ideas.

So you can react to what's happening in one of two ways. One is to say: 'Oh, my gosh! The sky is falling! How will we ever get through this?' And then shut down or sulk. The other way is to see this time as a great opportunity and be part of the solution.

When I was on active duty, we used to say you could either be someone who makes things happen or someone who wonders what the heck just happened. I've been in my job nearly two and a half years, and I think most in the Department of the Navy are those who want to make things happen. They realize what the Navy and Marine Corps offer to the nation, and that what the DON does everyday just cannot be duplicated by very many other organizations. But they also know we are going to have to keep being the best with fewer resources than we expected. I'm thinking most are going to help us identify ways to save money that might keep us from having to cut the workforce, or reduce force structure, or scale back on needed capabilities.

No matter what happens, the secretary, CNO, CMC, VCNO, ACMC and I are committed to taking care of both the men and women in uniform, as well as the men and women who make up our civilian workforce. While we are all probably going to have to take some cuts in the future of some kind, I don't think people should be demoralized. They should know that their leaders are fighting for them at every level of the department. And they need to get in the fight themselves.

CHIPS: In some of the notes, you mentioned looking at acquisition, ship maintenance and shipbuilding plans. Is the department going to be able to protect resources to fund these areas because the fleets are getting older and there are concerns about the number of ships available for tasking?

Under Secretary Work: There is a common view among the DON's senior leadership that while the future Navy-Marine Corps team may be a little smaller than it is today, it is going to be a ready force. The last thing any of us want is a return to the hollowed-out Navy and Marine Corps team we saw in the late 1970s. So the one thing I can guarantee to everyone who works inside the department is that we are going to place great attention on maintenance, spares and logistics so that we avoid hollowing the Navy and Marine Corps from the inside out.

CHIPS: Is there anything else that you would like to add, sir?

Under Secretary Work: Just this: I am really proud of everybody in the DON. It's a great comfort knowing just how good our people are and how dedicated they are to the department and to our nation. To everybody out there I'd just like to say: Thank you for what you are doing. You inspire me every day. Keep up the great work.