Pentagon Efficiency Experts Should Ask Why So Much Maintenance Work Is Reserved for Public Sector

In his effort to squeeze savings from the military budget that can be reinvested in modernization, Secretary of Defense Robert Gates has taken on such sacred cows as the low co-payments retirees make for healthcare and the bloated number of general officers. The result of this effort has been some $150 billion in projected savings, of which the Department of Defense (DoD) will be able to retain about half.

If the Secretary is really committed to making his department more efficient, then one of the things he should do is reexamine the role of the organic defense depots in providing maintenance, repair and overhaul (MRO) services to the military. These depots are a privileged public-sector operation protected by law. In an era when the costs to the states of their public-sector workforce is coming under increasing scrutiny, DoD needs to take a fresh look at the cost and value of its public-sector depot activities. In particular, the Secretary needs to assess whether the current congressionally-mandated division of labor between public and private-sector providers of maintenance makes sense in an era of tightening defense budgets.

Congress has chosen to protect the role and place of the public-sector depots and their work force in two important ways. First, it has mandated something called “core” work on weapons systems that must be performed in government-owned and operated facilities in order “to ensure a ready and controlled source of technical competence and resources necessary to ensure effective and timely response to a mobilization, national defense contingency situations, and other emergency requirements.” According to the law, “the Secretary of Defense shall require the performance of core logistics workloads necessary to maintain the core logistics capabilities.” Core workload is defined in terms of man-hours needed in order to maintain the capabilities defined by the law.

The other way that Congress has provided for the public-sector workers is the so-called “50-50” rule. This requires at least 50 percent of depot dollars be spent on work by government employees. Unlike the core requirement, the 50-50 rule has no performance standards, skills metrics or capability requirements associated with it; the rule simply looks at dollars spent. As a result, each of the military services is often required to send MRO work to a public depot even if a private-sector source could perform it better and more cheaply, in order to maintain the 50-50 split of dollars expended. Or, private-sector firms are required to subcontract to the public depots so that the dollars expended can be counted on the government’s side of the ledger for the purpose of meeting the 50-50 target.

There is clearly a rationale for the requirement to preserve a minimum or core capability in the public sector for emergencies as defined in the core legislation. The value of the idea of core work became evident as both public and private-sector maintainers ramped up to support the conflicts in Iraq and Afghanistan. However, there is no clear justification for the 50-50 rule. Congress simply has chosen to protect public-sector workers even if they are less capable and less productive than their private-sector counterparts. Indeed, without a connection to some standard for the work to be performed by the public-sector depots it is difficult not to conclude that the 50-50 rule is simply a way of bolstering the levels of employment in the organic depots. Therefore, this rule constitutes nothing more than a give-away to federal employee unions.

It is not simply the private sector or the American taxpayer that bears the cost of the way the 50-50 rule protects public-sector jobs. It is the warfighter who potentially suffers. If maintenance dollars are misspent trying to meet some arbitrary tax intended to protect the public-sector workforce this means that fewer weapons systems will be repaired and returned to the warfighters who need them. In an era of rising costs for operations and sustainment activities in DoD and tightening defense budgets it is no longer reasonable to have laws that unfairly protect government workers at the expense of all the other stakeholders. It is also an inefficient way to operate, one that reduces competition and hence raises the costs of MRO work to the government. Public-sector depots should compete with private concerns for available work based on their price and performance. If Secretary Gates wants to further improve the efficiency with which defense resources are expended he would be well-served to tell Congress to reform the 50-50 rule.