The Opportunity Costs Of Pentagon Overhead And Inefficiency Are Huge

Imagine that you discovered a federal agency was wasting enough money each year to send one million students to M.I.T. Not just the money needed to cover their tuition, but room and board too. Would you be outraged? Well there is good reason to think that is actually happening at the Pentagon, and sequestration is doing nothing to fix the problem.

My Lexington Institute colleague Dr. Daniel Goure has been investigating the cost of excessive regulation, antiquated business practices and lack of competition at the Pentagon. He figures that the amount of money being wasted by not adopting modern management techniques is at least $45 billion annually, and might be over twice that amount. Let’s say for the sake of argument it’s one-tenth of the Pentagon’s budget, or about $55 billion counting overseas contingency funding.

That’s a shocking amount of waste, but the figure doesn’t mean much in tangible terms. So let’s express it in terms of opportunity costs — the concept economists use to describe the things we must forego by choosing a particular course of action. $55 billion is enough money to continue purchasing all of the combat systems that have been canceled since President Obama took office five years ago, from the F-22 fighter to the Airborne Laser to the Medium Extended Air Defense System. It’s an amount of money equal to the worldwide sales of Google. Over a ten-year period, it would add up to the entire cost of building the interstate highway system in deflated terms. And, as I said earlier, it would be enough money to send a million students to M.I.T. each year.

These are the opportunity costs we pay for not learning to be more efficient in managing our military enterprise. And I haven’t even mentioned the carrying cost of the federal debt that results from wasting so much money, since every cent must borrowed. One problem with our present approach to deficit reduction is that it sets caps on spending without addressing the underlying drivers of spending increases. So once the Budget Control Act lapses, we can expect to see the accounts it currently limits begin marching back up, just like the entitlement spending it barely restrains at all.

Perhaps a better approach would be to modify the sequestration provisions of the law so that $10-20 billion of the mandated savings at the Pentagon each year must come from eliminating processes and practices that don’t add value to the military enterprise. Maybe we can get by on 4,000 flight tests rather than 8,000 before fielding a new fighter. Maybe we don’t need those 10,000 new bureaucrats that were hired to oversee acquisition just as the military was getting ready to exit Iraq. And maybe the responses to solicitations for new weapons systems don’t need to be hundreds of pages long. Instead of setting up yet another commission to investigate the problem, let’s just give Pentagon managers a legislative mandate to go find the savings, and stop wasting money.