The Army is in the midst of a significant reduction in its spending for service contractors, including a $2 billion cut to logistics support contracts so far, a figure officials expect to double within the next two to three years.
Top Army officials told the Senate Appropriations Committee that the reductions are part of an Army-wide efficiency initiative that aims to ensure contract support is used only where appropriate. The cuts have either happened or are planned at the Army’s headquarters organizations, on its bases, and in deployed scenarios.
In particular, the Army wants to reverse a buildup of contracted logistics support that occurred during the Iraq and Afghanistan wars — a buildup made necessary by the large demand for uniformed soldiers on the front lines at the time, said Gen. Ray Odierno, the Army chief of staff.
“We took much of the work out of the hands of our soldiers and put it in the hands of contractors in order to meet the increased demand. Some of that had to do with the purchase of new systems as we were still at war,” Odierno said. “But we are in the process of significantly reducing that by training our soldiers and giving them back the expertise that is necessary to sustain our equipment. We’re going to continue to transition these responsibilities back to our soldiers, who I want to be experts in sustaining our equipment.”
Likewise, Odierno said, the Army wants soldiers to perform more work on its bases. Again, because of deployment demands, many of those tasks were performed by contractors during operations Enduring Freedom and Iraqi Freedom.
“We have over-relied on contractors to do tasks at our installations that I believe can be done in many different ways, to include using soldiers,” he said. “In some areas, I think it’s part of their training to handle some of those base functions, for example, guarding our installations. They do that while they’re deployed, and it’s an important task. It’s a leadership task. And so we can reduce contractor costs by using our soldiers to do some of these tasks, which we think are military-related. We still have to take a look at where we have some contractors that are doing some things that I believe should be done either by Department of the Army civilians or by the uniformed military. We’re continuing to look at that. We’re working very hard to continue to work those efficiencies.”
The service contract reductions are in addition to an earlier DoD-wide insourcing initiative, during which the Army converted the equivalent of 10,000 contracted jobs to full- time equivalent federal civilian positions, either because officials determined the work was inherently governmental or could be done more cost effectively by Army civilians.
Overall, spending on service contracts has come down by 13 percent over the last several years, said John McHugh, the Army secretary.
“As part of our restructuring initiative, what we’re doing at headquarters and upper levels is taking 25 percent off the administrative staff and trying to ensure that where we do use contractors, it’s justifiable, not just in terms of the mission, but in terms of dollars,” he said.
And as part of that broader cost-cutting effort, designed to cut overhead spending across the Army, staff reductions have not been limited to contractors. Thousands of mostly-administrative positions have been cut across the Army.
“We’ve eliminated 12,000 positions by reducing all two-star and above headquarters by 25 percent,” Odierno said, “We have reorganized our brigade combat teams, eliminating overhead and maximizing our combat capacity. And we continue to achieve individual and collective training efficiency as we move forward.”
But Odierno and McHugh said the Army needs congressional approval to move ahead with several other of its cost cutting plans, including a controversial proposal to restructure the service’s inventory of helicopters, reallocating some of them between the active duty Army and National Guard and reserve units.
That step alone is expected to save $12 billion over five years, and together with compensation and other changes, is part of $6 billion in proposed Army reforms for 2016 that still need explicit approval from Congress.
“We can undertake the proposed reforms or we can accept increased risk,” Odierno said. “If these reforms and force structure reductions are not approved, it equates to a potential $12 billion shortfall in our budget, comprised of $6 billion in reforms and $6 billion in costs that are masked in (overseas contingency operations) that must ultimately transfer into our base budget.”
Like other defense officials who have appeared on Capitol Hill over the last several weeks, Army leaders testified that their cost-saving proposals — which also include base closures and several other unpopular items — are mandatory steps toward meeting the bare-minimum requirements of the current defense strategy, and that the mathematics of the 2016 budget they’ve proposed assumes that Congress will go along with all of their plans to reduce costs.
The budget also assumes Congress will eliminate the current defense caps in the Budget Control Act. If it doesn’t, Odierno said, the defense strategy would be rendered inoperative.
“Sequestration would compel us to reduce the Army end-strength even further, forcing out another 70,000 over the next five years from the active component, 35,000 from the National Guard and 10,000 from the Army Reserve,” he said. “We would cut out 10 to 12 additional combat brigades. Modernization would come to a standstill, training would go unfunded, and readiness rates — both unit and individual — would fall to very low levels.”
Readiness, Odierno said, is already a significant area of concern for the Army, due in part to the earlier triggering of the BCA caps in 2013, which forced the Army to cancel numerous training rotations.
“The unrelenting budget impasse has compelled us to degrade readiness to historically low levels,” he said. “Today, only 33 percent of our brigades are ready, and our sustained readiness rate should be closer to 70 percent. The compromises we have made to modernization and readiness, combined with reductions to our force size and capabilities translates into strategic risk. We have fewer soldiers, the majority of whom are in units that are not ready, and they are manning aging equipment at a time when a demand for army forces is much higher than anticipated.”
The funding levels the Army has proposed would break the budget caps in order to fund an active-duty force of 450,000 soldiers, instead of the 420,000 troops that sequestration would require. But Odierno said he is concerned that even a force of the size the Army’s pushing for — 980,000 soldiers, all-told, including the National Guard and reserve — would still be too small if its assumptions about the amount of time it would spend in a conflict turn out to be wrong.
“The assumptions that we’ve made [in the budget] are that our wars will be short- duration, and that we will not conduct any phase-four operations — which is the follow up to any war. The risk is there,” he said.” The assumption is we’ll be there for about six months to a year, and frankly, if we get into a conflict, they last longer than that. And so that will put a significant strain on our military, a significant strain on our reserve and National Guard forces, because they provide the depth in order for us to sustain this over a long period of time. I believe that we will be challenged to meet that at a 980,000 end-strength.