Esper gives Pentagon new set of marching orders to cut lower-priority spending

Esper's memo told military services, combatant commands and Defense agencies to get ready for another iteration of reforms meant to cut lower-priority costs.

Defense Secretary Mark Esper is moving the Pentagon on to a new round of cost-cutting exercises in 2020 — this one drilling down into the spending practices of a wide variety of DoD organizations, from Defense agencies to combatant commands to the military services themselves.

A memo the secretary sent to department leaders on Monday gave the outlines of the reform agenda he wants to pursue in 2020. The latest plan is the previously-promised followup to a review of “Defense-wide” agencies that identified $5 billion in planned savings in next year’s budget.

“The National Defense Strategy (NDS) requires relentless and ruthless prioritization in order to balance near-term challenges and prepare for great power competition, particularly given the fiscal realities confronting the nation,” he wrote in the memo obtained by Federal News Network. “Reforming the department to free up time, money, and manpower is not optional — it is a strategic imperative if we are to modernize the joint force and improve its readiness and lethality.”

Esper said he wants to focus the next round of cost cutting on three areas, starting with a deeper focus on Defense agencies and field activities. And even though Congress has strongly signaled that it intends to do away with DoD’s chief management officer position, for at least the time being, the CMO will take the lead on additional reforms to those “fourth estate” organizations.

The memo gives the CMO, Lisa Hershman, the task of “reforming business processes, overseeing resource planning and allocation, and evaluating each organization’s performance against business goals.”

In addition, Hershman’s organization — together with DoD’s office of Cost Assessment and Program Evaluation — are charged with drafting the department’s first-ever unified budget for Defense agencies and field activities. Currently, the spending proposals the department sends to Congress each year are fragmented across multiple documents with no top-line spending estimate for the fourth estate as a whole.

Meanwhile, Esper himself will lead a series of reviews on DoD’s geographic combatant commands, such as U.S. Central Command and U.S. Southern Command, and its functional commands, like U.S. Transportation Command and U.S. Strategic Command.

There, he says, the intent is to cut costs while focusing each command — and its personnel mix — on its top priorities under the National Defense Strategy. Each command is expected to come up with concrete reform plans in time for the 2022 budget proposal.

“This effort will require a standardized approach across all combatant commands, including a common baseline understanding of all tasks, missions, and overall resources and costs,” Esper wrote. “Further, it will require options for policy and operational prioritization, as well as a clear-eyed assessment of risks and associated mitigation courses of action.”

Congress has also shown recent interest in addressing how the COCOMs are administered. As part of the 2020 defense authorization bill, it told the department to deliver data on how their headquarters staffs have changed over the last five years, including the mix of military and civilian personnel broken down by functional area. And by January of next year, the law requires DoD to recommend how many military and civilian personnel each command’s headquarters should have.

Finally, Esper’s Monday memo calls on the secretaries and uniformed chiefs of the military services to conduct “clean sheet” reviews of their own spending and come up with detailed reform plans based on them.

As with the Defense agency and COCOM portions of the plan, Esper says the ultimate objective is to free up money to put toward the National Defense Strategy. He told service-level leaders to be ready to brief him on their progress by the end of this month, and again in June.

“Military department and service leaders should dedicate necessary time and attention to prioritizing resources within their prescribed fiscal guidance, making tough choices, and relentlessly seeking more cost-effective ways of doing business,” he wrote.

Although the memo doesn’t explicitly say so, the approach Esper is demanding from the services has echoes of the program-by-program budget reviews he and then-Army Chief of Staff Mark Milley oversaw during his time as secretary of the Army.

During that process — colloquially dubbed “Night Court” — managers were required to justify their program’s ongoing existence and spending levels before senior Army leaders. The Army used the process to cut $25 billion in projected spending over the next five years, and the current secretary, Ryan McCarthy, has pledged to continue the effort.

Esper told Defense leaders they should view the upcoming round of cost cutting as an “opportunity.”

“In short, I expect leaders across the department to approach reform as an opportunity to
support the strategy, rather than as a tax that can be avoided,” he wrote. “To achieve full, irreversible
implementation of the NDS, we must accomplish a mindset shift where leaders think critically
about the optimal application of every dollar in their respective budgets to advance the strategy.”

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