Congress to End Attempt at Managing Pentagon Like a Business (1)

After years of runaway spending on everything from fighter aircraft to hammers, and creeping bloat that created 17 different systems for writing contracts, Congress created a chief management officer position in 2018 to finally slash spending and prune the Pentagon’s unwieldy bureaucracy.

But two years later, lawmakers have deemed the effort a failure. The annual defense authorization bill (H.R. 6395) would eliminate the Pentagon’s number three management position, dismantle its office over the next year, and scatter its powers.

Billions in savings touted by both former Defense Secretary Mark Esper before he was fired in November and current Chief Management Officer Lisa Hershman were not enough to sway lawmakers who wanted more and faster.

To Rep. Mac Thornberry (R-Texas), the House Armed Services ranking member, “it was something of an experiment that has failed.” But ideological polar opposites Sens. Elizabeth Warren (D-Mass.) and Ted Cruz (R-Texas) were among members who’ve unsuccessfully tried to save it, and Mark Cancian, senior adviser at the Center for Strategic and International Studies, said Congress set the office up to fail.

“The problem is that they expected too much out of the office,” he said. “They are expecting major changes from management reform that does not have political fallout.”

The final defense bill passed the House with strong support and is headed to a Senate vote. President Donald Trump has threatened to veto the must-pass annual legislation over an unrelated social media law and congressional plans to rename bases that honor Confederate military leaders.

90:1 Benefit

The chief management officer was conceived in the fiscal 2017 defense authorization law (Public Law 114-328). It resulted from a push by the late Sen. John McCain when he was Senate Armed Services chairman.

Lawmakers had hoped to put power and authority behind their desires to overhaul business operations and cut costs in the largest federal agency, which in fiscal 2020 has a $738 billion budget.

The first chief management officer, Jay Gibson, was confirmed by the Senate in February 2018, and was pushed out of the job about nine months later by former Defense Secretary Jim Mattis.

Hershman served in an acting role before being confirmed in December 2019. She was previously the founder and CEO of the DeNovo Group, a business consultancy.

Hershman said her office has saved $90 for every $1 it spent over its two-year lifespan, making it a great value. The savings — from changing policies, business systems, and acquisition processes — were confirmed by the department comptroller, she said. For example, her office helped reduce the number of contract writing systems in the department to two from 17.

“In simplest terms, we identified $37 billion in validated savings, with the opportunity to save an additional $6.2 billion in fiscal year 2022 with a modest budgetary investment into the Office of Chief Management Officer of $77 million,” Hershman wrote in a statement to Bloomberg Government.

About $5.9 billion of the claimed $37 billion came from a department-wide hunt for savings called the Defense Wide Review that was started by Esper, who spent the last year of his tenure touting the savings and Hershman’s work.

(Photo by Juancho Torres/Anadolu Agency via Getty Images)

Lisa Hershman, then the Pentagon’s deputy chief management officer, speaks during a presidential visit to the General Santander National Police Academy in Bogota, Colombia, on September 3, 2019.

Benefits Questioned

But the claimed savings and performance of the position came under tough criticism, most recently by the Defense Business Board, an advisory committee on business and management issues.

Interviews with personnel throughout the Pentagon found a nearly unanimous opinion that the position has been mostly ineffective, according to a board review turned over to Congress in June. The chief management office has been just collecting data and trimming budgets, while the larger savings claimed since fiscal 2017 were mostly derived from work done by the individual military departments and not the chief management officer, the board reported.

Meanwhile, the military departments told the advisory board the CMO provided no benefits and hindered their missions.

“It is really hard to read that report and say, ‘Yeah, we ought to give this a few more years,’” Thornberry said.

Hershman pushed back on the Pentagon advisory board report, which also examined earlier incarnations of a chief management-style role that had much less authority.

“The report is inaccurate, I feel, because of two things. No. 1, it’s based on opinions,” Hershman said. “No. 2, they looked at 10 years of a prior lesser role that also didn’t have much support. It was vacant 40% of the time.”

A group of 13 bipartisan lawmakers including Warren and Cruz unsuccessfully urged the congressional armed services committees to spare the Pentagon office as the final defense bill was being negotiated and it was clearly on the chopping block.

“Let us at least give Ms. Hershman a fighting chance, and come together to adopt the changes needed to make this position work,” the group wrote in a letter to committee leaders.

‘Impossible Position’

If the compromise bill is enacted, the next defense secretary will be required to transfer the chief management office’s authorities, personnel, and assets to other department employees and offices in whatever way they choose.

Biden has named Lloyd Austin as his pick to lead the Pentagon, which could put the former Army general and head of U.S. Central Command in charge of the dissolution and reshuffling if he can get a service waiver needed for Senate confirmation.

“We’ve got to keep our eye on this ball and keep pushing the department to make better use of the resources they get from the taxpayers,” said Thornberry, who is retiring from Congress after serving as Armed Services chairman from 2015 through 2018 and ranking member for the past two years.

Cancian, at the Center for Strategic and International Studies, said the chief management officer is an “impossible position” because of Congress’s unrealistic expectations. Bigger savings would likely require moves such as a new round of military base closures in states and districts across the country or further restructuring of military health benefits, which carry higher political risks for lawmakers, he said.

Now, the debate over slashing Pentagon spending will likely slip into next year and be picked up by the Biden administration.

“They will talk about the need for management reform. They will criticize the Trump administration for not doing enough,” Cancian said. “I would not be surprised to see an announcement coming out of the Pentagon in the next year about a process that has been established to review management systems.”

To contact the reporter on this story: Travis J. Tritten at ttritten@bgov.com

To contact the editors responsible for this story: Bernie Kohn at bkohn@bloomberglaw.com; Sarah Babbage at sbabbage@bgov.com