Hagel shakes up Pentagon’s organizational chart, hopes for $1B in savings

Correction: An earlier version of this story inaccurately reported that the positions of DoD Deputy Chief Management Officer and Assistant Deputy Chief Management Officer were vacant. Kevin Scheid is currently serving as assistant DCMO and the office’s interim leader. — Dec. 7, 2013 -10:14 a.m.

Defense Secretary Chuck Hagel moved Wednesday to eliminate several high-level Pentagon positions, consolidate offices and change the responsibilities of a number of organizations within the Office of the Secretary of Defense, as part of a pledge to reduce the Pentagon’s headquarters headcount by 20 percent.

The implementation plans he announced Wednesday followed his July directive to pare back Defense Department back-offices strewn around the world and a promise that his office would be the first in the process.

“Much of these savings will be achieved through contractor reductions, although there will be reductions in civilian personnel,” Hagel said. “Ultimately, other headquarters elements will be implementing similar reductions, and we will detail our plans to achieve these savings in the Pentagon’s budget submission next year.”

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The changes come after a study of the DoD bureaucracy led by former Air Force Secretary Michael Donley. The department says the planned changes would reduce OSD’s military and civilian headcount to 2,200 by fiscal 2019 and save about $1 billion.

In historical terms, that’s not a huge retrenchment. It still would leave OSD with hundreds more headquarters staff than it had on Sept. 11, 2001. And it’s about the same number of personnel OSD had in 2009, when military funding was at its peak, according to figures compiled by the Defense Business Board. The DBB’s numbers showed that OSD’s staff count was more than 5,000 when it included contractor personnel.

Mergers and acquisitions

Perhaps more significant is the organizational realignment Hagel ordered to accommodate the reductions.

Some elements of the plan would require Congressional approval, such as the added responsibilities Hagel wants to place under DoD’s deputy chief management officer and its chief information officer.

Under the restructuring, the DoD CIO would take over DCMO’s current responsibilities for overseeing the development of business IT systems.

“I will work with Congress to make this change because it will strengthen DoD’s ability to address growing IT and cyber challenges,” Hagel said. “The undersecretary of Defense for acquisition, technology and logistics will continue to be responsible for acquisition of IT systems.”

But DCMO also would take on greater heft. The plan merges the Defense Civil Liberties and Privacy office with the assistant to the secretary of Defense for intelligence oversight. That combined organization would be placed under the DCMO. So would the quasi-independent office of DoD’s director for administration and management (DA&M), which handles administration and security of the Pentagon itself, numerous other facilities in the D.C. region and many other administrative issues for the department writ-large.

Hagel said the changes finally would make the DCMO the true focal point for management issues in the Defense Department.

“Secretary Donley’s review found that since its inception, the DCMO has lacked the resources and the mandate to effectively fulfill its role as a DoDwide manager,” Hagel said. “Meanwhile, the DA&M and others have important organizational management planning and oversight functions across the department and the national capital region that will further enable the DCMO’s work. The consolidation of these offices into a true DoDwide management office will provide for better coordination and integration of DoD’s business affairs, including performance management and compliance, and result in a much stronger and more empowered deputy chief management officer.”

Policy realignment proposed

DoD’s first-ever DCMO, Beth McGrath, retired last week after 25 years in the department. The office’s number two executive, Dave Wennergren, departed DoD in August. Wennergren’s replacement, Kevin Scheid, is leading the office until a new deputy chief management officer is appointed.

Congress has its own ideas about how the CIO and DCMO offices should work. A provision in the Senate Armed Services Committee’s version of the annual DoD authorization bill would simply merge the two offices.

Hagel also directed a significant realignment of the office of the undersecretary of Defense for policy. For example, the jobs of the deputy undersecretary for plans and forces and chief of staff to the undersecretary will disappear.

“The plan also eliminates four deputy assistant secretary of Defense positions and their corresponding support structures through a consolidation and realignment of the policy staff overall structure,” Hagel said.

The restructuring of DoD’s policy shop mostly moves responsibilities to lower- level assistant secretaries of Defense. But the policy undersecretary will also take in the Office of Net Assessment, an internal DoD think tank that had previously worked directly for the Defense secretary. The decision comes as good news to ONA backers who had feared that the office would be eliminated entirely.

“We will preserve ONA as a distinct organization with direct links to the secretary of defense, but this change will better ensure its long-range comparative analysis inform and influence DoD’s overall strategy and policy,” Hagel said.

Hagel also ordered the dissolution of the offices of five deputy undersecretaries of Defense, but those changes already were mandated by Congress. DoD would relocate their various responsibilities across the department.

Sharon Burke, the assistant secretary of Defense for operational energy plans and programs, will inherit the orphaned responsibilities from one of those offices, the deputy secretary for installations, energy and environment.

“The secretary is going to be presenting some more details in the February-March timeframe, but some of these organizational changes are going to be implemented immediately, no later than January 2015,” Burke said in an interview with Federal News Radio. “We have some time to make these changes, and we’ll do that.”

Other deputy undersecretary positions being cut from OSD include three in the office of the undersecretary for intelligence, all of whom will be renamed “Directors for Defense Intelligence,” the Pentagon said.

Other offices, services next in line

While OSD is the first to announce its headquarters reduction plan, the military services and combatant commands will soon follow, said Gen. Martin Dempsey, the chairman of the Joint Chiefs of Staff. He said he will deliver plans to cut the joint staff by 20 percent in the coming weeks, and all military organizations commanded by three or four star generals will do the same.

But Dempsey said the military needs a little help from Congress. He says DoD is doing the best it can to cut its back-office expenses, but that there’s an awful lot of overhead spending the department can’t reduce on its own.

“We have said for some time that we need to adjust or slow the rate of growth in pay, compensation and health care in order to ensure that the all-volunteer force remains sustainable, as well as allows us to balance the force across modernization, training, readiness and manpower,” he said. “And excess infrastructure. We have it, and we need to begin to consolidate infrastructure and close parts of it. And, fourth, of course, is acquisition reform, where the goal is to get out of this pattern where things are acquired and delivered too slowly and too expensively. We can’t do that ourselves. We’re going to need help across virtually each one of these areas. And we’ll be looking to gain support for that over time.”

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