DoD stands up 9 teams to look for cost savings via shared services, business reforms

The Defense Department’s new chief management officer said Wednesday he’s set about the task of getting DoD to operate more efficiently by exploring opportunities for the use of shared services. The department has already set up subject matter-specific teams to start to design those services, and is looking for “immediate wins.”

John Gibson, who became DoD’s first-ever CMO on Feb. 1, said there are nine such teams in place. Each is expected to select specific projects to begin to reform the department’s business operations in ways that deliver near-term efficiencies.

“Within each of those, there will be an intended outcome, operational and financial goals that will be based on real data,” he said in testimony before the Senate Budget Committee. “They will have a project schedule, we will be able to track and measure how they’re doing on that. We can then compile all of those into groups and report those out. So we intend this to be very, very specifically driven by data that we’re tracking and reporting on, and then all of that will build out to a total of what we can account for — reform savings that we’ll be getting.”

Gibson said he was particularly focused on increasing the number of areas in which DoD uses shared contracting for commonly-purchased goods and services, including by setting standard requirements for services contracts across the department.

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And although the teams are looking for “immediate efficiency opportunities,” Gibson said the department was also pursuing a “fly, test, fly” approach that could incrementally scale the reforms they suggest throughout the department, once they’re successfully piloted in narrower areas.

“Fundamental to institutionalizing this effort is governance and management,” he said. “We have formed the Reform Management Group to guide these multiple efforts. This integrated, cross-functional group leads dedicated teams and fosters ongoing working relationships, aligning all the stakeholders involved in the reform efforts. As our processes mature, we will form an integrated management board. This board will utilize relevant, standard measures and goals, coupled with the authorities to manage, enforce, and institutionalize a culture of performance and productivity with the goal of continuous improvement in our business operations.”

Gibson also endorsed a 2015 Defense Business Board study which postulated that DoD could save $125 billion over five years by using the same techniques large companies have employed to cut their overhead costs, including by using more shared services, reducing its reliance on service contractors and incentivizing some of its civilian workforce to retire early.

Pentagon officials have previously declined to embrace the report’s recommendations, calling them, at various times, “of limited value” and “unexecutable.”

“Great ideas, but not practical,” Gen. Paul Selva, the vice chairman of the Joint Chiefs of Staff said at an Air Force Association breakfast last year. “Great ideas, some of them we’ve already executed and they didn’t yield the savings that we thought they would. But everybody that has the report wants to wave it in front of us and say, ‘You haven’t tried all $125 billion, so therefore you’re not trying hard enough.’”

Gibson’s view – delivered in response to a question by Sen. Tom Cotton (R-Ark.), who asked whether it was possible to achieve the report’s objective of $25 billion in annual savings on back-office spending – appeared to represent a sharp contrast from the Pentagon’s previous stance.

“I fully embrace what they’ve suggested,” he said. “We actually took some of the specifics there, where they said focus on shared-services areas, put teams in place, and go after that. We’ve done just that. We actually added three additional areas to what they suggested.”