war on the rocks

A Primer on Mac Thornberry’s Fourth Estate Reforms

May 9, 2018

As the annual markups of the National Defense Authorization Act (NDAA) get underway for fiscal year 2019, lawmakers in the House are submitting amendments on topics ranging from surface warfare to improving electronic warfare capability. With this year’s spending levels locked down by the Bipartisan Budget Agreement of 2018, expect policy differences rather than budgetary fights to dominate conference discussions over the summer.

One bill in particular has stirred up a considerable amount of controversy: House Armed Services Committee Chairman Mac Thornberry’s (R-Texas) proposed reform package for the Pentagon’s so-called “fourth estate.” Despite the angst it has generated inside and outside of Congress, this package is just the latest in a nearly two-decade long string of similar (and often bipartisan) proposals targeting defense agencies and headquarters or management overhead that have failed to generate either traction or results.

Thornberry’s proposal advocates some useful initiatives, but the idea that these can be translated into immediate and deep cost savings and personnel cuts is a worn-out fallacy. This may be one reason why Thornberry already amended and watered-down his proposals, making most of them only voluntary for Defense Department compliance. While his original bill was more evolutionary than revolutionary, the kernels of originality within are worth airing on the Congressional floor. Too many of the best proposals from the bill were left behind when the Chairman shifted his stance, but he also used that opportunity to breathe some life into ideas long abandoned by Capitol Hill.

Speaking of blasts from the pasts, I’ve taken the liberty of adapting a trusty paradigm to better examine the nuances of the Chairman’s reform proposals.

What is the Fourth Estate?

Everything (outside the services)

From the Missile Defense Agency and Special Operations Command to the Test Resource Management Center and the Washington Headquarters Service, the so-called Pentagon “fourth estate” essentially refers to all of the entities within the Department of Defense that fall outside of the purview of the military services. From administrative and support functions like defense health care and human resources, to combat enablers like the Defense Intelligence Agency or the Defense Advanced Projects Agency, the fourth estate provides enterprise-wide services across the entire Department of Defense.

Unlike the strict hierarchy of the military services, the fourth estate resembles a loosely affiliated patchwork of semi-autonomous agencies. With limited oversight, waste and redundancy has inevitably sprung up throughout the bureaucracy, as I have noted elsewhere.

By my calculation, these functions account for about $116 billion, or 17 percent, of the Pentagon’s 2019 budget submission. As Thornberry has noted, the fourth estate agencies contain up to about a quarter of the Pentagon’s workforce — and nearly half of its civilian personnel — and controls a contractor army estimated at 600,000.

What has it hitherto been in the political order?

Nothing.

Owing to its disaggregation, and subsequent lack of accountability or transparency, the fourth estate is a frequent scapegoat for the malaise permeating the Pentagon. From scathing hearings to acerbic tell-all stories, many root problems seem to wind their way back to the same source.

There are three likely explanations for this. First, the fourth estate has few actual warfighters, its budget is outside the reach of the services, and the roles they perform — from special operations and intelligence collection to sensitive research and missile defense — are often highly classified. This means there are few military leaders positioned to openly defend their value to Congress and the nation. The lack of uniformed leaders is an important consideration when public trust in the military is much higher than elsewhere in government. Consequently, most of the fourth estate’s senior leadership consists of civilian political appointees who rotate in and out with administrations, leading to scant institutional culture of leanness or efficiency, in part based on rapid turnover. Finally, many of the fourth estate’s duties are mundane services that only see the limelight when something goes wrong. Thus in the zero-sum competition for scarce resources brought about by the Budget Control Act, the services have had an incentive to blame their problems on these nebulous agencies and offices and encourage Congress to divert resources toward warfighting rather than abstruse services.

There is some truth to this argument. The Pentagon now spends more on contracts for services than for procurement. Operations and Maintenance spending — which funds logistics and defense civilian salaries, accounts for 70 percent of fourth estate funding — has grown 57 percent in real terms from FY02 to FY17 — and even the Congressional Budget Office can’t put its finger on why.

Yet Thornberry’s answer to this problem is stark: a $25 billion reduction to the fourth estate (22 percent of its FY19 request) to be executed in two years. By comparison, the enacted budget caps diminished overall Pentagon spending from pre-sequestration plans by about 16 percent over seven years. Further, many warfighting aspects of the fourth estate would be immune to Thornberry’s cuts, as the proposed reforms in the NDAA are limited to a select group of agencies dealing with “civilian resources management, logistics management, services contracting, or real estate management.”

During the last two decades, similar efforts at sweeping reductions to headquarters, overhead, and the fourth estate have been proposed again and again and again.

And again, and again, and again.

And again.

And again.

And again.

What does (Thornberry) desire it to be?

To become something … and also something less.

Asked to comment on Thornberry’s proposals, Deputy Secretary of Defense Patrick Shanahan expressed support, but also cautioned that “it’s not a people issue … it’s our processes.” Efforts to slash the Pentagon’s overhead continue to founder because they make little to no effort to address the volume of work needed to support the military, and instead obsesses over immediate savings and job reductions.

Thornberry’s approach would continue this trend. While not ideal, this is understandable. That is because there is very little public data available to make more fine-tuned proposals. And Congress has been otherwise unable to arrest the ever-rising civilian workforce even as the active duty rolls declined dramatically over the past decade. Still, such deep cuts do little in the short term aside from generate political resentment toward defense reform. Being on the receiving end of such pushback, the chairman has now diluted his bill to establish goals versus hard-hitting and mandatory targets of reduction.

The most critical component of Thornberry’s reforms — the one that may well break this cycle of failed initiatives — is the one being discussed the least. By promoting the Pentagon’s new chief management officer to control the entirety of the fourth estate, there would finally be an equivalent to a service secretary who was ultimately responsible for the organization and operation of the collection of institutions writ large. This could allow for the general and gradual streamlining of the department by delegating accountability from the secretary of defense to a full-time manager.

Fortunately, this organizational change is upheld in the draft NDAA. The chief management officer is charged with conducting a systemic review to eliminate redundancy within the Pentagon every five years.

Beyond these tweaks, Thornberry also deserves praise for moving beyond sweeping reductions to the entire fourth estate and instead identifying specific missions the Department of Defense can stop doing altogether. If each of the seven agencies Thornberry proposed to eliminate were cut in its entirety, the annual savings would amount to $4.9 billion dollars — nearly a fifth of the overall reductions he seeks. However, even this target is aspirational, as the bill tempers its proposal to eliminate most of these agencies with the caveat that critical components of each would be folded into other extant organizations. Nevertheless, this gradualist approach — shuttering offices that are low-hanging fruit, while integrating their most productive components into other institutions, and then in turn cutting out the newly generated redundancy — proffers the most sustainable way to achieve lasting and strategically meaningful reductions in overhead. This strategy roughly mirrors a 2015 report by the Defense Business Board which laid out a similar path toward $125 billion in long-term savings.

Thornberry deserves praise for proposing decisive actions to speed up streamlining by targeting entire offices for elimination. However, most of these propositions did not translate from his bill into the chairman’s mark for the 2019 NDAA. Yet three of the original seven targets remain firmly in the crosshairs: the Washington Headquarters Service (slated for elimination), the Defense Information Systems Agency (vital personnel to be retained, the rest made redundant), and the Test Resource Management Center (which would lose its statutory mandate). Of these three, DISA was the obvious target. Eliminating this gargantuan agency would account for two-thirds of the $4.9 billion in proposed savings from shuttering all seven agencies initially suggested.

It is unfortunate that Congress did not have the opportunity to debate the value of each of these offices. However, some vestige of this debate may continue, as the NDAA proposes $443 million in FY19 savings spread across 12 institutions.

BRAC to the Future

But Thornberry was wise to reconcile with at least one of his original targets — the Office of Economic Adjustment — whose loss would have been catastrophic for defense communities. With just 37 full time equivalent employees and a budget request of $70 million, this office was a drop in the bucket of Thornberry’s proposed cuts. Second, the Office of Economic Adjustment is an incredible force multiplier for the department, helping innumerable populations impacted by the most recent round of base closures in 2005 and reductions in defense production since the Budget Control Act. The office has often created more jobs than were lost from these downturns.

Thornberry’s attempt to target the Office of Economic Adjustment should be called out for what it was — an effort to make future Base Realignment and Closure (BRAC) rounds impossible to execute. As the Pentagon has long suggested, implementing a new BRAC round is the quick and proven route to the sharp drops in spending and civilian manpower that lawmakers claim they are seeking.

Despite previous opposition, this year may see one small but significant development regarding underused facilities. Pentagon leaders have been so demoralized that they did not even request another BRAC round this year (something the House draft NDAA still forbids). But in an overdue sign of impatience by the Defense Department, the Pentagon has quietly begun moving forward with using obscure authorities to take action in the absence of broader Congressional approval for base closings. Empty buildings and blighted landscapes are ironically also hurting communities in the absence of an outright base closing round. Thornberry’s version of the bill catches up to this reality by allowing state governors to use $2 billion over 10 years to shutter small military facilities that have “outlasted their purpose.” (By comparison, the previous 5 base closure rounds are producing an annual recurring savings of $12 billion.) If approved, this measure would mark the first successful BRAC efforts in 14 years.

As the BRAC developments indicate, successful defense reform depends on legislative courage and persistent oversight. Of course, elevating the chief management officer to helm the fourth estate will increase the Pentagon’s ability to identify and report on redundancies and needed reforms, but that is meaningless without the congressional authority to cut. Shuttering bases or slashing entire offices will disproportionately impact certain districts while leaving others unscathed. However, the alternative — striving for an arbitrary level of savings through small reductions to every program — has a tried and true history of failing the warfighters.

Thornberry’s proposals are at their best when they present flashes of courageous brilliance, and at their worst when tritely recycling failed ideas. The military needs fewer promises to cut 20 to 25 percent of everything, and more decisive proposals to eliminate 100 percent of something — including workload. Looking ahead to the NDAA markups, lawmakers should vigorously debate the fourth estate propositions to reduce enterprises while leaving the demand for $25 billion in immediate overhead reductions without BRAC in the dustbin. Hopefully these modest reforms, if enacted, will empower the chief management officer to pick up where the chairman leaves off and generate truly revolutionary changes to the fourth estate in the years ahead.

 

Mackenzie Eaglen is a resident fellow for national security at the American Enterprise Institute. 

Image: U.S. Air Force/Chip Slack