Department of Defense

William J. Perry, Secretary

Mission Statement

In the uncertainty that has followed the Cold War, the United States has not only the opportunity, but also the responsibility, to help ensure a safer world for generations of Americans. President Clinton has said, "As the world's greatest power, we have an obligation to lead and, at times when our interests and our values are sufficiently at stake, to act."

In this new era, the Department of Defense (DOD) mission is to:

prevent threats to our security from emerging;
maintain well-trained, ready forces able to deter or respond quickly to a range of potential threats and prepared to seize opportunities;
defend the national interest through military force as a last resort and after balancing the risks and costs associated with such intervention; and
use military forces in certain specific situations to address humanitarian crises when other approaches have failed.

Summary Budget Information

*Total obligational authority in current dollars.
**Includes only direct hires.

FY 1993 (Actual)			FY 1996 (Budgeted)
Budget*	Civilian**	Military	Budget	Civilian**	Military
$270.300 billion	931,300	1,705,100	$254.500 billion	800,300	1,481,700

Reinvention Highlights

Contrary to the hopes of many and the predictions of some, the end of the Cold War did not bring an end to international conflict. The threats to our national security have been replaced with new dangers in regions such as Central and Eastern Europe. These new dangers make the task of protecting the nation's security in some ways more complex than during the Cold War. The new security environment has required a significant evolution in our strategy for managing conflict and has required new innovative defense programs and management philosophies to implement that strategy successfully.

No security strategy is better than the forces that carry it out. Today, the United States has forces that are the best trained and best equipped. Their performance over the last several years in the Persian Gulf, Haiti, and Bosnia demonstrates their superior capability. The Department has maintained unprecedented levels of readiness through a drawdown of historic proportions. From fiscal year (FY) 1993 through FY 1996, the Department's military forces will decrease from 1,705,100 to 1,481,700, while civilian employment (direct hires) will decline from 931,300 to 800,300 in the same period.

The Department will also undertake a new round of modernization through increases in expenditures, while achieving significant savings from infrastructure reductions of base closings, defense acquisition reform, and outsourcing of additional support activities. These efforts, which support the initiatives of the President and Vice President to make government work better and cost less, are described below.

Downsizing Goals and Accomplishments. The DOD Streamlining Plan charges Pentagon leadership with identifying high-payoff areas, establishing realistic goals that link authority with responsibility, eliminating unnecessary controls, and creating opportunities for innovators.

The focus of the civilian reductions called for in the National Performance Review (NPR) is limited to the direct hire portion of DOD's workforce. Because current DOD plans call for continued downsizing through FY 2001, and NPR reductions cover the period FYs 1994-99, DOD expects to exceed the reduction target set by NPR.

During the FYs 1994-95 period, civilian reductions have amounted to 110,000, or 12 percent of the workforce. The reduction plan for FYs 1996-99 should produce a reduction of another 100,000 civilians. Thus, by FY 1999, DOD expects to have cut its civilian workforce by 210,000, or 23 percent.

Management Innovations and Infrastructure Reductions. The Department has launched major efforts to restructure, reorganize, and reduce overhead in a wide variety of support activities ranging from logistics to transportation; from finance and accounting to printing, map-making, and commissary operations. A newly compiled list of dozens of success stories involving major initiatives at all levels within the Department shows that DOD employees have seized the opportunity to propose changes of an innovative kind that will make the Department more efficient and less costly to operate.

For example, the Defense Mapping Agency has reorganized its operations, consolidated its locations, modernized its operations, and reduced its costs to customers, while putting in place a greatly improved customer service operation. The Defense Commissary Agency has introduced new methods for improving the efficiency of delivery of goods to its stores. A new payment method is in place that uses the delivery ticket accompanying each shipment as the invoice. This new method of payment has reduced the labor associated with bill-paying by 40 percent, or by 140 staff jobs.

The Defense Logistics Agency (DLA) received a Hammer Award from NPR for an ongoing program to improve, streamline, and redesign its civilian personnel program. DLA focused on simplified, cost-effective work processes and relied on employee ownership of programs and methods to evaluate the effectiveness of its programs in order to meet the key goal of putting customer needs first. DLA also reengineered parts of its distribution process at Columbus, Ohio, cutting average time to fill a customer order at the depot from 11.8 days in 1993 to 2.0 days in 1994. DLA has initiated dozens of other efficiencies in its large supply and contract management businesses.

The Defense Printing Service has, since its establishment in 1992, reduced its staff by 43 percent, reduced the number of facilities by 30 percent and square footage by 700,000 square feet, disposed of over 4,000 items of obsolete or traditional printing equipment, and saved $70 million annually. In the past year, the Service has won five Hammer Awards for its innovative approaches to management.

Two Army organizations won the two top quality awards in the federal government this year. The Army Armament Research, Development and Engineering Center's Picatinny Arsenal in New Jersey is this year's winner of the Presidential Award for Quality. This is the public sector equivalent of the Malcolm Baldrige National Quality Award to private sector companies. This organization reduced internal overhead costs by $70 million annually while maintaining quality operations. The Army's Communication-Electronic Command Logistics and Readiness Center at Fort Monmouth, New Jersey, is the winner of the Quality Improvement Prototype Award.

The Department has made major use of NPR's reinvention laboratories, designed to allow and encourage organizations to reinvent themselves and seek waivers of regulations to help them do so. The Department has more than 80 such labs.

Financial Management Reform. Since its inception in January 1991, the Defense Finance and Accounting Service (DFAS) has been the Department's pivotal agent for financial management reform and consolidation. Through FY 1995, DFAS achieved budget savings of $314 million and has reduced its staffing from approximately 30,000 to 23,800. The consolidation of DOD finance systems is well under way:

By 1997, the Defense Civilian Payroll System will be fully implemented, replacing 27 separate payroll systems.
By 1999, the Defense Joint Military Pay System will be fully implemented, consolidating the original 22 military pay systems down to two.
The Defense Debt Management System became operational in 1993. It standardizes the collection of debts from military and civilian personnel not on active payroll, as well as delinquent contractor payments.

Another important financial management reengineering effort is simplifying the process for travel by DOD civilian and military personnel. The goal is to eliminate many of the steps now required to initiate travel, process a voucher, and receive payment. A new paperless system will meet the needs of travelers, support mission requirements, and save as much as $100 million annually.

Base Closure and Realignment. A change that makes good sense and saves money is closing and realigning military bases. Since 1988, 20 percent of the major military installations in the United States and over 200 smaller installations have been approved for closure. We project that when these closures are fully implemented, we will save $6 billion in FY 2000 and each year thereafter. We have also reduced overseas installations by 58 percent, for annual savings of over $1 billion. Our efforts to manage this process have been aimed at saving money while ensuring that troops have the training and equipment they need to be ready in the future.

Acquisition Reform. We continue the efforts to fulfill the Defense acquisition reform vision -- that DOD will become the world's smartest (use of best practices), most responsive buyer (timely and flexible) of the best value goods and services that meet our warfighters' needs. The Department will continue its efforts across the entire acquisition spectrum from statutory reform to cultural change, from the beginning of the process -- when a requirement is generated -- to the end of the process -- when the contract is closed.

The following two initiatives reflect continuing progress toward reinventing and reengineering the DOD acquisition system.

Acquisition System Reengineering. In FY 1994, the Department implemented the Electronic Commerce/Electronic Data Interchange system for the procurement of items within the simplified acquisition threshold. The system will allow vendors to connect with commercial value-added networks that access the entire DOD system at one primary and one backup site and receive data on all planned purchases.
Policy Limiting Government-Unique Procurements. In FY 1994, the Pentagon established a policy that relies upon nongovernmental performance standards and specifications for most procurements, in place of the old "milspecs" system.

Outsourcing. The purpose of the Department's outsourcing initiative is to sustain or improve readiness, generate savings for modernization, and improve the quality and efficiency of support to our men and women in uniform. It involves the transfer of a function previously performed in a government facility to an outside, private sector provider. Doing so offers us significant opportunities to generate savings and perform tasks more efficiently. For instance, a system in which medical suppliers deliver products directly to their DOD customers, rather than to a warehouse for storage and subsequent distribution, has cut delivery time by 75-to-90 percent and cut costs to taxpayers by 25-to-35 percent. There are, of course, limits. The Department will not pursue outsourcing activities that compromise our core warfighting missions.

As the Department of Defense completes the transition to a post-Cold War military force, it has undertaken policies and programs to prevent threats to our security from emerging; and to maintain well-trained, ready forces able to deter or respond quickly to a range of potential threats. The Department is moving rapidly to change the way it manages its resources so that it can use them efficiently, reducing overhead costs and ensuring a strong military force into the future.