Study suggests ways Pentagon can cut billions

Jul 11, 2012

As with most government agencies, the US Department of Defense faces intense pressure to be more efficient in how it spends tax dollars.

Building greater trust with defense contractors might be the solution, according to a new study sponsored by the and co-authored by professors from UT, Auburn University, and the University of Alabama.

Cutting unneeded could reduce costs by 20 percent, which would save about $20 billion each year, according to the study, written by Russell Crook, a UT associate professor of management; David Patterson, executive director of the UT National Defense Business Institute; Dave Ketchen, a Lowder Eminent Scholar at Auburn University; and James Combs, a professor at Alabama.

The Department of Defense currently spends $400 billion each year acquiring products and services from defense contractors. About $100 billion of the money is spent on , according to eighty defense executives who were surveyed for the study.

The authors found that a lack of trust between the Department of Defense and its contractors is a major driver of red tape.

One solution could be “relational contracting,” a concept that has helped private industry dramatically reduce the costs of doing business, Patterson said.

Relational contracting requires buyers and suppliers to work together to build trust.

“As Department of Defense funding is reduced and the department seeks better buying power, establishing trust between the government buyer and the industry provider remains extremely important,” Patterson said.

Cooperation created through relational governance also can bring new opportunities, Crook said.

Suppliers for Procter and Gamble, for example, have collaborated with the consumer products giant to create a series of innovative products. This program has been so successful that Procter and Gamble’s executives now believe that half of their firm’s innovations can arise from ideas provided by suppliers.

“The Department of Defense could benefit by adopting Procter and Gamble’s approach in two key ways,” Crook said. “First, the Department of Defense and its suppliers could work together to develop more advanced technological innovations for defending our country. Second, the costs of these innovations could be lowered if unnecessary reporting and compliance costs could be trimmed.”

In the survey, one contractor contended that the Department of Defense needed to view contractors as partners—not as adversaries. The contractor added that his company was trying to help improve the way the Department of Defense does business, but the government stonewalled the efforts.

A big—and costly—aspect of this stonewalling is the Department of Defense’s monitoring of contractors’ activities, Ketchen said.

“From the contractors’ perspective, the Department of Defense requires too many reports, and it micromanages how contractors do their jobs,” he said. “Contractors believe that everyone could save money if the Department of Defense would focus on outcomes rather than processes and let the contractors figure out the best way to deliver good results.”

Explore further: Tax benefits for housing not as outsized as previously thought, study says

add to favorites email to friend print save as pdf

Related Stories

FDA sends Procter & Gamble a warning

Sep 18, 2007

The U. S. Food and Drug Administration has warned the Procter & Gamble Co. about claims it makes for its Vicks Early Defense Foaming Hand Sanitizer.

Recommended for you

The tyranny of realism in energy planning

16 hours ago

A report exploring the political economy of energy planning under democracy and the Integrated Energy Planning (IEP) process due to conclude this year was launched by the British High Commission, Project ...

Organising is the key to efficient purchasing

Aug 19, 2014

A well-functioning purchasing organisation is a powerful tool for companies. Chalmers researcher Ingrid Hessel shows in her thesis that internal purchasing operations affects and is affected by relationships ...

User comments : 8

Adjust slider to filter visible comments by rank

Display comments: newest first

Jonseer
1 / 5 (1) Jul 11, 2012
As long as the contractors lobby congress to get freebies courtesy of the defence department, this sort of suggestion is nonsense.

Proctor And Gamble can work with its suppliers because it does NOT have to worry about its suppliers backstabbing it in a variety of ways by going behind its back to a "higher authority" like that which exists for the Government.

No matter what the agency is, you have congress members eager and willing to bend the budget process to get a business a special deal.

The notion that they actually paid for a study like this, and pretended that lobbying by businesses in order to get guaranteed profits doesn't matter is mind boggling for its stupidity and naivete.
ryggesogn2
3 / 5 (4) Jul 11, 2012
You all do know DoD operates the Defense Acquisition University.

And another issue is Congress forces the DoD to buy systems they don't want.

The DoD is not perfect and has room for improvement, but compared to all other departments, they are less wasteful than all other departments.
harryhill
not rated yet Jul 12, 2012
Jeez...loads of bombers....sinkable Aircraft Carriers. And, fighter jets that will never be used-against who? Firecrackers are not effective..Consensual corrupt relationship with the military and the contractors.
COCO
2.3 / 5 (3) Jul 12, 2012
this is heresey - we need to increase the military budget by at least 50% in these times of terrible terror threats. People who say things like this should be gaoled to show them the true value of freedom and liberty. Sure it costs a wee bit but we MUST get our priorities straight - we need to wage more wars and we need the resources to do that regardless of cost!!
ryggesogn2
3 / 5 (4) Jul 12, 2012
fighter jets that will never be used-

Isn't that the purpose of an effective defense?
Create a system that would quickly end any attack and few would be be foolish enough to attack.
That is the concept behind concealed carry laws and any type of defense. Increase the risk of death to any attacker.
'Liberals' like mutually assured destruction (MAD) so much they attack missile defense. But if a rouge state doesn't really care about its destruction, why not lob a few nukes, or threaten to, and force concessions of the free nations to support the tyrannies.
alfie_null
not rated yet Jul 13, 2012
That is the concept behind concealed carry laws and any type of defense. Increase the risk of death to any attacker.

Flaws:
- Assumption that antagonist is rational.
- A sufficiently large number of people are carrying concealed weapons that antagonist becomes worried about that likelihood.
- Antagonist can't preemptively attack (e.g. shoot in the back).
ryggesogn2
3 / 5 (2) Jul 13, 2012
Assumption that antagonist is rational.

Assumption is the antagonist is not suicidal. But if he is, there is even more incentive to be well armed and prepared.

Antagonist can't preemptively attack (e.g. shoot in the back).

Most such antagonists DO preemptively attack which again motives the need for all to be prepared to defend themselves.

What flaws?
Birger
5 / 5 (1) Jul 16, 2012
Um, what if USA chose to go without those weapon systems that were only intended for use against the Soviet Union? Do you really need all those ballistic missile submarines?
-And the only current value of super-advanced fighters (conceived when there was a rival superpower) is as pork to the congress districts where they are manufactored.
If those districts want Keynesian handouts, maybe they would be better off with contracts building civilian stuff, that is actually of benefit for the economy.
Since most current military activities are in dirt-poor countries you could re-open the production line of Douglas Skyraider (manufactured in the late 1940s) for air support.
H*ll, you could use Junkers 52 trimotors, it's not as if the Taliban have fighter aircraft.