The Cost of Culture: Controlling DOD's Runaway O&M Spending
Abstract
Since September 11, 2001, the Department of Defense (DoD) has been engaged continuously in combat. As operations subside and DoD attempts to recapitalize its forces, it faces a different yet extremely critical threat: unsustainable operations and maintenance (O&M) cost growth. O&M costs are skyrocketing, reducing funding available for recapitalization. With major budget cuts looming, DoD must address the root causes of the rising costs. Several recent studies have attempted to pinpoint the root cause of the huge O&M cost growth. Many have discussed growing healthcare costs and others have dwelled on the increased use of contracted support. These are only symptoms of the problem, not the root causes. The O&M cost growth is, at its core, due to an underlying culture that does not incentivize development of cost-effective solutions. DoD must counter this growth by instituting incentives and rewards that encourage unit-level commanders to accomplish their assigned missions under budget. Effective incentives vary depending on whether DoD is operating at steady-state, in a war, or absorbing a postconflict drawdown. Potential solutions for each case are presented herein. O&M funds pay for DoD's "day-to-day" operating expenses, including training, supply, and equipment maintenance of military units as well as the administrative and facilities infrastructure of military bases; salaries and benefits for most DoD civilian employees; depot maintenance activities; fuel purchases; flying hours; base operations; consumable supplies; health care for Active-duty Service personnel and other eligible beneficiaries; Reserve Component operations; and DoD-wide support operations including several combat support agencies, four intelligence agencies, and other agencies that provide common information services, contract administration, contract audit, logistics, and administrative support to the military departments.
Document Details
- Document Type
- Technical Report
- Publication Date
- Jan 01, 2013
- Accession Number
- ADA591431
Entities
People
- Joel J. Luker
Organizations
- Naval War College