PBL process meets vital Pentagon budget needs

ARLINGTON, Va., May 27 (UPI) -- The still young administration of U.S. President Barack Obama can have a significant, early positive impact on national security by directing the Department of Defense to move forward aggressively on Performance-Based Logistics. It should also take the necessary steps to educate Congress on the value of PBL and oppose misguided attempts by some members to create barriers to a more efficient logistics system.

It is imperative that the Department of Defense create a 21st century logistics system. Changes in the character of modern warfare, the need to deploy forces in an expeditionary fashion to difficult locations, and the requirement to improve the efficiency and cost-effectiveness of logistic processes dictate the need for a modern approach to logistics. A reformed logistics system must be agile and flexible, able to respond to unpredictable demands. It must also be able to provide a high level of service at reduced cost.

A new logistics system is needed to address the intersecting challenges posed by the likelihood of reduced defense spending and continuing increases in the operations and maintenance account. The Obama administration's budget projections call for reduced defense spending over the next decade. The withdrawal from Iraq will mean reduced or eliminated supplemental funding. During previous periods of reduced defense spending, the procurement accounts have been particularly stressed.

Operations and support spending now accounts for more than 60 percent of the Department of Defense budget.

Acquisition and research and development have shrunk to some 35 percent. Operations and maintenance costs are rising as the result of two seemingly contradictory factors. First, since much of the military's hardware is relatively old, maintenance costs are steadily increasing.

At the same time, new systems are more complex, although more reliable overall. The cost of necessary maintenance on new platforms is extremely high. Another factor contributing to the growth in operations and maintenance as a share of the defense budget is the growing cost of personnel.

The cost per active duty service person is growing significantly faster than for their civilian counterparts. Pay for Active and Reserve service members rose 32 percent and 47 percent, respectively, between 2000 and 2006. The cost of military healthcare has risen some 144 percent over the last decade. In effect, current costs are crowding out spending on modernization.

Historically, the U.S. government has bought military equipment, supplies and services "by the yard" with relatively little thought as to the costs of integrating all the parts and activities. The availability of that materiel and support to the warfighter was a secondary consideration.

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(Part 3: The failure of traditional fixed-price and cost-plus contracts to create incentives to lower costs and improve outcomes)

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(Daniel Goure is vice president of the Lexington Institute, an independent think tank in Arlington, Va.)

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(United Press International's "Outside View" commentaries are written by outside contributors who specialize in a variety of important issues. The views expressed do not necessarily reflect those of United Press International. In the interests of creating an open forum, original submissions are invited.)