An extensive look at the lack of auditing inside the Pentagon...
The report, issued in January 2015, identified “a clear path” for the Defense Department to save $125 billion over five years. The plan would not have required layoffs of civil servants or reductions in military personnel. Instead, it would have streamlined the bureaucracy through attrition and early retirements, curtailed high-priced contractors and made better use of information technology.
The study was produced last year by the Defense Business Board, a federal advisory panel of corporate executives, and consultants from McKinsey and Company. Based on reams of personnel and cost data, their report revealed for the first time that the Pentagon was spending almost a quarter of its $580 billion budget on overhead and core business operations such as accounting, human resources, logistics and property management.
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In a confidential August 2014 memo, McKinsey noted that while the Defense Department was “the world’s largest corporate enterprise,” it had never “rigorously measured” the “cost-effectiveness, speed, agility or quality” of its business operations.
Nor did the Pentagon have even a remotely accurate idea of what it was paying for those operations, which McKinsey divided into five categories: human resources; health-care management; supply chain and logistics; acquisition and procurement; and financial-flow management.
McKinsey hazarded a guess: anywhere between $75 billion and $100 billion a year, or between 15 and 20 percent of the Pentagon’s annual expenses. “No one REALLY knows,” the memo added.
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But the McKinsey consultants had also collected data that exposed how the military services themselves were spending princely sums to hire hordes of defense contractors.
For example, the Army employed 199,661 full-time contractors, according to a confidential McKinsey report obtained by The Post. That alone exceeded the combined civil workforce for the Departments of State, Agriculture, Commerce, Education, Energy, and Housing and Urban Development.
The average cost to the Army for each contractor that year: $189,188, including salary, benefits and other expenses.
The Navy was not much better. It had 197,093 contractors on its payroll. On average, each cost $170,865.
In comparison, the Air Force had 122,470 contractors. Each cost, on average, $186,142.