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22 March 2023

Beyond Monopsony: Pentagon Reform in the Information Age

Mackenzie Eaglen

Executive Summary

The United States Department of Defense pur­chases more goods, services, and software than all federal agencies combined and is often the tar­get of scrutiny and reform. But the majority of what the military buys is no longer equipment or tangi­ble items but rather labor and technology. Reform­ers have yet to keep up and continue to overfocus on weapons acquisition when hardware is increasingly the commodity.

Despite near-constant attempts at reform, encom­passing no less than 14 different efforts over the past eight sessions of Congress, change has not fully met the moment but typically served as short-term bud­get bogey exercises. Too often, changes are imposed on the Pentagon by Congress—a body that creates many of the problems reforms fail to fix. The Defense Department is a victim of the instability caused by continuing resolutions and lack of clarity, yet Con­gress further ties its hands regarding finances and sticks to rules from a bygone era when the defense budget was a tiny fraction of the size it is today.

This report explains where past reform efforts focused and charts a new course for the Informa­tion Age when urgency, flexibility, transparency, and action are the watchwords. It reviews defense reform initiatives of the past decade and more and provides a series of policy recommendations borne out of the belief that to truly reform the Pentagon, change must not be additive. Defense reforms instead must roll back unnecessary strictures, byzantine regulations, and outdated bureaucracy and reduce time, tasks, and attention on unnecessary work. Pentagon reforms should also increase accountability for passing appro­priations on time and help realize the true costs of running the US military.

The end goal of these reforms is to reduce work­load, mission, and the constant churn of forces that are burning out man and machine too quickly. As a result, implementing them will allow the United States to better deter, compete with, and, if neces­sary, defeat America’s great-power adversaries.

Introduction

Washington is rarely without ideas for how to next, and better, reform the Department of Defense. Indeed, there have been so many efficiencies drills over the past two decades that some reforms never had time to fully gestate before change came yet again. Constant churn is a way of existence for the Pentagon bureaucracy, which is constantly under the microscope. From the annual defense policy bill to other internal and external change efforts—such as Better Buying Power, the Weapon Systems Acqui­sition Reform Act of 2009, “night court,” and Secre­tary Robert Gates’s efficiencies initiatives—there is no shortage of ideas to improve how the Pentagon does business.

What there is a shortage of is lasting, positive results.

Updates and improvements are important for being transparent with taxpayer investments, having accountability of officials, staying relevant in a rap­idly changing world, and meeting varied threats over differing time frames. But change for change’s sake, or to bolster political arguments to sustain needed defense spending levels, is unhelpful. Reformers should instead employ a two-track approach. The first track is taking the long view, allowing commissions and entities to dive deep and return with actionable policies for debate and implementation. A paral­lel track is to seek bite-size shifts that have outsized impact in the near term.

Reformers should have a bias for action, with a larger goal of removal and streamlining instead of addition. Instead of accumulating new rules, orga­nization, or manpower to the Defense Department, policymakers should focus on cutting layers or, at the very least, abstaining from adding new barriers for the military. Indeed, senior leaders need to focus more on what policies can be sunsetted, what laws must expire, what rules and regulations should go away, and what specific work and tasks of lesser or outdated importance can be stopped.1

While threats are evolving, as is America’s response to them, the base defense budget mostly stays the same year after year, with any meaning­ful shifts largely at the margins.2 Defense planning, programming, and budgeting are rife with flaws and overdue for updates. This is why Congress estab­lished the Planning, Programming, Budgeting, and Execution Commission to review and reform these internal processes that help prioritize and allocate nearly three-quarters of a trillion dollars per annum. While the commission investigates at a detailed level over many months, some practical and imple­mentable reforms are needed at a macro level.

Congress and the executive branch should begin the earnest process of scrubbing the books and axe procedures, headquarters, rules, and regulations when necessary. Reformers should also adjust ideas to meet the moment. No longer does the defense budget buy mostly equipment with its acquisition funds. Today, the majority of dollars contracted out at the Defense Department are for labor, services, and technology—not weapons. Too often, defense reform has been limited to an over-scrutiny on how the Pentagon buys tangible items. No longer is the mili­tary a monopsony buyer or inventor; rather, it must innovate mostly commercial products and give them a unique defense application.

Further, the military has to work to attract com­panies to do business with the armed forces, given its shrinking ability to move markets due to smaller bets, long timelines compared to the private sec­tor, shrinking Major Defense Acquisition Program portfolios, and a shift away from buying equipment. Efforts to impose change must account for this new reality, in which the military mostly buys software and services while using legacy systems as tech play­grounds for innovation and to bolster capacity for global deterrence missions.

By undertaking this essential but difficult job of slashing the barnacles of bureaucracy that have accu­mulated and calcified over time, policymakers will demonstrate their seriousness about needed defense rehabilitation while skipping the defense reform the­ater that has plagued the military for too long.

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