Our Money’s Worth

I always get frustrated when the members of the Joint Chiefs of Staff opine about rising healthcare costs in DoD and their assertion that us mean,ole Retirees are what’s causing costs to rise out of control.  One gets the impression from listening to their rhetoric that this is the only way to fix things.  Just make the retirees pay more…..that’ll fix it!  Of course, they say they won’t mind paying higher fees because under their retirement system they stand to make much more money in retirement than they ever made  on active duty.  Look at the pay tables for a four-star…..a four-star retiring with 41 years of active service makes a base pay of about $181,500 a year (the table actually says $237,144, but because of Federal pay cap limitations, they are held to the lower number). That’s not including various allowances.  Once they retire, let’s say with 41 years (about right for a four star) their retired pay is calculated by multiplying their uncapped pay by the appropriate multiplier, in this case 102.5%.  That means retirement pay will be $243,072 bucks a year…….not bad…..I wouldn’t mind paying those additional premiums either!  Not to mention all the high-paying board jobs that they will get………..So they have no credibility with me when they say they don’t think increased premiums for retirees will have much of an impact on the average retiree. My retirement was capped at 75%.  I propose that as a gesture of good faith, all four stars forfeit all money they get in excess of the maximum amount they made on active duty.

A recent CBO study made three recommendations on how to control DoD health care costs, yet we only hear about one of them, increasing retiree costs.  Here is the complete report but the three things CBO cites as ways to control costs are:

  1. Better management of chronic diseases
  2. More effective administration of the military health care system
  3. Increased cost sharing by retirees

How come the brass never mentions the first two?  I can guarantee you we waste a lot of money in administration, special pays, unnecessary medical procedures,  and excessive equipment, but I never hear what DoD is doing about that.  One would think that before off-loading the burden of paying for healthcare cost increases on those who faithfully served, the powers-that-be would exhaust all other possible avenues….but not so here.  Why?  Because it’s just too hard to fix the first two and it’s all too easy to point at retirees as the root of the problem.  Don’t get me wrong….I support yearly increases in TRICARE premiums that track economic indicators…..but don’t make it seem like we retiree are the only problem.  It’s time for those in charge to acknowledge that there is much more to increasing health care costs than just retiree benefits.

I was so inspired by the article in today’s WaPo concerning the Soldier who has received a double arm transplant……It’s makes me proud to be an American when I read those stores.  But that technology costs a lot of money…..and we should spend it without question.  How come one of the Joint Chiefs never points out that we have thousands of casualties from a decade of war who deserve the best we can offer and that the increased costs associated with this high quality healthcare are going to be steep.

I also think that there is no incentive within the medical community to reduce costs.  There is every specialist imaginable in military medicine and we have to keep them busy.  Take dental care for example.   Mr. and Mrs. America go to their family dentist.  When they need a filling, the dentist does it.  When they need a root canal, the dentist generally does it, when they need a tooth pulled, that same dentist does it.  Not so in military dentistry….you have to go to an endodontist to get root canals and an oral surgeon to have teeth pulled.  That care probably cost at least 3 times more than it does in civilian life. That’s just one example of why health care costs so much more in the military.

And just take a look at how long we have been futzing around with electronic medical records and joint records with the VA.  Here’s a quote from an article in NextGov: “Worried that the Defense and Veterans Affairs departments might continue to spend years and billions of dollars in a “futile exercise” to develop their own electronic health record systems “and lose sight of the end-goal of an interoperable record,” lawmakers included funding restrictions in the 2014 Omnibus Appropriations Act the House passed Wednesday.” AMEN.  

So my point is that before trying the easy way out by radically increasing retiree health care costs, why doesn’t DoD get its own house in order.  If DoD can stand up in front of the world and say “We have done all we can to fix the way we manage chronic illnesses, streamline administrative processes, incentivize cost reductions within military medicine and there’s not another dime there,”, then I will cheerfully consider ways to increase the money I pay for my retired health care.  Until then, I ask that they stop beating that horse (the one that died when they first proposed healthcare premium hikes 10 years ago)

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What to do, or what not to do. That is the question!

I received several comments after I published my last article on “Leadership in the 21st Century” and I appreciate all the comments. In that article I commented on the recent case involving a former Commanding Officer of the Navy’s elite flight demonstration team, the Blue Angels.  After consulting, conferring and otherwise hobnobbing with my  fellow former Wizards, I thought I might offer up just a few more comments on the subject before forever holding my peace on the subject of Capt. McWherter and the Blue Angels.  There was a lot going on there besides just the failure of judgement of the CO, including limited oversight by the Navy and the absence of an Executive Officer senior enough to step in and provide some advice and counsel. More on that later.

I was struck by a recent Gallup Poll which once again found the Navy as the least prestigious of the Services. I’m not sure what that means since most of what Mr. and Mrs. America think about the Services is a product of their own (the Services’) PR machines.  Wasn’t it the Navy that successfully extracted the Captain of the Maersk Alabama?  Wasn’t it the NAVY SEALS that terminated Mr. B. Laden?  Wasn’t it the Navy that was first on the scene providing relief during Hurricane Katrina, and Indonesia and Japan? Doesn’t the President always ask “Where are the carriers?” whenever something goes wrong in the world? Doesn’t the Navy run the White House mess?  Isn’t it CAPTAIN Kirk, not Colonel Kirk?  Jeez , what do you have to do to become the most prestigious Service around here?  I know……..Sponsor a race car that wins the Daytona 500!  Or make a cool commercial about killing dragons and rescuing damsels! Or lose track of a couple of nukes!

The notion struck me that part of the problem is that the Navy is too transparent.  We not only advertise when we relieve Commanding Officers (don’t think that the other Services don’t relieve their share of Commanders) but we also come clean when we relieve senior enlisted advisors.  You just don’t hear much about that from the other Services.  Of course it’s a big news item these days and I liken the problem the Navy finds itself in with regards to negative publicity to the problem I have on the golf course…..Once I’m in the woods, it’s almost impossible to get out. Either I schwack another tree in my current thicket, foolishly trying to thread the needle between a couple of obstructing trunks, or I wind up in the woods on the other side of the fairway because I gooned up my attempt to pitch out. Why I don’t just pick it up and take a “Snow Man” when I wind up in the woods I’ll never know.  That’s where the Navy is right now, in the trees and trying to pitch out.

This openness puts us behind the eight ball in my humble opinion….On the other hand, I think being open about our problems is not all bad.  At least it shows we are aware of the problem and attempting to deal with it.  But what exactly is The Problem?  Is it that the Navy has a crisis in leadership?  I don’t think so……in fact I know that’s not the problem. With close to 300 ships, 50 or so aviation squadrons and probably at least 100 shore commands, we actually have very few COs that break the event threshold.  In fact, you could write 100 good stories for every bad one…but that doesn’t sell papers.

I’ve commented before on abusive leaders, so I won’t beat that dead horse.  The Navy and DoD have reacted to lost nukes, out-of-control Commanding Officers and other misdeeds  by increasing  ethics training, establishing an ethics Czar ( and a very capably one I might add), and adding ethics courses to Prospective CO schools and Senior Enlisted schools.  But in the end, by then what is there to train? Someone is going to stand up in front of a class of prospective Commanding Officers and say……Don’t have sex with your XO, don’t use counterfeit casino chips, don’t fake your death to escape from your bad marriage, etc etc?  I don’t think this will have much of an impact. It’s focusing on what not to do…….not what to do.  The striking thing about almost all the heinous infractions that appear in the news is that none of them are questions on the margin. They are about personal failures by people who should know better.  No amount of training will fix that.  What we can do is:

  1. Focus training efforts of prospective COs and Senior Enlisted Advisors on how to be successful, not how to stay out of trouble.  Be positive, proactive and practical in training COs.
  2. Provide support to leaders. Conduct regular checkups of commanders by mentors who have successfully navigated the waters of command.  (Not IG-like, but as a sanity check)
  3. Improve the fitness report system to allow for a more honest appraisal of  performance and potential for command (I don’t know what the number is now, but it used to be that 70% of officers were in the top 10%…..similar to the current VA flap which found that all SES’s in VA we rated in the top 2 performance categories)
  4. Revamp the command selection process to take advantage of improved fitness reports and include 360 reviews as part of the process
  5. Continue to set the bar high for performance in command

The bottom line: Let’s spend more time on how to succeed in command,instead of how not to fail.  There’s a big difference.


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Leadership in the 21st Century

There has been a lot of hoopla in the press concerning the recent disciplinary action against Navy Captain Greg McWherter related to his second command tour as Commanding Officer of the Blue Angels, the Navy’s Flight Demonstration Team.  Here is a link to a recent Washington Post article on this issue.  Blue AngelsI feel compelled to add my two cents to the debate, mainly because I am distressed that so few people in the blog-o-sphere,  on Face Book and other internet forums really understand what the Blue Angels case is all about.  For background, if you haven’t heard of the Blue Angels, then I assume you have been off-planet since 1946 (Welcome back, by the way!).  Here’s all you need to know about the Blue Angels.

I suppose you could sum it up by saying the Blue Angels embody the best there is about Naval Aviation, and by association the US Navy.  As such, my assumption is that they are the penultimate squadron in Naval Aviation.  That’s a key assumption to all that follows, so if you don’t buy that argument, feel free to switch over and catch up on the latest Duck Dynasty news. So here’s a quick summary of  the Capt. McWherter/Blue Angels story in the news.  Capt. McWherter was Commanding Officer (CO) of the Blues twice.  There were no issues with his first tour as Commanding Officer in 2008-2010.  After Capt. McWherter left the Blues, the new CO had trouble adapting to the demanding flight program of the Blues and subsequently voluntarily resigned as CO.  One factor in his resignation was that the Blues pilots thought that the new CO focused too much on administrative details and not so much on flying skills.  Faced with loss of leadership in the Blue Angels, the Navy elected to bring Capt. McWherter back for a repeat performance as CO in May 2011 and he completed the rest of the performance season with the Blues. The feeling among the remaining pilots was one of relief, as Capt McWherter’s flying skills were among the best. Capt McWherter focused much of his attention to rebuilding trust among the demonstration pilots, a key consideration in the highly demanding environment in which the Blues operate.  Capt. McWherter was relieved in November of 2012 and went on to another assignment.  Sometime after the change of command, allegations surfaced that under his second command, the command atmosphere in the Blue Angels squadron was toxic.  Among these allegations were  the presence of sexual harassment, hazing, improper acceptance of gifts and other command-condoned inappropriate behavior throughout the squadron.  The Navy initiated an investigation and reassigned Capt. McWherter to administrative duties until the report could be completed.  The report (here is the link) found many of the allegations to be true and subsequently the Navy issued a Letter of Reprimand to Capt. McWherter, essentially ending his career in the Navy.

What’s been the reaction?  Not so much in the general public, but there has certainly been lots of chatter on the various blogs and other internet media that I regularly monitor.  There is one side that says “We are all doomed in an era where political correctness trumps all.”  In my opinion this is just plain wrong.  Since when is prohibiting pornographic pictures in cockpits (sigh…….I hated to use that word in this context) anything but just plain common sense?  It’s not an issue of political correctness, but one of respect for our people.  There are a variety of other problems, so I encourage you to read the report.  I dare you to find one “politically correct” statement.

I think the real issue is one of context.  Many of the bloggers are Vietnam-era veterans who lived at-sea in a different time.  Our notions of what is socially and professionally acceptable have changed over time.  Today’s 21st Century leaders have to recognize that fact.  Ready Rooms and the Sailors who support them are no longer all male, nor heterosexual. Our society no longer tolerates gender discrimination or discrimination based on sexual orientation and neither does our Navy.  It wasn’t that long ago that NCIS spent a lot of time and resources searching for homosexuals and rooting them out of the Navy. Now it’s different.

Was Capt McWherter all bad?  Certainly not. He had a long and distinguished career, but Navy did not do a lot to help out the good Captain in his new leadership challenges the second time around.  There is a great leadership piece by Dean Ludwig and Clinton Longenecker entitled The Bathsheba Syndrome: The Ethical Failure of Successful Leaders.  This paper is copyrighted so you will have to spend 5 bucks to read it, but if you are a leader, it will be the best $5 you ever spent.  Here’s a quick synopsis.   A great number of leadership failures can be explained by the Bathsheba Syndrome, many of those within the Navy.  The Captain was ripe for this sort of problem. Basically the Bathsheba Syndrome is this:

  • Ethical failures in leaders is a product of success, not pressure to perform
  • Success may cause leaders to shift focus from those things that made them successful to less important issues
  • Success leads to access to privileged information that may be abused
  • Success leads to unrestrained control of an organization
  • Success leads to inflated ego, leading one to believe they can fix anything

Do any of these traits sound familiar in recent leadership meltdowns?

One example of where the Navy may have prevented this leadership failure is that in the Blue Angels squadron, there is no Executive Officer(XO), a near-peer to the CO and usually next in line for command.  I relied heavily on my XO daily to keep me grounded.  He could take me aside and tell me that I might be doing something kooky.  He was a key element in my successful command.  Given that being in the Blues is  apparently a continuous popularity contest, the Captain was in little danger of having anyone question his actions.

I will let  you read the report and decide for yourself about rather or not Capt McWherter upheld the highest traditions of the US Navy and the United States. But I submit that in this case, given the nature of the Blue Angels, someone decided that all the leadership lessons we have learned since Lord Nelson was a Midshipman didn’t apply.  I know of nothing which gives the Blues a pass to any principle of leadership.  This squadron, above all, should embody all we strive for in Command and should be exemplary in every aspect.  If it turns out that I’m not right, that the nature of the Blues indeed makes them special and exempt from tried and true leadership lessons, then I submit they are not worth having in the United States Navy.




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DoD Audit: Is the Cure Worse Than the Disease?

I can’t let the recent articles in the press regarding DoD audits go by without commenting.  The headline on the Federal Times web site was “DoD falls behind audit goals – again”.  Again is the operative word here.  Some of the reasons cited for the slide (paraphrasing here): two wars in the last decade, overwhelming size and complexity, furloughs, shut-downs and the general “drain” brought on by an infectious STD in DoD (That’s Sequestration Transmitted Disease).  Preparing for audits has been on the DoD leadership’s plate for over a decade as is regularly cited as the reason for many fits and starts in DoD:  Lean Six Sigma, ERPs, Business Transformation, cost initiatives, process standardization, etc..

But in truth, there has been some progress.  Let’s not forget the US Marine Corp’s efforts in that regard (not mentioned in the article).  I have commented on the USMC progress a few months back in the Hall of Heroes and Auditors article. As of today, the USMC is the only Service to complete an audit of its Statement of Budgetary Activity (SBA), even if it’s only for one year.  We are still awaiting the results of the latest audit of the USMC SBA.  There is every reason to expect that it too will be “clean” and thus the USMC will have two successive years of clean opinions on their SBA.  This was done on purpose, because the previous years were so gooned up that it was pointless to spend the amount of time and money necessary to get things up to speed for water already under the budget bridge.  The SBA can be thought of as that part of the SBR that covers most appropriations and transactions, but not prior-year appropriations and therefore not affected too much by prior-year sins.  It is also accurate to say that DoD is focused on achieving an audit on only one part for the Department’s financials, the Statement of Budgetary Resources (SBR).

In many areas audit readiness is being achieved by manual work-arounds and other non-sustainable means instead of actually simplifying and consolidating the rat’s nest of kludged together systems and processes that have evolved over the ages.  The result of this type of preparation will be continued costly audits, with each one being just as costly as the next.  The only way to save costs is to move to reliance on internal controls instead of conducting on-site, manual inspection of paperwork, digital or otherwise.  (Most private sector audits move rapidly to reliance on internal controls because it’s cheaper and faster).  Reliable internal controls are a result of standard processes, interoperable systems, standardized data and legacy reduction, so the more we focus on the audit (at the expense of fixing internal controls) the more money we will spend.  This means that the 2018 audit is likely to be just as costly as the 2015 audit.  That, my friends, is unsustainable.

We haven’t  gotten around to auditing property records and equipment inventories (existence and completeness), for example. The plan is to do that later, after tackling the SBR.  The problem I have with all the DoD audit rumpus is that no one really understands DoD financial ops and the statements behind them outside a few budgetary monks within DoD.  Contrary to just about any commercial company, no one…not management, not customers, not investors, no one but a few accountant types at GAO and OMB look at these things.  We don’t measure the success of DoD or the desirability of investment in it by its financials.  In the real world, when a company releases its financial reports, stock prices either surge or shrink, depends on the results.  Not so in DoD. DoD Financial Statements do not reflect its performance or effectiveness.   If (almost) no one uses them, then why all the hype?

First things, first.  What the heck is a Statement of Budgetary Resources anyway?  Here’s the definition from GAO’s Financial Audit Guide, Auditing the Statement of Budgetary Resources, dated December 2001:

The SBR and related disclosures provide information about budgetary resources made available to an agency as well as the status of those resources at the end of the fiscal year. The SBR and related note disclosures serve as a tool to link budget execution data in an agencys financial statements to information reported in the actualcolumn of the Program and Financing (P&F) Schedules in the Appendix of the Budget of the United States Government (hereafter referred to as the Presidents Budget). Coupled with the analysis of other budgetary data, the SBRs linkage to the Presidents Budget provides a means to help assess the reliability of budgetary data reported in the Presidents Budget. 

Whew!  How about them apples?  Let me decode for you: The SBR makes it easier for OMB to aggregate the budget numbers.  For the “Show and Tell” crowd, here’s a copy of the Navy’s 2013 SBR.  By the way, don’t go looking for it because it is buried so far down in the paper stack that it’s impossible to find by mere mortals.
Navy 2013 SBR
WoW!  For you purists out there, here is the link to the complete set of Navy’s 2013 Financial Statements along with the accompanying footnotes. I suggest putting it in the bottom of your parrot’s cage so it can memorize the numbers and amaze your accountant friends when they visit.

This is what the little red guy with a pointy tail on my left shoulder says:  So far the Services have spent hundreds of millions of dollars to get this statement correct (Audit Readiness, financial system modernization, ERPs, etc).  But take a look at it.  Is this what really matters?  Our benefactor, the US Congress has never thought we do that bad of a job in accounting for the money.  The money just keeps coming and we are in little danger of Congress withholding the bucks because the SBRs don’t balance.  When we told them we spent $800 on a toilet seat, no one said, “Your accounting practices must be flawed.”  Nope, they believed us.  Why we spent the $800 is far more important than accuracy of the number.   DoD knows to the required degree of accuracy (you engineers will remember the significant digits drill) where the money is.  When you are dealing with half a Trillion dollars, what’s a few million among friends?  Is it worth paying the King’s Treasure to get to the finite level of detail demanded by auditors?  In my previous life as the Navy’s budget guy, I would have declared this a “Science Project for the Green Eye Shades.” There is no doubt that DoD can do a better job at managing the money, but is it really worth the Billions we will ultimately spend to get it THAT right? Maybe DoD audit is too big of a bite to make it worth the cost.  Why not focus on specific processes and make them right.  Get pay and allowance correct, get inter-service transactions right, get contract payments right, etc.  If the individual parts are good, why waste a lot of time and money messing around with trying to combine them.  Let’s spend that money somewhere else.

On the other shoulder, the little guy with the nightgown and halo says: Even if the financial processes in DoD are off by one-tenth of one percent, that’s a lot of money.  Anything we can do to increase confidence in the management of our national treasure is worth the effort.  If these things weren’t valued, why have a GAO?  Obviously the American people have made a judgment that accurate accounting is important.  Why should the DoD be exempt from the requirements levied on every other part of our government year after year after year?  Oh by the way, it’s the law of the land that all federal agencies will have auditable financial statements.  The DoD is not above the law, therefore they must do it (Never mind that DoD has ignored the CFO Act for many years, or at least failed to comply with no consequences!).  Finally, audits can save money.  In the case of the Marine Corps, correcting errors in accounting systems and procedures found during the audit resulted in identifying additional funds it could use.  It’s interesting that the Department almost never spends more money that it has been appropriated because the system is set to err on the side of caution.  Anti-Deficiency Act violations are low.  Just look at the amount of unobligated balances at the end of each year.  If our accounting procedures were better, we could spend that money.

So who’s right….left shoulder or right shoulder?  Hard to say, but the answer to this question falls squarely into the “Tough Decision” category and our leadership should seriously consider what to do.  I would not  push the “Audit” button just because it sounds like a good idea.   A lot of money rides on this decision.  It’s easy to say “It’s good business to spend money on audits,” but others will say, “At what cost?.  At the macro level DoD does an adequate job managing the money, so spend those resources on combating Cyberterrorism, readiness, R&D investments to ensure our dominance on the battlefield or on taking care of Wounded Warriors.”

In the end, I say we should focus less on the obsession with a clean audit opinion, and more on fixing the processes and systems, once and for all, that we use to manage the money.  I don’t think it’s nearly as good as it could be, but it’s certainly not as bad as some assert.

Thanks to BG Roger Scearce USA (Ret.) and Deb Delmar of Vanguard Advisors LLC  for their assistance on this article.

Disclaimer:  I’m sure I may not  have gotten some of the technical terms exactly right, but for the intended audience (non- DoD Budget Monks and Scribes) it’s close enough!


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The High Risk List: So what?

The Washington Post had a great little piece over the weekend on the number of reports required by the Congress this year.  The article, “Unrequired Reading” states that the Congress is expecting  no less than 4291 reports from 466 Federal agencies and non-profits this year.  Of course one wonders who the heck reads those reports and more importantly, what gets done about them. As far as who reads them, my guess is that even the people who write them don’t bother to read the whole report, so that means probably one of the 18,000 employees on Capitol Hill (638 of whom owe $9.3M in back taxes, by the way) finally reads each individual report.  Perhaps the 638 who owe back taxes are so busy reading reports that they don’t have time to fill out an income tax return.  The Post article leaves the impression that basically nothing gets done with the reports.

That’s not entirely true.  I know that last year I was on a panel that produced such a report ( NAPA Review of the STOCK Act) and within weeks of issuing the report, the Congress passed legislation recommended by the report.   Occasionally something does get done, but keep in mind that this particular report directly impacted each and every member of Congress, so there was undue interest in this particular item.  Back to the subject:  Reports are merely Congress’ way of doing something while doing nothing.  If they don’t want to take on a tough issues, it’s all too easy to request a report so that when their constituents ask what is being done, members can respond with,”I’m glad you asked.  As you know, Dog and Cat Fur is a very complex issue, requiring carefully consideration of all aspects of perhaps the number one problem facing the American people today. That’s why my colleagues and I have asked the Department of Homeland Security to produce an annual report on Dog and Cat Fur Protection.”(This is some web site,  huh?  Where else could one find copies of the STOCK Act and Cat and Dog Protection reports to Congress in one article??) Dog and Cat FurOne  wonders how much those 4291 reports cost to produce?

That brings me to the title of this article.  There’s another report that comes out every two years that might fall into the category of “So What.”  I attended an event last week which highlighted the GAO High Risk List and how to get off (Not a high priority at DoD as you will see).  The GAO began compiling the list in 1990 as a means to highlight the agencies and program areas that are high risk due to their vulnerabilities to fraud, waste, abuse, and mismanagement or are most in need of broad reform.  There are currently 30 items on the list.  Here’s a link to the current list, and I’ve singled out those owned by the Defense Department below:

DoD High Risk Areas from GAO and year placed on the list

That’s quite the list that DoD has managed to accumulate with a cumulative time on the list of 115 years!  To be fair, DoD has managed to remove an item from the list, DoD Personnel Security Clearance Program in 2011 after six years on the list (and now that appears to be gooned up again).

You might ask, “What’s the penalty for being on the list?”  Answer: Nada.  There are no consequences as far as I can tell.  In fact, in the twisted DoD budget world, being on the list is a good thing! Why you ask?  Well, you can go over to the Hill and ask for more money to get off the list (although past performance would indicate that we are in little danger of having any items removed).  It makes a great budget exhibit to show how much money is needed to get off the list.  Congress wants you off the list, so you get money.  It seems like a Seinfeld stand-up routine (Congress in italics):  I need money! Are you on the list? Yes, I’m on the list!  Then you get money!  or the alternative; I need money! Are you on the list? No, I’m not on the list.  No money for you!

Who wouldn’t want to be on the list?  In fact, DoD is soooo on the list, they need lots more money!

To be sure, there is value in highlighting problems in the management of Federal agencies, but if it is going to be worth the effort of putting together and maintaining the list, there should be penalties for being on the list, and even more penalties for not getting off the list.  If the current crop can’t fix it, bring in a new group.  Or perhaps the greater penalty would be that one can’t leave until it’s fixed.  In the case of DoD that might provide a greater incentive.

So I guess the point of today’s philippic is that if there’s going to be a report, someone has to read it.  If there’s going to be a “Bad Boy” list, there has to be a penalty for staying on it.  The management lesson to be learned is that if you have someone producing reports, it’s not a bid idea to periodically evaluate who’s reading them, and more importantly, what’s being done as a result.  If the answer is no one or nothing, stop doing it.  And if you are going to go to the trouble of producing some sort of “Dink List”, make people accountable.

For a complete copy of the 2013 update to the GAO High Risk List, click here.GAO High Risk List


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birc-a-bracThere’s lots of hot air blowing about on the subject of Base Realignment and Closure (BRAC) inside the Beltway.  I thought I put a few points out there as food for thought.  First of all, a quick explanation of the BRAC process is in order (Here’s a link to the 2005 BRAC web page).  BRAC is the process by which the Defense Department determines what US bases and facilities are no longer needed or facilities which should be repurposed, obtains Congressional approval to close those bases and goes about closing the bases  The determination process is done secretly within each Service based on criteria set in advance by OSD and the Services.   The Service data is then forwarded to OSD where the lists are “modified” to accommodate the desires of the OSD staff and SECDEF.  This list is then presented to an independent BRAC Commission.  The commissioners are appointed by the President, in consultation with the Congress.  The BRAC staff reviews the recommendations, conducts field visits and hearings around the country, and then the Commission produces a list of base closures.  This list is given to the President for review and approval who then forwards the list to Congress.  Congress has 45 days to vote “all or none” (no modifications allowed) on the recommendations.  If they do nothing, the recommendations become law and DoD has six years to close or realign the bases on the list.  In past BRACs the DoD has done a variety of disposal actions, including Federal real property  made available by public benefit conveyances for airport, education, and homeless assistance; federal transfers to native American tribes; economic development conveyances to local redevelopment authorities; and public sales.

Communities spend vast amount of money and effort preparing for BRAC, making sure the contributions to the local economy from local bases are well known, lobbying the Hill and Pentagon and generally stirring up dust in an attempt to “BRAC-Proof” their bases. That’s a big reason why the process is kept under wraps until released to the Commission.

The Defense Department says it needs BRAC to rid itself of excess infrastructure in order to reduce costs.  The big question is rather or not BRAC closures actually achieve the projected savings.  That’s a tough question because there is a fair amount of conflicting data out there.  The DoD uses a model (critics say it’s flawed and inaccurate) called COBRA (Cost of Base Realignment Actions) that projects closure costs and the modeling results are generally used for racking and stacking the recommendations. To my knowledge, the model has never be compared to actual costs in order to validate its results (partly because I doubt if the real costs are known). I just don’t know enough about it to have an opinion either way, but given that determining costs is involved I tend to agree with the critics.

There have been several problems related to BRAC which have limited savings or increased costs:

  • Environmental Clean up costs are often underestimated negating the savings anticipated.
  • Turnover from DoD to the receiving locality or other governmental agency has not progressed smoothly.
  • Unsafe building must be demolished before turnover
  • Local communities not prepared to accept the property and ensure security.

I just read today that the Navy’s Treasure Island Facility, BRACed in 1993, is now scheduled for radiation testing because high levels of radioactivity have been detected in the housing areas. YIKES!

The CNO has said that the Navy does not need another round of BRAC , but the Army and the Air Force maintain that it’s needed.  The Army’s position is certainly understandable  given the  personnel reductions they are facing.

Although great pains were taken to “de-politicize” the BRAC process, politics inevitably creep in.  Take for instance the Portsmouth Naval Shipyard located in Defense Committee Heavy New England.  Its main purpose was to refuel nuclear submarines.  The Navy’s newest version, the Virginia-class is designed to last 30 years without refueling.  The last of the submarines requiring refueling are long gone, but when the Navy tried to close it, the fan was clogged by politics and it was removed from the list.

So keep an eye out in the  Defense Budget debate over the next few months.  To Bric-a-BRAC?  That is the question.

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Rethinking LCS

I was recently asked to do an interview on Federal News Radio on the subject of the Secretary of Defense’s decision to terminate the LCS buy at 32, instead of the 52 on the Navy’s FY15 Shipbuilding Plan. Here is the audio:

LCS It was on my watch as the chief requirements and resources officer for the Navy (N8) that the requirement for the number of LCS’s was determined.  At the time, the Navy was looking towards a more sophisticated engagement policy with the navies of developing and emerging littoral countries.  The idea was to have a ship which could access shallow water ports and operate in the “brown” water environment.  Its defining attributes were speed and maneuverability.  Some limited self-defense capability was built in, chiefly rapid firing, larger caliber guns to combat the swarming boat threat (then a big concern) and an aircraft point-defense capability.  The number was based on what we thought was needed to execute the “From the Sea” maritime strategy in a variety of littoral interest areas.  Another attribute of the LCS was the inclusion of mission modules, specially developed, mission-focused packages of sensors and aircraft (helos, manned and unmanned) with limited weapons capability.  The modular approach was chosen for affordability since large, multi-mission ships (like DDG-51 class) are very expensive to build.  We carefully crafted a ship inventory to ensure that our carrier battle groups and amphibious ready groups were protected and that our ISR requirements were met before looking at how many LCS’s were needed.  Said another way, LCS’s were not planned to be a front-line battle force protecting carriers and amphibious assault ships.  The three modules we envisioned were mine warfare, surface warfare and submarine warfare.  In each of the appropriate warfare areas, the LCS’s were meant to augment forces by providing extra eyes and ears.

Now Secretary Hagel wants a smaller, more capable and lethal ship to be built to take the place of the LCS.  But we can’t afford the Navy we want to build now.  Adding a more capable, lethal ship (Frigate style) is going to cost more that the LCS it will replace and will lead to even smaller quantities of ships at a time when the vision is to expand the Navy’s reach in the Asian-Pacific region.  Where’s the reality check? By the way, it’s not like the current US Navy frigates are bristling with armament….a Point-Defense CIWS, 76mm gun, a few torpedoes, maybe a towed sonar and a helo.  Virtually the same  as the ASW module equipped LCS.  So I submit using current frigates as a model for the capable, more lethal vessel is probably not a good idea.LCS
A Congressional Budget Office analysis of the Navy’s 2014 Thirty Year ShipbuildingPlan has some startling data in it.  It notes that the most optimistic case is that the FY14 plan was going to cost at least $18 Billion a year for the next 30 years and that a more realistic figure is probably closer to $20 Billion.  The report also notes that the historical average in the Navy’s ship procurement budget from 1984 to 2013 is about $14 Billion…..that’s a deficit of $4-6 Billion a year!  Keep in mind in the FY15 request the Navy is putting 11 Aegis Class cruisers on the bench, seriously considering not refueling the carrier USS George Washington and delaying the procurement of the amphibious docking ship replacement by a year.  There’s a fairly reliable benchmark used by shipbuilders to determine the cost of a ship… the DDG-51 Class costs about $167,000 per ton to build and the frigate exported by the French (probably about the size and capability that SecDef wants) costs about $122,000 per ton to build.  The LCS is costing about $350 Million right now, so the Big Guy wants to replace that with something that’s going to cost about $500-600 Million to build.  The current frigates “lack multi-mission capability necessary for modern surface combatants” (that’s a quote from the US Navy web site) so whatever frigate the new LCS Study Group comes up with will have to be more capable than what we have now……and that, my friends, will cost a lot of money the Navy does not have.

So I’m really interested to see what the Study Group comes up with….a deadlier, more capable ship than either the LCS’s or the FFG’s currently in service. And in order to afford them the Navy will have to come up with an additional $400 Million or so in the shipbuilding budget each year.  Where’s the money coming from?  I guess we just print more.  Why not?  It’s not much different to be $4 Billion under the requirement as it is to be $$4.4 Billion.  What’s a few hundred million among friends?

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A Self-Licking Ice Cream Cone

Today’s title is a fairly common term used when referring to an organization that appears to have no other purpose other than sustaining the survival of the organization itself.  Ice Cream ConeIt’s like an Organizational “Black Hole” (OBH) which sucks up activity and productivity, only to have nothing of value produced in return.  It’s a phenomenon I’ve observed in both government and the private sector so neither world has a corner on the market.  Organizations that one might classify as a “bureaucracy” may exhibit the characteristics of an OBH, but not necessarily.  There are plenty of bureaucracies in government producing useful things, perhaps not at the speed or efficiency we would like, but that issue is a different matter from the OBH.  I  suggest as a leader that you should periodically take a look at your organization to ensure you remain well outside the influence of the OBH.  OBH’s have the following items in common:

  1. They tend to form when an entity reorganizes frequently
  2. There is excessive focus  on development of strategy
  3. There is too little focus on execution of strategy
  4. Their mission and/or desired results are not clear
  5. They have highly organized and complicated structures
  6. They have difficulty in articulating what they do in plain terms (excessive “buzz word” use)
  7. They are always in meetings

Black HoleI think that will do for now.  I’m not going to comment on all of these factors in this posting, but I will chat for a moment on what I consider to be the most significant problem, the balance between strategy and execution.  My experience has been that most successful and growing organizations have a healthy balance between the two.  If there is too much focus on strategy, companies are constantly conducting strategic off-sites because they never feel like the previous strategy is accomplishing the desired results.  This is not surprising since if there is little focus on execution, metrics are rarely established and responsibility rarely assigned for elements of the strategy.  Therefore, no one really knows if the strategy is being effective or not.  If a company focuses too much on execution, it never achieves its growth targets because of Crenshaw’s Anti-Multiplicative Rule, “ You can’t double revenue by doing twice as much of the same thing.”  I’ve noticed that many OBH’s have very sophisticated organizational structures and have multiple interconnected relationships.  The organization has spent so much time organizing and admiring itself, it has forgotten to produce product. The leadership feels very comfortable with this complex organizational structure because it gives the outside observer the illusion of operational excellence and it looks great in Power Point.   I firmly believe it’s possible to organize yourself right out of business.

The dilemma leaders face is that as companies and organizations grow, they require more structure.  But structure tends to inhibit agility and entrepreneurship, thus limiting growth.  Good leaders know how to put just enough structure in place to allow for growth without adversely impacting agility and entrepreneurship.

So beware the Organizational Black Hole syndrome.  Be highly suspicious of briefings pregnant with elegant organization charts, explained with a healthy dose of “buzz words” like stovepipes, barriers, synergistic effects,  vis-a vis, etc.  Make sure the focus is not so much on structure but more on execution and results.  I believe that an organization that is focused on execution excellence will do well with just about any strategy but an organization focused on strategy will never quite hit the mark.  There’s a quote I like from Stephen Covey….”The main thing is to keep the main thing the main thing.”  Make your main thing execution and you can’t go wrong.






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Horseless Carriages and Pilotless Airplanes

I’ve often thought of my Grandfather and the changes he saw in his 95 years.  Once he plowed fields with a mule (~1 HP) , but switched to plowing with a turbocharged International Harvester tractor (~300 HP) in his later years. As a young man on a farm in Alabama he got the news of what happened last week by horseback, but in his later years he got the news as it happened from the television.  He even went from watching the man in the moon from the back porch to watching a man walk on the moon.  At the turn of the century he saddled his horse and rode four hours to town and just before he died , he hopped on a plane and was in Las Vegas in four hours.  And he saw the horse-drawn wagon turned into a horseless carriage.  I suspect he wondered what possible benefit could come from getting rid of the reliable horse and replacing the Old Grey Mare with an unreliable, noisy and complicated gasoline engine.  In fact, I bet he would still saddle his horse to go to town, even when he could have taken the Ford and I’m sure he wasn’t the only one.  MQ-9As I was looking at an MQ-9 Reaper, Remotely Piloted Aircraft (RPA) doing touch-and-go’s at Creech AFB near Las Vegas this morning,  I thought once again about my grandfather and the parallels in our lives.  I’ve gone from giving the Operator the phone number to having my iPhone give me the number.  I’ve moved up from the Atari 800 (with the 32K memory module) to the MacBook Air….heck, I even have a three terabyte server sitting in my basement (at significantly less cost than the 32K Atari I might add).  My fleet airplane, the A-6 Intruder, had a computer with a memory made up of 32,000 little round ceramic magnets woven together, operating at a speed of 8 Hertz (32 Hertz in Attack).  Watching the JSF flying this morning I can’t even imagine how much memory it has, although I suspect it’s in the Giga’s.  And my guess is the speed of its computer is in the Giga range as well.  Wow!

So think about the early attempts to field a pilotless airplane or what was called a drone.  DASHI remember the Navy’s attempt at pilotless aircraft as a midshipman looking at the DASH helicopter operating from the deck of a destroyer.  You never see them in museums because they all were last seen flying over the horizon, never to return.  We made several other attempts before arriving with Fire Scout.  We are now on the dawn of deploying a fixed-wing, X-47Bpilotless, tactical aircraft on aircraft carriers with the X-47B and long-range Global Hawks operating from our Naval Air Stations.  The Air Force is conducting routine combat patrols with MQ-1 Predator and MQ-9 Raptors and contributing to our war efforts in Afghanistan daily.  The Air Force pilots who remotely fly these aircraft are quick to point out that they are not flying drones, but rather Remotely Piloted Aircraft.  Just like at the turn of the century when people thought of automobiles as “horseless carriages.” Because of that narrow view they had no concept of what the automobile might become.  I submit the same is true in the RPA world.  Even now,  I suspect that many of the “Old Salts” are questioning the value of a carrier-based RPA because they see it a merely an A-7 or A-4 flying around with no pilot inside.  We have no idea how the addition of the X-47B to carrier air wings will change the way the Navy flies and fights.  But the sooner we get out of the “horseless carriage” mindset and look at the X-47B not as an airplane without a pilot, but as a radically new way of projecting power, the better off we will be.

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Risky Business

After getting wrapped around the axle yesterday on the tried and true budget method of “Salami Slicing” I never got around to opining on risk, so here goes!  During much of my early career, risk didn’t enter into my decision making process, at least not consciously.  Of course, flying from aircraft carriers is all about risk and how to manage it, but risk management is already baked in.  The “powers that be” know that if you have a certain number of practice landings, maintain technical currency in your aircraft and fly regularly, the risk of an accident is minimized.  Over the years I’ve seen the Navy’s thinking about risk mature.  The time was, when one went on deployment, you could expect to lose a couple of airplanes and several aviators in a typical 6-7 month cruise.  Because of a focus on managing risk, the loss of a single aircraft or crew member is a rarity.  (keep that thought in mind).  On a personal level,  as one moves up the leadership ladder, the onus for managing risk shifts from the institution to the individual leader.  My opinion is that one of the reasons people become effective leaders is that they concentrate on minimizing risk to the people and equipment under their command, not on minimizing personal risk to their themselves (careers). Of course, there’s always a healthy tension between accomplishing the mission and minimizing the risks associated with it.  Safety is paramount!!! But if safety were really paramount, we would never fly, because it’s a dangerous business!  That’s where leaders earn their pay—making the trade off between risk and reward.  In the Navy, it’s interesting to see how the various warfare communities manage risks.  In the Surface Navy,  the decisions on risk rest principally with the Commanding Officer.  The CO does this by being intimately involved in planning and executing the training, day-to-day operations and mission execution of the ship.  The CO has the Officer of the Deck and his Tactical Action Officer to do the minute-by-minute execution, but the CO is always available for problems as they arrive.  An aviation CO has to worry about many of the same things at the surface CO, but must depend on his crews to exercise judgment when hundreds of miles away for the ship. Hopefully the aviation CO has instilled a good sense of risk management in the aircrews when they have to make risk decisions without his/her advice.

The point of my little blurb is to highlight that operationally, commanders do a great job of managing mission accomplishment and risk so that mission is maximized and risk is mitigated, minimized or eliminated.  Fast forward to the Pentagon.  Now those commanders who were so good at minimizing operational risk must deal with a new risk, budget execution risk, or said another way, “What are the chances that this program will be successful, given the level of funding?”  I was one of those commanders.  As an operational commander, I insisted on making sure all risks associated with a mission had been considered and mitigated…….no less than about 98% chance of safe success was tolerated.  But when it came to taking risks associated with the Navy budget, I was far more tolerant.  For instance, “What’s the chance that an LCS will only cost $220 Million?”, I would ask the Program Manager.  When the answer came back,”About 20%”, I would say, “OK.  Guess we will have to go with that.”  Why was my risk tolerance so much greater as a budgeteer?  Most likely it was because most of the decisions affected events far in the future and I would not be around when programs matured.  That attitude was reinforced by the excessive optimism that always goes with budget building.  This notion of budgetary risk is not new nor mine.

Former CNO Vern Clark once asked me as the N81 (Navy’s Ops Research group) if we could characterize the risk built into the budget and it was a very hard thing to do.  I don’t remember all the details but as I recall we came up with several categories of risk:

  1. Institutional Risk.  The degree of support by leadership of a particular program.
  2. Execution Risk.  The degree to which a program was underfunded
  3. Political Risk.  The degree to which this program was supported by the Administration or Congress
  4. Financial Risk.  The degree to which the assumed efficiencies built into the budget were achieved
  5. Economic Risk.  the degree to which the economy would support the Five Year Defense Plan

Some of these risks were subjective and others data-based.  The aggregation of them would give the CNO an idea of how much risk was being carried by a particular program.  Financial risk was the most interesting of the four.  It turned out we discovered that we had assumed away tens of Billions of dollars in efficiencies, but never went back to see if we achieved the saving associated with the efficiencies.  In a sense, it didn’t matter because once we take the money, it is never put back.  I’ll end up by saying the FY15 budget on the Hill now has a fair chunk of “Efficiencies” in it.  Will they be achieved?  What exactly is being done to put these efficiencies in place?  How will you know if the efficiencies were achieved and what will you do if they are not? Are these efficiencies or wedges (unexplained cuts)? These are the questions the Hill should be asking the risk-takers in the Pentagon.

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