Privatization Issues

Congress Resists Privatization Savings

Defense Secretary William Cohen's suggestion to increase privatization of depot maintenance work (DMW) to 50 percent has fallen on deaf congressional ears. Instead, Congress may extend the current requirement that 60 percent of DMW be performed by government operators.

Defense analysts agree privatization of DMW could save the federal government millions of dollars -- for example, Kelly Air Force Base in San Antonio alone performs $1 billion worth of DMW annually.

  • The 1995 Base Realignment and Closure Commission and the Pentagon's latest Quadrennial Defense Review recommended more privatization of DMW.

  • The Center for Naval Analysis (CNA) examined 2,100 cases in which other military services were contracted out and found that privatization saved an average of 30 percent.

  • Even when private firms fail to win contracts in competition with civilian government employees, CNA found the process reduced costs on average by 20 percent.

  • For instance, the Air Force estimates competition from private firms cut costs by 30 percent, or $190 million, on a C-5 maintenance work contract recently awarded to Robbins Air Force Base in Georgia.

Analysts agree Secretary Cohen's recommendation to privatize 50 percent of maintenance work would save the government millions of dollars and help squeeze more defense out of every dollar the U.S. spends on the military.

Source: Doug Bandow (Cato Institute), "Home-based Appetite for Pork," Washington Times, September 11, 1997.

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