Outsourcing Military Support Functions
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In February, the Department of Defense will announce its first
selections of military support functions suitable for outsourcing
-- a move which amounts to a near revolution for the armed forces.
- About half of the Defense budget consists of support functions
such as maintenance, supply, health care, data processing, administrative
services, facilities management, transportation and so forth.
- In 1995, these functions cost over $100 billion.
- The military has traditionally held that activities necessary
to waging war should be performed internally; but budget pressures
and the impressive performance of private-sector firms are forcing
the Pentagon to rethink that premise.
- Large private firms commonly achieve cost savings of 20 to
30 percent when they contract with other firms to perform noncore
functions.
- Such savings on even half of the services currently performed
internally at Defense would cut costs by more than $10 billion
annually.
Economists predict that privatization of these functions and services
should also improve the efficiency and responsiveness of the defense
infrastructure.
Experts say that -- with the support of Congress -- privatization
could be the most important defense management initiative of the
post-Cold War period.
Source: Loren B. Thompson (Alexis de Tocqueville Institution),
"Outsourcing Defense?" Investor's Business Daily,
January 17, 1996.
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