NCPA - National Center for Policy Analysis


May 3, 1997

Critics say that the Defense Department wastes huge sums of money each year through mismanagement -- including maintaining computer systems which cannot communicate with each other and continuing to make payments to people who are dead. Congress will be holding hearings on these practices soon.

Every year, too, the Department spends some 40 percent of its budget on "infrastructure" -- which covers everything from people who work in the military base cafeterias and day care centers to accountants and managers of health care plans for employees.

A number of analysts think some of these functions could be outsourced or privatized.

  • Such a move could save anywhere from $7 billion to $30 billion depending on whose estimates are used.
  • By the Pentagon's own estimates the savings could be around $14 billion.
  • Savings could be realized, for example, if the private sector were to manage the upkeep of weapons -- a function on which the Pentagon spends some $15 billion a year, according to Alexis de Tocqueville Foundation estimates.

Advocates of outsourcing point out that the money saved could be used to modernize the armed forces or develop new weapons systems, where necessary.

But the problems involved in adopting a privatization policy are political rather than economic, according to political observers. Congressmen and Senators always want these funds directed to their own states and districts. So many are expected to oppose privatization because they might lose the power to direct spending to their own areas of interest.

Source: "Adjutants or Accountants?"Economist, May 3, 1997.


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