Congress gives the Pentagon $600 billion a year: our largest non-entitlement expense. In return, the military must spend money efficiently and report back to civilian leaders. Fulfilling these obligations builds trust and ensures every dollar in the defense budget benefits America and our sons and daughters who protect us.
Yet civilian leaders at home and abroad struggle to obtain details on military spending. It was unacceptable (but not surprising) to learn last month that the Pentagon buried evidence it could save $125 billion over five years by reforming personnel practices and reducing waste. Perhaps more shocking is the fact that the Department of Defense (DoD) cannot explain $6.5 trillion in financial adjustments from 2015–rendering the Pentagon’s financial reports almost meaningless.
Three features of the Pentagon’s organizational design hamper effective fiscal management. First, Congress slashes funding if a division spends under its budget. Hundreds of managers respond by spending inefficiently and obscuring financials. Second, DoD leaders rarely measure program ROI. Third, elected officials and Pentagon leaders throw more money at failing programs rather than learning from mistakes. This creates a dishonest procurement culture and deters both efficiency and innovation.
How do we fix this? We can begin by opening the books.
Congress ordered the Pentagon to be prepared by October 2017 to finally comply with a 1996 law mandating audits of every agency. This is a positive first step, but true financial accountability and efficiency will remain elusive without deeper organizational reforms and standards.
America has the greatest military in the world, and it’s up to our leaders to set the bar for what a 21st century military culture of innovation with transparent, collaborative leadership looks like. Innovative cultures transparently document spending, admit mistakes, and ask how they can do better.
Technologists and entrepreneurs can help. The Pentagon should use data to guide financial decision-making. Of course, some black ops need to be obscured — but too often, “TOP SECRET” or compartmentalized information is an excuse to hide incompetence. Transparent, top-down financial reporting from every part of the DoD must inform military and civilian leaders.
Today, the Pentagon’s technology is not up to the task. IT staff are scattered across the DoD, operating on inconsistent data standards and formats. Staff devote their energy to maintaining legacy systems: the Pentagon spends 80 percent of its IT budget on maintenance and only 20 on modernization. Outdated IT infrastructure stunts innovation and obscures wasteful spending.
Fixing the Pentagon’s technology deficit begins with standardizing the Pentagon’s financial data, then bringing that data into a unified platform in the cloud.
Why the cloud?
First, effective financial reporting increases visibility into back-office spending, fostering accountability and enabling oversight. For example, with a unified data platform, instead of waiting months to compile questionable reports, military and civilian leaders could access detailed financial information to enable accurate discussion any time.
Second, the Pentagon could budget more efficiently. A data platform would enable data science-driven analytics that uncovers waste and detects fraud. For example, years of budget and transaction data would enable software that flags anomalies, informs trade-offs, and sharpens oversight.
Finally, a financial data platform would boost over a million staff members’ productivity by eliminating routine work, such as maintaining legacy IT systems and compiling data.
Experience shows us these benefits are not out of reach. For example, over a thousand local governments, from San Diego to Washington, D.C., use a company we launched in 2012 called OpenGov to build efficient budgets, track spending, and engage citizens. The Pentagon could get similar benefits from new cloud-based technologies.
We cannot delay a solution. From 2016 to 2046, discretionary spending’s share of the federal budget, which includes defense, will fall from 44 to 26 percent. But the morphing threats emerging in today’s multilateral world won’t disappear. We must spend military dollars more efficiently to address these challenges.
Those who serve in our armed forces do so from a profound sense of duty to secure liberty for their fellow Americans. They enlist to serve their fellow citizens who express their will through elected representatives, not an unaccountable defense establishment.
As President Eisenhower warned us, “Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.”
The political right has traditionally talked tough on government waste and accountability, but given the defense establishment a free pass. But President-elect Trump won without help from special interests that refuse to scrutinize defense spending. We have a unique chance for reform. Let’s not waste this opportunity to affirm our dedication to our soldiers and to the liberty they defend.
Let’s open the books.
General Partner, 8VC