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October 20, 2014

Pentagon Agency Rid Itself of 45 Football Fields’ Worth of Storage Space, Delivering Other Stuff Elsewhere

The Department of Defense has a lot of, well, stuff. With wars winding down and amid the push to reduce the U.S. budget, the agency in charge of supplying the military with commodities like food, clothing, fuel and more has been dramatically shrinking its inventory and all the things going along with it — like demolishing 45 football fields’ worth of warehouse space in the past couple years alone.

But the Defense Logistics Agency isn’t done shrinking yet, said its director, Navy Vice Adm. Mark Harnitchek, on Thursday. And it’s firmly in the middle of gearing up for the changing needs of the military, including in places like Africa and Asia.

Between fiscal year 2014 and 2019, Harnitchek told reporters over breakfast Thursday, the agency forecasts saving the department $13 billion. Having disposed of 2.6 million square feet of warehouse space, the agency plans to rid itself of another 2 million this year. Before the Sept. 11 terrorist attacks, the agency moved $18 billion to $20 billion worth of goods and services, Harnitchek said; in part by taking on new missions, the agency peaked at $46 billion around fiscal 2012. It’s going to come down to between $35 billion and $37 billion this year.

“We’re going to be a lot smaller in terms of our people, our infrastructure, our inventory and our financial footprint,” Harnitchek said. “Our theme is to significantly improve performance, and do that at dramatically reduced cost.”

The department is transitioning out of Afghanistan, bringing some things home and selling others, namely demilitarized “white goods” — like bulldozers — that the Afghanis would want, for what Harnitchek said could amount to tens of millions of dollars. But other goods have to be destroyed, he said, because it’s pricier to keep around, even if that includes expensive vehicles. The department just has to look at it as sunk costs, he said. This might be controversial.

(The agency made headlines last year when an inspector general report determined that Boeing had overcharged it by more than $13 million for parts, such as paying $2,286 apiece for bearing sleeves used on aircrafts’ main landing doors that were worth more like $10. Harnitchek said the agency has learned lessons from that overcharge by doing things like better training personnel to recognize what items should cost, and Boeing has agreed to give the agency $3.3 million back in parts elsewhere; as it happened, Boeing was also undercharging for some other parts, thus explaining the $10 million difference between the overcharge and reimbursement.)

In trying to cut costs, the agency is taking a close look at what kind of inventory it should keep on hand, where and how much. He said in a place like Afghanistan, the agency has to keep larger inventories in case, say, Pakistan closes off supply routes, as it has done periodically when angry at the United States. But the agency also probably doesn’t need to keep 15 years worth of inventory on hand anywhere, he said. Harder to ascertain is what to do with items that aren’t frequently in demand, but need to be there for when they’re called upon.

With Africa increasingly unstable, and with the “Asia pivot,” the agency and other department components are trying to figure out how to handle getting things to the military there. Africa is a large continent, and in some places lacks the roads and airfields that make it hard to deliver those goods. Harnitchek said that’s what the agency spends most of its time managing.

“We don’t talk about do we have enough fuel, do we have enough lumber, it’s all, can we get the stuff there?” he said. One of the answers in Afghanistan and Iraq was to buy local, which saves money and fosters relationships.

And if another big war breaks out, requiring the Defense Department to rapidly ramp up, Harnitchek said he isn’t worried, in part because it’s something they’ve been through recently.

“We have a battle-tested combat-hardened group of logisticians in all the services,” he said.

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