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Defence budget problems can be solved by a simpler structure

By Mark Drummond - posted Wednesday, 30 January 2002

The article "ADF caught in poverty trap" (Canberra Times, 28/4/00) paints an unnecessarily gloomy outlook for future Defence spending levels, which, if managed properly, can easily be contained or even reduced in real terms.

Three concerns are being expressed at present by the broader Defence community: firstly, that the attrition rate among military personnel is too high; secondly, that the military personnel structure is way too top heavy; and thirdly, that personnel costs are blowing out. The good news, however, is that the first "problem" is actually a solution to the other two indeed very critical problems mentioned here. The cost blow-out is a direct consequence of the overly top heavy rank structure, which in turn is exacerbated when military attrition rates are problematically low – as happens especially in times tending toward or actually in recession. It is simply a myth that high military attrition rates are altogether bad. The immense benefits of higher attrition rates are continually overlooked in the Defence personnel debate.

The underlying cause of the top-heavy military personnel structure is the inherently top-heavy rank structure. There are presently some 10 separate commissioned officer rank levels and 4 non-commissioned officer rank levels presiding over just 4 ordinary rank levels. Savings of several hundred million dollars per annum could be achieved by reducing the 14 separate officer rank levels to say 9, with the resultant structure still easily "tall" enough to satisfy command and control imperatives.


The overall salary and cost bill for military personnel can also be reduced simply by maintaining high throughputs - in other words, high levels of recruitment and attrition - a measure which also substantively enhances national security by increasing the total number of people with current or recent military experience, all of whom could be called to contribute in the event of a national emergency.

If we assume that the number of full-time military personnel will be kept at say 50,000, then a 12 per cent per annum attrition rate (resulting in 8.33 year average career lengths) will every year permit the addition of 6000 to the pool of "capable of serving" personnel, whereas just 4500 could be added each year if the attrition rate was just 9 per cent (and average careers 11.11 years). Furthermore, all else being equal, the overall personnel bill with a 12 per cent attrition rate will be some $400 million per annum less than if it were just 9 per cent. Higher attrition rates generate savings because they permit a lesser number of high ranking personnel and hence reduce the extent of top heaviness in the rank structure. Furthermore, without diminishing the value of military experience in general, it can nevertheless be argued that when attrition is too low, the military will tend to retain too large an element of conservative "oldies" who will too often be less well acquainted with and problematically threatened by state-of-the-art technology, management practices and ideas generally.

The problem of losing too many experienced personnel is certainly very real when attrition rates are sustained above 13 per cent or so, but the present 12 per cent level is probably about ideal and is at any rate a reality which - in view of its advantages - Defence planners should accept rather than fight.

Another massive source of waste and cost blowouts in Defence occurs in the form of the myriad non-operational activities still carried out by uniformed military personnel which could be done either by civilians or not at all.

Whereas Defence personnel can be divided functionally into operational and non-operational components, and longitudinally into pre-operational, operational and post-operational career phases, the problem is that costly pre-operational, post-operational and non-operational components of Defence activity take up far too much of the Defence budget, to the detriment of the operational component which adds most value to our national security. Massive costs are incurred through "most expensive in-house option" pre-operational education and training schemes such as the Defence Academy - which restrict many Defence personnel (especially officers) to glorified boarding school environments for up to (and in some cases more than) five years before they enter a productive career phase. The absurdly top heavy structure also means that far too much of the Defence budget is spent on personnel in their less productive post-operational career phases.

Costly waste in non-operational activity is further exacerbated by the unnecessary fragmentation of Defence into the separate army, navy and air force branches, and by the less than optimal military-civilian divide. Whilst we obviously still need operational sea, land and air components of our defence forces, this by no means demands the retention of separate navy, army and air forces in their present forms with the vast extent of wasteful duplication, traditional baggage, and antagonistic tribalism they entail.


An optimal Defence structure would comprise military personnel serving in sea, land and air combat components of a unified, single defence force like that of Canada - which we could obviously improve upon with the benefit of their experience. People performing non-operational roles within Defence should, in peace time, be employed principally as Defence civilians rather than full time military personnel, with uniformed service in the Defence reserves being optional or mandatory for such staff where necessary and beneficial.

The structural change and policy measures recommended herein could significantly enhance national security and at the same time generate savings of some $1 billion per annum and safeguards against future personnel cost blowouts.

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This article was first published in The Canberra Times on 9 May 2000.

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About the Author

Mark Drummond is a mathematics and statistics teacher at the Canberra Institute of Technology who completed a PhD thesis in 2007 at the University of Canberra titled Costing Constitutional Change: Estimates of the Financial Benefits of New States, Regional Governments, Unification and Related Reforms.

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