Comparing the Costs of DoD Military and Civil Service Personnel

In an era of heightened concern within DoD over operating costs, there is renewed interest in civilianization — the transfer of functions performed by military personnel to civil service personnel. This interest stems from a fundamental assumption that civil service workers are less expensive than their military counterparts. At the request of the Office of the Secretary of Defense (OSD), RAND researchers examined the factors influencing the cost-effectiveness of civilianization — in particular, the relative cost of a military workyear and a civil service workyear, the way in which workforce substitution occurs, and the effects of substitution on the overall workforce. The authors demonstrated that underlying assumptions about the nature and impact of substitution of civil service for military workers significantly influence the benefits to be derived from civilianization. As a result, they find that civilianization can produce cost savings under many, but not all, circumstances. Moreover, the authors find that policies designed to maximize cost savings can have a negative impact on military readiness and career-progression opportunities in both the military and civil service workforces. For example, under current military personnel management and budgeting arrangements, a cost-effective civilianization policy would require DoD to limit substitution to positions that could be filled with lower-grade civil service workers. While such a policy might generate substantial cost savings, it could create personnel-management problems within both workforces. The authors recommend that the OSD modify its current guidance on military/civil service position assignments. Revised guidance should specify that assignment decisions be predicated on three considerations: military necessity, cost, and career-progression opportunities. Study findings should be of interest to OSD, service, and defense agency personnel managers and policymakers, especially those involved in the evaluation of civilianization policy. Managers of outsourcing and cost-comparison processes may also have an interest in the findings.