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The Department of Defense strives to only use military personnel for military-essential tasks and has consistently recommended the civilianization of ever-more military functions and positions. This guidance also stems from the belief that military personnel cost more than comparable civilians. As a policy, civilianization can only be properly applied when it is an integral element of a broader personnel-management strategy. This work presents a new method of estimating the cost of a military person-year that focuses on the actual cost of the retirement benefits that the federal government must provide to military personal. It provides a better foundation for the development of a broad, force-shaping strategy than previously available measures that focused only on annual retirement-fund accrual costs. A major implication of this alternative calculus is that truly effective force management — using strategic human-resources principles to identify the proper mix of age and experience in the personnel inventory — requires an increased focus on the cost of personnel.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    Personnel Costs and DoD-Regulated Conversion Rates

  • Chapter Three

    The Cost of Deferred Compensation

  • Chapter Four

    Calculating the Correct Cost of Eliminating a Military Person-Year

  • Chapter Five

    Applying the Calculus

  • Chapter Six

    Final Issues, Conclusions, and Recommendations

  • Appendix

    Grades and Titles for Military Officers and Enlisted Personnel

The research described in this report was prepared for the Office of the Secretary of Defense (OSD). The research was conducted in the RAND National Defense Research Institute, a federally funded research and development center sponsored by the OSD, the Joint Staff, the Unified Combatant Commands, the Department of the Navy, the Marine Corps, the defense agencies, and the defense Intelligence Community.

This report is part of the RAND Corporation monograph series. RAND monographs present major research findings that address the challenges facing the public and private sectors. All RAND monographs undergo rigorous peer review to ensure high standards for research quality and objectivity.

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