Privatizing the Defense Finance and Accounting Service

The end of the Cold War has brought with it a dramatic decline in overall United States defense spending and a sharp decrease in funding for force modernization. This trend cannot continue without serious negative impacts on readiness. The DoD has identified a need to increase investment on modernization from the current 45 billion a year to 6O billion by fiscal year 2001. Privatizing non-core missions offers one possible way for the Department to obtain funds for this purpose. This paper examines the possibility of accruing savings through the privatization of Defense Finance and Accounting Service DFAS functions. The paper concludes that, while privatization will eventually provide significant savings, the department must take action to first streamline DFAS operations and requirements before outsourcing will provide a viable means of reducing operational costs.