December 15, 2015

December 15, 2015 | Issue Brief on National Security and Defense

Defense Reform Bill Is Biggest in Decades, But More Remains to Be Done

On the Wednesday before Thanksgiving, President Obama quietly signed into law one of the biggest defense reform bills in decades. The National Defense Authorization Act for Fiscal Year 2016 (NDAA) establishes budgets and policies for the U.S. military.[1] While many in the military have followed this bill closely, most Americans do not realize the important changes the bill makes. At a time when many major issues seem intractable, it is worth paying a bit more attention to the tough problems that this bill successfully addressed in a bipartisan fashion.

The major reforms in the NDAA were accomplished only because of the commitment of the leaders of the Armed Services Committees in the House and Senate. The two chairmen, Senator John McCain (R–AZ) and Representative Mac Thornberry (R–TX), were both very deliberate in developing and advancing these reform proposals and have indicated their commitment to continue their efforts in next year’s bill. The ranking members on both committees, Senator Jack Reed (D–RI) and Representative Adam Smith (D–WA), were also instrumental in successfully passing this legislation. Regrettably, the White House and the Pentagon were less helpful. In addition to the President vetoing the first version of the NDAA for political leverage, the Pentagon was not quick to support some of the major reform proposals.

Why Defense Reform Matters

Before examining the details of the bill, it is worth discussing why reforming the Department of Defense (DOD) is important. At times, “defense reform” is primarily seen as a budget exercise: How can the U.S. spend less on defense but still keep a strong military? While some of these reforms can save money, there are others that will cost money. Defense reform should never be about money; it should be about mission effectiveness. Every level of the defense enterprise should be continually sharpening its ability to effectively and efficiently support the men and women who put their lives at risk for our country. The goal for any defense reform effort should simply be to build a better military.

Eliminating Excess Bureaucracy

The DOD is a massive organization, and many analysts have raised concerns about the growth of bureaucracy within it at the expense of combat forces. For example, according to the Senate Armed Services Committee, the Army has increased headquarters staff positions by 60 percent over the past decade, even as the Army is cutting brigade combat teams.[2] The FY 2016 NDAA addresses this problem by requiring a 25 percent cut of DOD headquarters activities over the next five years.[3] In a related effort, the bill also requires that reductions in civilian personnel be done based primarily on performance, rather than seniority—a policy specifically recommended by Heritage analysts.[4] These provisions should start streamlining DOD bureaucracy, and are a major step forward, but more work remains to be done.


Reforming the defense acquisition process is an ongoing challenge and the FY 2016 NDAA made some significant changes in that area. The uniformed leaders of each military service were given greater authority over the acquisition process, in an attempt to ensure that the users of military equipment help inform key acquisition decisions. The NDAA also expands rapid acquisition authority and promotes the use of commercial buying practices in the DOD. While these acquisition reforms are fairly considerable, it is clear that more work needs to be done to ensure that the DOD acquisition system can procure warfighting technology quickly and in a fiscally responsible manner.

Retirement Reforms

The most significant reforms in the FY 2016 NDAA are in the area of military retirement. Earlier this year, the congressionally chartered Military Compensation and Retirement Modernization Commission (MCRMC) proposed a series of changes to military health care, military retirement, and other benefits relating to military compensation. The NDAA contains a major change to the military retirement system, moving from a pension (or defined-benefit) plan to a hybrid plan that incorporates both a pension benefit and a retirement investment plan. The legacy system requires 20 years of service to receive any retirement benefits, which means that 83 percent of enlisted service members and 51 percent of officers do not receive any government-sponsored retirement benefit for their military service.[5] The new system will provide over 80 percent of service members with a retirement benefit while also increasing flexibility.

By harnessing the power of 401(k)-like retirement investments, the new system increases access to retirement benefits while also producing significant savings. The changes implemented through the new retirement plan will save $13 billion in discretionary funding over the next decade, and once fully implemented, the new retirement plan saves approximately $12 billion per year in mandatory spending.[6] This reform alone was years in the making, and will affect the military for decades to come. With the leadership of the MCRMC, the committee chairmen, and ranking members, Congress was able to pass a major military entitlement reform that simultaneously provides better retirement options for service members and is more affordable. This is an impressive accomplishment and should be commended.

Ukraine Security Assistance Initiative

In response to continued Russian aggression in eastern Ukraine, the NDAA authorizes up to $300 million for the Ukraine Security Assistance Initiative.[7] This initiative will provide security assistance and intelligence support to Ukraine, including at least $50 million in lethal weapons. This is an important step in pushing the Obama Administration to stand with Ukraine in the face of Russian aggression, and the provision of defensive lethal weapons is a step that has been encouraged by Heritage analysts.[8]

South China Sea Initiative

The South China Sea is a major security concern for the United States and its allies in the region. China’s aggressive actions have resulted in greater attention to the potential for conflict in the region and highlighted the fact that the United States needs to collaborate closely with its allies in the region. The South China Sea Initiative created by the NDAA gives the DOD important new authorities to partner with friendly countries in the region to build greater maritime security and maritime domain awareness capabilities.[9]

Eliminating Excess Reporting Requirements

Congress will often create legal requirements for the DOD to submit written reports on specific issues. Over time, however, these reporting requirements can create significant work for the DOD with little or no value for congressional oversight. While some of these reports serve important functions, many are outdated and Congress has never repealed them. The NDAA includes a number of specific repeals of reporting requirements as well as a blanket repeal of all reporting requirements in two years unless specifically re-authorized by Congress.[10] This repeal provision is a smart move to help ensure that both Congress and the DOD function effectively and efficiently.

Right-Sizing DOD Infrastructure

DOD leaders regularly argue that excess basing capacity is a financial burden and have called for a new round of base closures. However, much of the DOD’s supporting data are a decade or more old, and may not reflect current and future basing needs. The NDAA requires a new capacity study that reflects the current threat profile and attempts to gauge future end strength.[11] While Congress continues to resist a full base closure process, this capacity study is an important step toward an honest assessment of the military’s infrastructure needs and costs.

Next Steps

The FY 2016 NDAA is one of the most significant defense bills in recent years, and congressional leaders should be commended for successfully passing this bill. However, more work remains to be done. The DOD and each of the military services have inefficiencies and challenges that Congress needs to address. As Congress begins thinking about the defense authorization act for FY 2017, they should focus on two issues in particular:

  1. Improving the military health care system. The current military health care system limits the ability of service members and their families to choose health care providers and often makes access to allowed providers difficult. A health care system that increases service member and family access to private-sector medical care can be developed in a way that also provides more affordable care.
  2. Continuing acquisition reform. While the FY 2016 NDAA made some significant reforms to the defense acquisition process, much remains to be done. For example, service contracts account for roughly 45 percent of the defense budget and were largely untouched in this bill.[12] Additionally, the rapid and affordable acquisition of new technology remains a fundamental challenge. More can be done to ensure that DOD acquisition continues to improve.
—Justin T. Johnson is Senior Policy Analyst for Defense Budgeting Policy in the Douglas and Sarah Allison Center for Foreign and National Security Policy, of the Kathryn and Shelby Cullom Davis Institute for National Security and Foreign Policy, at The Heritage Foundation. Aaron Strickland, an intern at The Heritage Foundation, contributed to this paper.

About the Author

Justin T. Johnson Senior Policy Analyst for Defense Budgeting Policy
Center for National Defense

Show references in this report

[1] The National Defense Authorization Act for Fiscal Year 2016, Public Law 114-92, (accessed December 9, 2015).

[2] Press release, “SASC Chairman John McCain Statement on National Defense Authorization Act Conference Agreement,” U.S. Senate Committee on Armed Services, September 29, 2015, (accessed December 4, 2015).

[3] The National Defense Authorization Act for Fiscal Year 2016, Section 346.

[4] Justin T. Johnson, “Congress Should Give Responsible Guidance on Reductions in DOD Civilian Workforce,” Heritage Foundation Issue Brief No. 4418, June 10, 2015,

[5] Military Compensation and Retirement Modernization Commission, Report of the Military Compensation and Retirement Modernization Commission: Final Report, January 2015, pp. 9–17, (accessed December 7, 2015).

[6] Press release, “SASC Chairman John McCain Statement on National Defense Authorization Act Conference Agreement.”

[7] The National Defense Authorization Act for Fiscal Year 2016, Section 1250.

[8] Luke Coffey and Nile Gardiner, “The United States Must Be Ready to Send Weapons to Ukraine,” Heritage Foundation Issue Brief No. 4346, February 12, 2015,

[9] The National Defense Authorization Act for Fiscal Year 2016, Sec 1263.

[10] Press release, “National Defense Authorization Act Fact Sheet: Highlights of National Defense Authorization Act For Fiscal Year 2016,” U.S. House of Representatives Committee on Armed Services, September 29, 2015, (accessed December 4, 2015).

[11] Ibid.

[12] Wendy Ginsberg, John F. Sargent Jr., and Moshe Schwartz, “Defense Acquisitions: How and Where DOD Spends Its Contracting Dollars,” Congressional Research Service Report for Congress, April 30, 2015, (accessed December 09, 2015).