The report states that the IDF (Zahal) could save from 1.3 to 1.6 billion shekels annually if it implements its recommendations.

Date: 25/11/2009, 1:03 PM    

The IDF (Zahal) Chief of the General Staff, Lt. Gen. Gabi Ashkenazi, and the director General of the Israeli Ministry of Defense (MoD), Mr. Pinchas Buchris, have decided to adopt the conclusions of the consulting firm McKinsey and Company. The report was commissioned as part of the multi year reorganization and efficiency plan dealing with acquisition, construction and air and land maintenance.

The Plan will be implemented over a number of years with the goal of reducing expenses by NIS 1.3-1.6 billion.

In parallel, the IDF (Zahal) is assessing its personnel management and during 2010, as part of the second phase of the McKinsey project, the company will also asses the personnel management of the IDF (Zahal).

It should be noted that the decision to commission consulting services from a civilian company is unprecedented in Israel. The project’s aim is to identify opportunities to improve the efficiency and MoD. This will allow for the re-allocation of budgets from day-to-day activities to improvements in readiness and combat power of the IDF (Zahal), as was decided by the “Brodet” committee.

For the first time in the Israeli public sector, the IDF (Zahal) and the MoD have initiated a thorough and transparent assessment by an external professional company that is one of the world’s leading and most experienced consultants for various aspects of military reorganization. McKinsey and co thoroughly evaluated and analyzed various aspects of the IDF (Zahal), identified efficiency potential and prepared a detailed work plan for some of the most significant processes in the Israeli defense establishment. This activity is based on the defense establishment’s commitment to constantly improve and become more efficient, specifically given today’s financial reality.

The IDF (Zahal) Chief of the General Staff and the Director General of the MoD have directed the defense establishment and its various arms and branches to fully cooperate and allow complete transparency, creating, unprecedented access and thus an assessment of an unprecedented scale of IDF (Zahal) and MoD operations. Sensitive operational and intelligence issues were not exposed.

McKinsey’s employees who participated in the assessment were required to go through a security clearance before they could take part.

In light of the findings and after tens of thousands of hours of work by experts, McKinsey and Co. Recommended a thorough change in the IDF (Zahal) construction, purchasing and maintenance processes. Some suggestions include:

In the field of construction, the report showed that there is room for improvement in comparison to the civilian market. In a sample assessment of IDF (Zahal) construction projects, it is found that these were 30% more costly than similar civilian projects. Amongst other conclusions, it was found that there is not one body in the defense establishment that is responsible for construction projects from start to finish.

The process of construction was insufficiently driven by cost consideration, with the majority of construction risk borne by the IDF (Zahal) and MoD. The report stated that projects should be carried out by private contractors and concessionaires, who will be responsible for them from beginning to end. This change will enable substantial economies including:

Shutting down the Construction Branch in the Israel Defense Ministry and the IDF (Zahal) Construction Center.
Forming a united Infrastructure Branch in the MoD that will be responsible for new methods of communication with contractors, while putting an emphasis on cost, quality and time.
Complete outsourcing of construction projects.
Updating of purchasing procedures.
The creation of economic benchmarks for performance, transparency of performance, and improved control of costs and the level of performance.
In the field of purchasing, the findings show that the process of purchasing in the defense establishment did not always include clear accountability, insufficient financial challenge and limited leverage of scale. For example, in transportation services the saving target is NIS 20 million, achieved by increasing supervision, minimizing lateness, decreasing cancellations, increasing the integration of travel and changing the approach of contracting suppliers. In accordance, it was decided:
• Every purchasing category will be managed by an integrated team of MoD and IDF (Zahal) personnel responsible for cost, quality, supply time, which will have authority over the entire process.
• Establishing economic benchmarks for purchasing costs.
• Organizational and procedural changes in the purchasing delegation staff in New York that will include cuttings its size by 30%.

In the field of maintenance, the assessment shows that many of the IDF (Zahal)’s maintenance activities present global best practices.

However, there are also opportunities for improvement, by implementing advanced management methods for taking advantage of the existing resources, manpower and infrastructure. Applying these methods will allow for improvement in level of maintenance within the /units, minimizing turn-around times and faster delivery to combat units, while simultaneously saving money (these principles are applied today in the leading defense, aviation and automobile industries in the world). For example, it was found that there can be an increase in the percent of effective work time in the maintenance workshops, thus saving about NIS 170 million per year.

This plan, which was presented to the Head of the Budget Directorate in the Ministry of the Treasury, Dr. Udi Nissan, will lead to a meaningful organization change in the IDF (Zahal) and MoD.

In light of the approval by the Chief of the General Staff and the Director of the MoD of these recommendations, the efficiency plan is already being implemented applying its recommendations while maintaining preparedness for any emergency or operation.

In the coming years McKinsey will support the IDF (Zahal) and MoD in implementing the plan.