By Andrea Shalal-Esa
WASHINGTON (Reuters) - Former Air Force Secretary Michael Donley will lead a major review of the Pentagon's organizational structure aimed at cutting headquarters costs by almost $40 billion through fiscal year 2023, the Pentagon announced Tuesday.
Deputy Defense Secretary Ashton Carter told key Pentagon officials in a memo dated Monday that he had asked Donley and his team to submit findings and recommendations for Defense Secretary Chuck Hagel's consideration by the end of September.
"The review will assess and recommend specific adjustments to (Office of the Secretary of Defense) OSD's organizational structure and alignment in light of new fiscal realities and evolving security threats," Carter wrote in the memo, urging senior officials to support Donley's review.
Carter first mentioned his plan to bring in an outside expert last month when he unveiled the results of a four-month strategic review and said the Pentagon aimed to cut its headquarters costs by 20 percent.
At the time, he said implementing such cuts could be very challenging and the Pentagon needed an outside expert who was "deeply knowledgeable about the defense enterprise and eminently qualified to direct implementation of the ... reductions."
The U.S. military is grappling with massive mandatory spending cuts that could reduce the Pentagon's overall budget by $500 billion in the next decade, on top of $487 billion in cuts already planned.
Donley retired at the end of June after nearly five years as the top civilian in charge of the Air Force. During that time, he worked closely with Carter, who served as the Pentagon's chief arms buyer before moving into his current job. Together they managed a controversial competition between Boeing Co and Europe's Airbus to buy new refueling planes for the Air Force.
Before heading the Air Force, Donley held a series of jobs overseeing the Pentagon's management and administration. He also has experience in the private sector, at various think tanks, in Congress and with the White House National Security Council.
Donley's review is aimed at achieving "a more effective and efficient organization for OSD (Office of the Secretary of Defense) while reducing the number of civilian, military and contractor personnel supporting it," according to a document released by the Pentagon.
The review will help identify ways to reduce the headquarters budget by 20 percent in the next five years, and cut the number of direct reports to the defense secretary by consolidating functions and eliminating jobs, the document said.
Donley will head a small team with some Pentagon officials and a small number of outside experts.
(Reporting by Andrea Shalal-Esa; Editing by Bill Trott)