February 08, 2016

The Labyrinth Within

Reforming the Pentagon’s Budgeting Process

By Michelle Shevin-Coetzee

The current austere fiscal environment has brought the debate over the defense budget to the forefront of policymakers’ agendas. Technical terminology once deemed irrelevant for policy discussions – continuing resolutions, excepted personnel, furloughs, government shutdowns, and sequestration – is both seeping into the Pentagon’s daily lexicon and familiarizing the public discourse. Evolving figures and budget scenarios have begun to overshadow a much-needed discussion on the appropriate size and shape of the force. Confronted by shrinking and unpredictable budgets, as well as persistent international challenges, the Pentagon requires a more agile and efficient system to align strategy with resources. Created during the early stages of the Cold War, the modern Planning, Programming, Budgeting, and Execution (PPBE) process is designed to do just that. Yet as that process unfolds today, it is deeply flawed, preventing the Pentagon’s budgetary preparations from progressing in the comprehensive and coordinated manner that was intended. In particular, there are three discrepancies between PPBE’s “theory” codified in Pentagon directives and the more disjointed “practice” by which senior officials undertake this process: an unrealistic timeline, a stove-piped analytic system to model scenarios, and a reliance on Overseas Contingency Operations funding. Until these constraints are addressed, DoD cannot budget properly for the future security environment and is forced, therefore, to endure additional and unnecessary risk.

Recommendations: From Practice to Theory

How can PPBE’s theory and practice be realigned? Although DoD desperately requires budget stability from Congress in the long term, the following ten recommendations – with one exception – provide options for internal change within DoD and do not identify necessary actions or reforms within the legislative branch. 

Target the Current Fiscal Environment

1. Take steps to fund DoD on a biennial basis. As a means of reducing the workload of Pentagon budgeteers and programmers and eliminating the incentive to “cut and paste” previous POMs from one fiscal year to the next, DoD’s senior leaders should initiate conversations with Congress to address this issue. Gaining momentum from Secretary Carter’s call for a “multiyear budget process,” OSD should work with House and Senate leaders to determine the appropriate balance between Congressional oversight and departmental independence. An initial step could include discussing the difference in culture between Congress’ short-term, “chaotic” reacting and DoD’s long-term, “laborious” planning. Engaging in an initial conversation with Congress and focusing on incremental progress could yield greater flexibility in the future. In proposing a biennial authorization and appropriation process, DoD should emphasize that two-year budgets could undergo a second round of amendments after the first year. Doing so would assuage Congressional concerns in allocating an additional year of funding and enable DoD to respond more readily to the ever-changing international landscape. As part of this “review mechanism,” Congress could maintain a level of control it deems appropriate, while allowing DoD the flexibility it desperately requires to develop a budget along a more fluid timeline.

2. Plan for the worst. The Deputy Secretary of Defense should appoint a small team of experts to monitor the annual impact of DoD absorbing its OCO account into the base budget. Although initiating such an exercise might send a political message of mistrust to Capitol Hill, DoD cannot ignore the possibility of further fiscal constraints. Should the fiscal environment worsen, Congress could drastically rein in OCO spending, requiring the Pentagon to fit billions of dollars into its fixed budget. The team would assess the risks of doing so and develop recommendations for prioritizing programs and missions in order to execute the defense strategy. Likewise, this would prevent senior leaders from scrambling to react to a steep decline in OCO funding and allow them to maintain a steady focus on the other many crises that will dictate their schedules.

3. Strengthen PPBE’s execution phase. Particularly in an era of fiscal austerity, it is crucial that DoD make the best use of every dollar at its disposal. The final phase of PPBE, therefore, provides an excellent opportunity for senior leaders to discuss what worked, what did not, and how the process can be improved for its next iteration. Led by the Deputy Secretary of Defense, DoD should establish a forum on execution to reaffirm its commitment to this self-checking, internal mechanism for evaluation. Participants in this series of meetings should include both senior leaders at the undersecretary level and action officers at the staff level. In order to take a more holistic view of DoD’s budgeting cycle, they should not only examine one cycle of PPBE, but also evaluate the process and its results in tandem with previous sequences as well. In particular, giving greater weight to PPBE’s execution, a phase that goes largely ignored, allows DoD to analyze whether the process produced concepts and programs that align with the priorities outlined at its earlier stage. 

Target Bureaucratic Interests

4. Prioritize elements of planning guidance. In order to provide clear and upfront direction to all DoD components, the Secretary and Deputy Secretary of Defense should issue a directive that categorizes roles and missions as critical, high risk, low risk, or optional. Identifying particular labels matters less than the exercise of prioritization. This action can help to eliminate ambiguity over the ways and means of executing the defense strategy and establish a strong link between priorities and investments. Particularly during a time of austerity, it is critical to prioritize what is essential and what is not. Investing in unmanned aerial vehicles, for example, could be labeled “critical,” while building the next generation of aircraft could be designated as “high risk.”  

5. Expand funding within CAPE and the Joint Staff. Current dynamics within the Pentagon demonstrate an imbalance in practice between the services and civilian oversight, as well as deference to the individual services over the Joint Staff. In order to mitigate some of the parochial tendencies of the Air Force, Army, Navy, and Marine Corps, DoD should increase funding (and the number of billets to correspond with additional personnel), particularly within the analytic community, to CAPE and the Joint Staff’s J8, the office responsible for force structure, resources, and assessments. The key, however, is not simply providing more money, but monitoring closely how the additional funding is used to make the analytic community more robust. Such an initiative will help to integrate the activities of the services, as opposed to each developing scenarios and modeling on its own. 

6. Establish an informal forum to discuss strategic analysis. In order to foster an inclusive culture among the analytic community and break down institutional barriers, DoD should encourage civilian and military personnel at the staff level (GS-15 or O-6) to participate in a monthly luncheon or roundtable. A supplement to existing professional organizations, such as the Military Operations Research Society, the goal of this informal forum would not be to finalize details that were not discussed in previous meetings, but rather to build relationships across the services and civilian components. The conversation should focus on identifying areas of commonality, sharing best practices, and gaining a new perspective from colleagues. As a means of incentivizing participation in this forum, supervisors at the director level should evaluate their personnel based on efforts to work across the department horizontally, not simply vertically. Creating such a discussion will help promote a wider culture of impartial and objective analysis in the long-term.

7. Increase education related to PPBE. PPBE is a critical process that undergirds every subsequent DoD mission. If defense leaders do not lay this foundation properly, subsequent initiatives may be jeopardized. Yet, despite its importance, many individuals who work for the department have little understanding of this process or maintain narrow perspectives on how it operates. Those who work in both functional and regional offices must maintain a basic knowledge of how the Pentagon aligns resources with ends, ways, and means. Doing so will help its personnel to think more strategically and serve as better stewards of taxpayer dollars. Just as organizations require their new employees to complete a certain level of training before joining the office, defense leaders should make a standardized PPBE familiarization course required for all incoming personnel, both at the junior and senior levels. 

Target Peripheral Authority

8. Empower a PPBE czar and adjudicator to oversee the process from start to finish. In order to centralize authority, hold DoD components accountable for their work, and ensure discipline throughout PPBE, the Deputy Secretary of Defense should take the reins of the process. The deputy should assume a greater role in issuing clear guidance to the department at the beginning of the PPBE cycle, monitor progress made during the year, and conclude the process by soliciting best practices for the next iteration. Furthermore, he or she should serve as a referee in settling disputes between senior leaders across the services, combatant commands, and civilian components. For tactical level disputes, however, the Deputy Secretary of Defense should appoint a member from his or her staff to work on these issues and quell tensions among the actors in question. This person should attend high-level meetings, including the DMAG, in order to best articulate the decision reached and serve as a subject matter expert when most of the senior leaders might lack the required intimate familiarity with the details. A structure that allows Pentagon officials to engage in a frank and transparent debate within the building, but requires them to recognize that ultimate decisions are made by an enforcing figure, will enable PPBE to run more smoothly. 

9. Articulate a clear vision of leadership. No matter who serves as Secretary or Deputy Secretary of Defense, he or she must outline their priorities for the PPBE process. In particular, the Deputy Secretary of Defense should lead from the top by gathering key stakeholders in order to solicit alternative perspectives, discuss competing visions, and, most importantly, adjudicate among them. To initiate real change in this process will expose resistance from organizations whose individual interests are served by the current system. Overcoming these tensions will require a significant expenditure of time and political capital by the department’s most senior leaders. Playing a personal leadership role in bringing about change and achieving “buy-in” early in the process or, ideally, before the latest cycle begins, however, will reduce the likelihood of future bureaucratic conflicts among various Pentagon components. Setting such a tone quickly will help foster a culture in which discussions among senior leaders remain at a higher and more strategic level than they would otherwise. Furthermore, institutionalizing these responsibilities, as the current Deputy Secretary of Defense is doing, will ensure that whoever occupies this position will continue to play a central role in the process.

10. Standardize the PPBE process. As it stands, each service executes PPBE in a different manner, preventing DoD from undergoing the process uniformly. In the short term, the Deputy Secretary of Defense and the Under Secretary of Defense for the Comptroller should work with service leaders to identify the pros and cons of PPBE across the Air Force, Army, Navy, and Marine Corps. In the long term, the attributes of the process identified in these discussions will allow DoD to institute a standardized and increasingly effective version of PPBE. Furthermore, the Deputy Secretary of Defense should develop common questions that all of the services should address throughout their POM development. Creating a common framework for assessing risk and making tradeoffs will integrate service activities more easily and allow senior DoD leaders to make the best use of data at their disposal. 

The full report is available online.

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  • Michelle Shevin-Coetzee

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