Tailor DoD’s budget process to the national security imperatives the times demand
Andreas Lucido, managing director at Alvarez & Marsal Federal, explains why the Pentagon needs budget reforms to focus on people, process and technology.
The Congressional Commission on Planning, Programming, Budgeting and Execution (PPBE) Reform recently released its final report with 28 substantive recommendations. The report details key themes and challenges related to the existing PPBE system. Overall, the report makes a significant contribution to the conversation about what needs to happen in order to improve the PPBE process. Few can argue with the commission’s findings and recommendations. But is it enough and will it make the Defense Department more agile, flexible and lethal? What does implementation really look like? And will we find ourselves in a similar state, executing the same PPBE system and processes but now rebranded as the Defense Resourcing System (DRS)?
First, there are a number of external legislative factors that can impact reform. Congress can accelerate it or hinder it. This remains largely out of the control of DoD. However, even with the actions DoD is currently executing based on the earlier draft report, there is still a more simplistic approach that could accomplish reforms needed for a more efficient and effective PPBE. It goes back to people, process and technology.
People
There are too many people involved in the PPBE process. There are multiple organizational duplications — from financial management and comptroller offices, to resource management staff directorates, to program analysis and evaluation entities. This flows up and down the military departments to the Office of Secretary of Defense (OSD), the Fourth Estate and to the commands at the operational level. A former N8 resource manager once said, “[A]t any given moment, 90% of the Pentagon is working on some part of the budget. Hundreds of thousands of hours to manage incremental budget change.” In order to effectively achieve reform, a more streamlined structure, staffing mix, decision authority and accountability should be established. For example, the role of the chief financial officer or comptroller can be more empowered and made to align more closely with the financial planning and analysis function and decision authorities much like the private sector. That way the roles are better coordinated and not duplicative.
Process
As the commission’s report highlights, existing appropriation structure, cumbersome checks and balances and restrictive authorities make it difficult and burdensome to procure, acquire and “use money as a weapon.” Ten years ago, the Department of Homeland Security (DHS) moved away from its legacy budget structure to a common appropriation structure. As the report alludes, appropriations can be organizationally aligned rather than functionally aligned to better enable execution and provide badly needed flexibility. However, DoD should be prepared to act on the authorities and the flexibilities they get. Many suggest DoD is too risk averse to leverage streamlined authorities, even if approved by Congress.
Whatever process is put in place, perhaps the most important element is metrics. What gets measured, gets managed. The report details the elements of budgetary metrics. This is an area on which PPBE reform must double-down. Budgets should be outcome focused and investments should flow to defense organizations that achieve important results. Funded organizations that do not meet metrics must be held be accountable. Don’t reward Defense organizations that can’t meet their financial management improvement targets and can’t adequately report where their money goes. Invest, instead, in those organizations, like the Marine Corps, that can show how they will invest additional dollars in greater lethality.
Rewards could include budgetary increases funded by offsets from those organizations that missed performance targets. And who decides where and how to reallocate such offsets? It’s complicated, of course. But the service secretaries, who are ultimately responsible for providing civilian oversight of the military, must play a stronger role in driving needed change across their organizations. Air Force Secretary Frank Kendall is a good example. His organization is moving investments across the Air Force to optimize and modernize combat capabilities and structure, which depicts just how PPBE can enable and hinder such efforts.
Technology
The report focuses on business systems and analytics and discusses a path toward a single system at OSD. As we look at the landscape, many combatant commands and Fourth Estate entities have started moving in that direction already. Many agree that DoD’s home grown system environment, a “Frankenstein” of commercial off the shelf (COTS) technology, is not the right solution. On the other hand, a single COTS enterprise resource planning system may not be the answer, either. An independent, outside entity agnostic to the DoD and the technology firms in the DoD market can help the enterprise choose the system best equipped to align with and adapt to the department’s new resource planning processes.
As the digital and technology landscape continues to evolve like it has over the past few years, agile principles are more important than ever. By leveraging cutting-edge technological solutions that bring in AI at the integration layer, the DoD can significantly enhance data analytics, decision-making processes and overall operational efficiency within the PPBE framework. But the organization must fail faster, so more precious resources aren’t wasted and can, instead, be invested in new approaches. The introduction of advanced technologies more quickly not only streamlines processes and improves accuracy in budgeting and resource allocation but also empowers personnel with tools that foster innovation and more strategic thinking.
PPBE redesign and the system that enables it will dictate the structure and scale of resources needed to operate it. It should be smaller and more agile across the department. Otherwise, the unwieldy process we have today will persist.
The next steps Congress takes, of course, will be important. It is not clear what reforms will win legislators’ approval. Appropriators have already warned the department that “no changes shall be made to the appropriations structure … without prior consultation of the Defense appropriations committees.” Engaging Congress openly, transparently and frequently on mutually beneficial reforms to the PPBE process — ones that strengthen Congress’ essential role in allocation of resources and oversight of their impact — will be critical to their success.
PPBE has a long and distinguished history. The Commission on PPBE Reform provided significant momentum to drive long needed fixes to the process. Getting the people, process and technology right will take heroic efforts. But our security posture will be better for it.
Andreas Lucido is managing director at Alvarez & Marsal Federal. He is a former Army Ranger and military veteran of Iraq and Afghanistan.
Tailor DoD’s budget process to the national security imperatives the times demand
Andreas Lucido, managing director at Alvarez & Marsal Federal, explains why the Pentagon needs budget reforms to focus on people, process and technology.
The Congressional Commission on Planning, Programming, Budgeting and Execution (PPBE) Reform recently released its final report with 28 substantive recommendations. The report details key themes and challenges related to the existing PPBE system. Overall, the report makes a significant contribution to the conversation about what needs to happen in order to improve the PPBE process. Few can argue with the commission’s findings and recommendations. But is it enough and will it make the Defense Department more agile, flexible and lethal? What does implementation really look like? And will we find ourselves in a similar state, executing the same PPBE system and processes but now rebranded as the Defense Resourcing System (DRS)?
First, there are a number of external legislative factors that can impact reform. Congress can accelerate it or hinder it. This remains largely out of the control of DoD. However, even with the actions DoD is currently executing based on the earlier draft report, there is still a more simplistic approach that could accomplish reforms needed for a more efficient and effective PPBE. It goes back to people, process and technology.
People
There are too many people involved in the PPBE process. There are multiple organizational duplications — from financial management and comptroller offices, to resource management staff directorates, to program analysis and evaluation entities. This flows up and down the military departments to the Office of Secretary of Defense (OSD), the Fourth Estate and to the commands at the operational level. A former N8 resource manager once said, “[A]t any given moment, 90% of the Pentagon is working on some part of the budget. Hundreds of thousands of hours to manage incremental budget change.” In order to effectively achieve reform, a more streamlined structure, staffing mix, decision authority and accountability should be established. For example, the role of the chief financial officer or comptroller can be more empowered and made to align more closely with the financial planning and analysis function and decision authorities much like the private sector. That way the roles are better coordinated and not duplicative.
Process
As the commission’s report highlights, existing appropriation structure, cumbersome checks and balances and restrictive authorities make it difficult and burdensome to procure, acquire and “use money as a weapon.” Ten years ago, the Department of Homeland Security (DHS) moved away from its legacy budget structure to a common appropriation structure. As the report alludes, appropriations can be organizationally aligned rather than functionally aligned to better enable execution and provide badly needed flexibility. However, DoD should be prepared to act on the authorities and the flexibilities they get. Many suggest DoD is too risk averse to leverage streamlined authorities, even if approved by Congress.
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Whatever process is put in place, perhaps the most important element is metrics. What gets measured, gets managed. The report details the elements of budgetary metrics. This is an area on which PPBE reform must double-down. Budgets should be outcome focused and investments should flow to defense organizations that achieve important results. Funded organizations that do not meet metrics must be held be accountable. Don’t reward Defense organizations that can’t meet their financial management improvement targets and can’t adequately report where their money goes. Invest, instead, in those organizations, like the Marine Corps, that can show how they will invest additional dollars in greater lethality.
Rewards could include budgetary increases funded by offsets from those organizations that missed performance targets. And who decides where and how to reallocate such offsets? It’s complicated, of course. But the service secretaries, who are ultimately responsible for providing civilian oversight of the military, must play a stronger role in driving needed change across their organizations. Air Force Secretary Frank Kendall is a good example. His organization is moving investments across the Air Force to optimize and modernize combat capabilities and structure, which depicts just how PPBE can enable and hinder such efforts.
Technology
The report focuses on business systems and analytics and discusses a path toward a single system at OSD. As we look at the landscape, many combatant commands and Fourth Estate entities have started moving in that direction already. Many agree that DoD’s home grown system environment, a “Frankenstein” of commercial off the shelf (COTS) technology, is not the right solution. On the other hand, a single COTS enterprise resource planning system may not be the answer, either. An independent, outside entity agnostic to the DoD and the technology firms in the DoD market can help the enterprise choose the system best equipped to align with and adapt to the department’s new resource planning processes.
As the digital and technology landscape continues to evolve like it has over the past few years, agile principles are more important than ever. By leveraging cutting-edge technological solutions that bring in AI at the integration layer, the DoD can significantly enhance data analytics, decision-making processes and overall operational efficiency within the PPBE framework. But the organization must fail faster, so more precious resources aren’t wasted and can, instead, be invested in new approaches. The introduction of advanced technologies more quickly not only streamlines processes and improves accuracy in budgeting and resource allocation but also empowers personnel with tools that foster innovation and more strategic thinking.
PPBE redesign and the system that enables it will dictate the structure and scale of resources needed to operate it. It should be smaller and more agile across the department. Otherwise, the unwieldy process we have today will persist.
The next steps Congress takes, of course, will be important. It is not clear what reforms will win legislators’ approval. Appropriators have already warned the department that “no changes shall be made to the appropriations structure … without prior consultation of the Defense appropriations committees.” Engaging Congress openly, transparently and frequently on mutually beneficial reforms to the PPBE process — ones that strengthen Congress’ essential role in allocation of resources and oversight of their impact — will be critical to their success.
PPBE has a long and distinguished history. The Commission on PPBE Reform provided significant momentum to drive long needed fixes to the process. Getting the people, process and technology right will take heroic efforts. But our security posture will be better for it.
Andreas Lucido is managing director at Alvarez & Marsal Federal. He is a former Army Ranger and military veteran of Iraq and Afghanistan.
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