Defense innovation bumps up against a Cold War budget system

Pentagon planners know the U.S. military needs new technologies if it hopes to stay on top. But many of the innovation initiatives don't gain scale because of t...

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Pentagon planners know the U.S. military needs new technologies, new innovations, if it hopes to stay on top. But many of the innovation initiatives don’t gain scale. Jerry McGinn says that’s because of the 1960s-era planning, programming, budgeting and execution (PPBE) process the Defense Department uses. He is executive director of the Center for Government Contracting at George Mason University, and he joined the Federal Drive with Tom Temin in studio.

Interview transcript:

Tom Temin: Jerry, good to have you back.

Jerry McGinn: Great to be here, Tom.

Tom Temin: Alright. So the PPBE dates back to 1960s. It’s work this long, what’s the matter with it?

Jerry McGinn: Well, as you said, it was state of the art in the 1960s when [Robert] McNamara and the Whiz Kids came into the Pentagon. It’s centralized planning, trying to build out and define requirements for defense programs and requirements going forward. And then planning in a centralized way. However, commercial industry has moved on long ago, and now does innovation through iteration. They set broad parameters, give portfolio budgeting or different approaches that allow much more dynamic development of products and concepts. And meanwhile, the Department of Defense is stuck with the ’60s approaches which requires three years to really plan and then program and then execute on a system which doesn’t really match well, without the needs of the department today.

Tom Temin: Well, just to play devil’s advocate some of the enduring systems that are still being used, still reliable F-15, F-16, F-18, a lot of these platforms were developed in that old PPBE process. Although if you’ve read the detailed history of them, they were all late, they were all over budget, they were all destined to failure and but nevertheless, they somehow got to fruition. But that’s not good enough now.

Jerry McGinn: No, I don’t think it is. Because with those programs, they sort of proved the point is that if you’re trying to set requirements for things that you need in five or six years, defining those unlocking those in five years in advance of the earliest prototypes is kind of silly. So you need a way to be able to do that and then scale it. So we need to sort of go back to the future and think about how the department did budgeting before PPBE and how commercial industry does it now, which is why it’s really timely that Congress passed this commission on the PPBE reform in the 2022 National Defense Authorization Act. And that commission, a lot of commissions just sort of yawn, those things sort of never kind of lead anywhere but the last couple of years, the effort on, the Solarium Commission on cybersecurity, and this Commission on artificial intelligence were both very impactful. So we’ve got some good recent history. And I like to think that PPBE could do the same.

Tom Temin: So this commission is at work now but it hasn’t issued what its findings are yet.

Jerry McGinn: Not quite. I think there are 14 commissioners to be named, and they’ve identified 11 of them. I think there are a few left to be named. However, it’s sort of caught up in the budget process, believe it or not. They can’t start the work until the ’22 budget is passed, which is not, so they have to appoint a new executive director for the staff. And then it’s a three-year kind of process for them. Earliest results will be in ’23. So it’s going to take a bit of time. But the nice thing to see is there’s strong bipartisan commitment and executive and congressional commitment to do something about this.

Tom Temin: Do you see, say, the possibility of dual systems because some things you can plan in advance, manpower for example. Planners know the cost of manpower, they know what the direct and indirect costs of that are going to be actuarily, pretty accurately way into the future. Whereas development of a new platform, for example, can go any of a million ways. So could it be that they need a dual system? And some part of the budget is set aside under a different planning system than the PPBE?

Jerry McGinn: Yeah, that’s a great point, Tom, and I think this is gonna have to be done through iteration and piloting. They’re gonna have to figure out where do we need this kind of push because there are some things where you don’t need this kind of flexibility that is very dynamic. But very much in the development of systems that our warfighters need for today and tomorrow, we need that because you see, there’s been a lot of innovation efforts over the past three administrations that bringing in new technology, and so on. But the challenge is a lot of those, as you mention the outset had been scale. And that’s because the budget was built three years ago, and trying to backfill or adjust to reprograms, it’s really hard to do. So we need to have the ability to do that in a more dynamic way.

Tom Temin: I think the explosive-resistant troop carriers of the Iraq War era are an example where Secretary Bob Gates said, “we need these now, because the conflict is killing soldiers in crazy numbers.” And that was developed and fielded for the Pentagon in a breathtakingly short time. That’s the kind of thing you mean.

Jerry McGinn: Exactly. Our colleague, Jim Hasik just put out a book on that case study on the MRAP development, the marketing to the military. It’s sort of an exception that proves the rule, that it was so hard to do. And it required Gates to really just grab people by the neck and drive it. And we need a way to do that which is not as Herculean of an effort required. And one of the important things about this is this has to be done in a transparent way. This is not something so the Pentagon gets their pot of money and they can go do what they want. It’s got to change how we do reporting, because Congress needs oversight, right? And that’s very appropriate. And we have very clear reporting ways to do it now into the PPBE, how does that impact it? So that’s an important part of this commission, a critical part because otherwise you’re not going to get buy-in on Capitol Hill and the executive branch.

Tom Temin: We’re speaking with Jerry McGinn, executive director of the Center for Government Contracting at George Mason University. And this issue then is not really a procurement issue, although procurement itself is a function that is under a lot of scrutiny in the Pentagon, always is every year in the NDAA. There’s something having to do with buying and procurement. But you’re really talking about a much wider system, of which procurement is only almost the tail end.

Jerry McGinn: I think so but I think my perspective is that you see the inadequacy of the PPBE system most dramatically in the procurement and R&D space, which, as you said, the personnel and operations maintenance are less impacted. So I encourage the commission not to take so much of a financial management approach to the commission, but really focus on where is this not allowing us to have the most capable military we need for today. And I posit that it’s in these areas in the procurement and research and development areas. And that’s where I think change would be the most beneficial for the department.

Tom Temin: Because you’ve got these units, AFWERX, and there’s several other “werx” throughout the Defense establishment. And you’ve got the Defense Innovation Unit. You’ve got all these different gambits to try to speed things up, but they all operate kind of at a low scale year after year. That’s what you’re arguing also?

Jerry McGinn: Yeah, and you saw this out in the Reagan [National] Defense Forum in December, Secretary [Lloyd] Austin gave remarks about the need, the department has to do better. And I would agree, because SBIR, the Small Business Innovation Research, or small efforts that are done by AFWERX and so on, which are great, but they don’t scale. And there was a real tension at the Reagan Defense forum where the Silicon Valley VC companies and others made it very clear, look, time’s running out. We need to be able to find some ways that we get production contracts out of these innovation efforts, and not just little prototypes that don’t go anywhere.

Tom Temin: And just to give credit to McNamara, he was a systems planner and production man. If you love the Ford Falcon than you love, Robert S. McNamara.

Jerry McGinn: I think it’s right. But that was a very different time. And I think the automobile industry has moved on.

Tom Temin: But what I mean is he came in as a radical change agent right at the very top. I mean, he was president of Ford I think three months before Kennedy tapped him to become Defense secretary, he was young and he took the entire thing and shook that building. And I think there are people that are still mad about it. But that kind of agent, I think, is needed probably to affect this type of change, if this commission says “here’s what we got to do.”

Jerry McGinn: That’s a fair point, it does come down to leadership. And I’m hopeful the commission delivers in a way that enables the department and Congress to run with it.

Tom Temin: Jerry McGinn is executive director of the Center for Government Contracting at George Mason University. As always, thanks so much.

Jerry McGinn: Thanks, Tom. It was so great to be with you.

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