A progress report from the chairman of a Defense-management reform commission

Few people know the innards of Defense department finance, as well as Bob Hale. He was comptroller and chief financial officer. He was an assistant Air Force secretary for financial management. And he spent a dozen years at the Congressional Budget Office, heading its defense group. Among his current gigs: Chairman of the Congressionally-chartered commission examining DoD’s Planning, Programming, Budgeting and Execution (PPBE) process. In this exclusive extended interview, Federal Drive with Tom Temin talks with PPBE Chairman Bob Hale.

Interview Transcript: 

Tom Temin And this is on the occasion following the issuance of the commission’s interim report. And I guess the fundamental question may be people were hoping against hope that somehow this was going to be an exercise to get rid of PPBE, ding dong, the witch’s dead. Robert McNamara can rest in peace now. But that doesn’t seem to be what really it was all about in reality.

Bob Hale Well, Tom, we’ve conducted a lot of research over the last year and a half. Some of it included looking at partner nations and their budgeting systems. China and Russia, their budgeting systems, non-DoD federal agencies and their budgeting systems. I think we’ve kept an open mind about replacing the current PPBE, and we’ll continue to do so through our final report next March. But we have in the last year and a half, I think, found some significant strengths in the current PPBE and some ways to improve it. And we haven’t, I think we’re in a cross system that is clearly better. So at the moment I think we’re probably heading toward improvement. But I will keep an open mind as we complete our research.

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Tom Temin And if you think of the words planning, programing and budgeting with a small p, p, b, then it’s kind of fundamental to doing any kind of large scale project. And so maybe it’s just the way the world ought to work at some basic sense.

Bob Hale It was interesting because of the RAND Corporation did the work force on China and Russia and partner nations, and the Chinese budgeting system has stepped similar to PPBE, they don’t call them the same thing. And they actually did a paper some years ago examining the DoD PPBE system and looked at its pros and cons. And it’s pretty similar to some that we are foreseeing now. So I think you’re right, there’s some similarity in what you need to do just to carry out a reasonable process.

Tom Temin And before we get into some of the details of the interim report, maybe describe what the benefits, in fact, are of PPBE, because it started out as PPB. The E was added in latter years, but it has been durable for a good reason then.

Bob Hale I think that’s right. It does offer some significant benefits. One of them, it brings analysis to bear on budget issues rather than relying solely on executive judgment to choose among them, though, judgment certainly still plays a role. And that analysis looks at costs for sure, but also benefits as it attempts to be a classic cost benefit analysis. It also takes a multi-year approach. You really can’t sensibly plan defense budgets a year at a time, because what you do this year can have significant effects. Two or three years out. The system allows all relevant voices to be heard during this process, and that helps build consensus, and I think that’s important in a government agency. And finally, it provides a mechanism for senior leaders to make decisions on budgets, and budgets control a lot of the policy at DoD, so that’s important. These are benefits you want to build on. There’s some shortcomings too, and we’ll talk more about them, I think, as we go on that were areas where we think the system needs improvement.

Tom Temin And sometimes I think people maybe conflate it with the acquisition and purchasing system, which strictly it’s not to that, but when people see how long it takes for the actual delivery of things that have been programed and budgeted, specifically the large platforms, then maybe the two do get conflated. What is the connection of PPBE and acquisition?

Bob Hale Well, they’re definitely related and need to be mutually supported. But as you say, they are separate systems to do different things. PPBE’s job is to allocate resources, acquisition jobs is figure out how to spend those to get things that the department needs to be overly simplistic. In terms of the critics of PPBE, I’d mention one more thing I think it’s worth thinking about. Sometimes I think there’s a confusion between whether the system is working right, and whether you won in the system. So you got a great idea, but the federal manager in charge of it says, I’m just not interested. This is not the highest priority for me. Maybe PPBE is working fine there, although you probably don’t think it is. On the other hand, if PPBE stands in the way, and it can sometimes of making timely decisions about, say, updating technology, then that’s a problem that we need to try to address through process changes.

Tom Temin And that gets to one of the items that stood out in the interim report and that is year of execution agility that seems fundamental to the reform idea. Let’s talk more about that.

Bob Hale Okay. Well, it is important. You need the ability to make changes as innovation changes, as new technologies become available and programs change in their requirements and their ability to meet them. So you definitely need a year of execution agility. And the commission is looking at some ways to improve it, particularly by speeding up the so-called reprograming process, reprograms an informal agreement between Congress and DoD that allows the department to move money around in the year of execution. But it can take quite a bit of time. The larger ones we heard repeatedly take six months or more, sometimes less, but often a matter or more. And that’s a long time when you’re dealing with rapidly changing technology. So we have some proposals in the interim report to try to speed up this reprograming process and to make some other changes that we hope will improve your execution agility.

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Tom Temin We’re speaking with Bob Hale. He is chair of the Commission on Planning, Programing, Budgeting and Execution reform. And so that’s something that the commission said could be implemented without a lot of sturm und drang to get it done. What are some of the other things that you suggested in the interim report that could be done without a lot of heavy lift to get them done?

Bob Hale Well, let me just be clear. We had two kinds of recommendations we made, as you were alluding to. One, we did something, I think kind of novel for a commission, at least the ones I’m familiar with, since we had to do an interim report by law, and we decided we would lay out some ideas where the commission hadn’t made a final decision and then seek feedback from our stakeholders. And we call these potential recommendations. The reprogramming actually fell in that category of potential recommendations, and there were ten of those in our interim report. But we also made 13 suggestions of things that we think you could do now or at least begin to implement now. And I’ll give you just a couple examples to give you a flavor for those, Tom. One of them, we heard from congressional staff that they get an avalanche of budget data when the budget proposal is submitted in a normal year that occurs in early February. But after that, the data they get from the department is episodic when they ask for a slate not consistent with other data. The Commission recommends that the department implement a mid-year budget update for the Congress that would deal with both execution year issues, but also changes in the budget proposal.

Bob Hale Some of the things that DoD sends to Congress, they put together two years before Congress is debating them even longer, and things change. And so we think this budget update briefing would be an opportunity to communicate some of those changes, and Congress can decide whether they want to take them into account in their final appropriations. So that’s one of the things. I’ll give you one other example, and that is we think the Department and Congress would benefit if DoD established enclaves or networks that allowed them to communicate better about budget information to Congress. So right now, a lot of data is set, most of it sent electronically, but it’s often through PDF files or briefings. Not easy to search, not easy to sort, not easy to update. You could establish enclosure networks that allow you to send data in a way that is sortable, searchable and easily updated. And we think that would be a good idea. Defense is looking at this. We recommend that they implement it for both classified and unclassified data and both going to Congress, but also coming back information back from Congress as well. Those are the kinds of some of the implement now suggestions that we made.

Tom Temin And one mysterious thing happened, at least mysterious to outsiders, and that was the issuance of that memo from the secretary of defense saying we’re good with some of the things that we can do within our discretion. That came out simultaneously with the report. People said, well, how did that happen? I think a similar thing happened way back in the Packard Commission days also.

Bob Hale Well, we’re certainly pleased to see the memorandum acts as a press release from Deputy Secretary Hicks, saying that she directed the department to implement the implement now recommendations within the purview of the Commission. And I might add, although I don’t know that is directly related to the commission, we’re seeing some movement in Congress. Both the Hackensack bills have some changes in reprograming thresholds that we believe would move in the right direction. So we were encouraged, and look forward to continuing to work closely with DoD and Congress as we move toward a final report. And we have six months after our final report is issued before the Commission goes away completely. And I hope we can use that time to answer questions and maybe push the process along toward implementation.

Tom Temin Our guest is Bob Hale. He is chair of the Commission on Planning, Programing, Budgeting and Execution Reform. And we were talking about some of the items that you recommended that can be done within the discretion of DoD in Congress right now. But then there are some more longer term suggestions that might take legislation. In particular, this comes up a lot, and that is the color of money question. It comes up in the context of modernizing and the need to do things quickly and agile. Sometimes the color of money is an impediment to that.

Bob Hale It can be. As you’re aware, I think your listeners are probably aware, the Department of Defense is required to pay for certain categories of purchases with certain types of money. So if you’re buying something large, you’re going to pay procurement. If you’re operating something, it’s usually operation of maintenance and they’re known as colors of money. Sometimes it can be a problem. If a program manager doesn’t anticipate or maybe can’t anticipate the exact kind, the color of money he or she needs. They may have to pause their program while they try to reprogram or make other changes to get it in the right buckets. The commission is considering recommending for selected organizations only one color of money. So if an organization predominantly did acquisition, for example, maybe it would be allowed to pay for everything it does with procurement funds, even if it’s research or operating dollars, that would prevent the delays. I think it raises another issue, though, and that is it’s got to be coupled with some restrictions that permit congressional oversight to continue. That is something that’s firmly rooted in the Constitution, and obviously very important to Congress. And so if we end up making this kind of a proposal on color of money, I think it will come with some restrictions that allow Congress to continue its oversight.

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Tom Temin And getting down to the plumbing level. One of the issues, and you know this as well as anybody, is the disparate information systems, the disparate databases. I think earlier in this interview you said, sometimes same numbers about the same things sent to Congress don’t match. And so it’s not strictly a PPBE issue. But any reform, it seems, would be enabled by somehow getting all of the information systems to line up the business systems such that you could get a single cogent view of whatever it is somebody wants to look at.

Bob Hale For sure. And we think there’s benefits to be had by some system changes. For example, the department is currently implementing a single system to handle data in both the programing and budgeting phases of PPBE. Call it the next generation resource management system. Before it came about, there were two systems, one in programing, one budgeting. She actually had to transfer the data in the middle of this process. So this is definitely a step in the right direction. I already mentioned, so I won’t repeat that there are probably better ways to use systems to communicate information to Congress and get it back, whether it’s budget justification, material or whatever. And finally, I think another aspect of improving systems and management or data analytics, they’re becoming quite common and useful in assessing budgets. And some of these systems would allow DoD to make better use of data analytics. And so we encourage all of that. As I say, some of it is happening already. We’d like to see it speeded up or at least continued, and it’ll certainly get the Commission’s imprimatur.

Tom Temin And that would also help people that either in the DoD or people overseeing the DoD understand maybe some of the systems which now exist as a million disparate pieces, because what’s mounted on a ship, what’s underneath the ship or in the propulsion system, it’s different from the hull. You’ve got maybe thousands of individual pieces when someone says, what the heck does the ship cost and what’s going on with it. It could help there, too.

Bob Hale Yes, it could. I don’t want to be naive here. I don’t think we’re going to be able to get rid of large numbers of systems. There are different needs for effort met by different managers. But in the PPBE area, I think there has been some progress, and more can be made toward getting all the data that’s used, at least in the programing and budgeting processes into one system, maybe even one system that’s shared among the military departments, but at a minimum one that is used by the officers for defense.

Tom Temin And in the work of its research. The commission, you said earlier, looked at partner nations as well as China and Russia. What are some of the chief learnings from outside the United States?

Bob Hale Well, as I said, RAND does work for us and it’s ongoing. They’re looking at some an additional. In China and Russia’s case, I think their inclusion was the systems of government is so different that we can’t imitate a lot or don’t want to imitate a lot. Plus, there are some significant failings of both of their budgeting systems. And the partner nations we’ve looked at through so far, they’re looking at some more. But they’ve completed work on Australia, the United Kingdom and Canada. They’re one thing that came out is that those nations have more stable funding over a number of years, doesn’t change as much. And some times provisions that essentially prohibit anything that we call a government shutdown, part is because they’re smaller and more focused defense needs. Also, the parliamentary systems of governments have a lot less legislative oversight. But to the extent we could find ways to imitate that stability, it would certainly be helpful. And I’ll mention one other category that you didn’t raise, Tom, but I think we probably learned most from it, and that is looking at non-DoD agencies and their budgeting systems. Many copied PPBE because way back for McNamara put this in effect, President Johnson ordered all federal agencies to use it. That didn’t turn out to be practicable. Many of them have PPBE like systems, but they have some provisions that would be helpful to DoD, more flexibility in handling operating money, for example, and especially in Department of Homeland Security and NASA, and sometimes a better job of evaluating budget programs, not just were they carried out, but did they actually accomplish the goals that they were set to meet. So I think we’ve learned something from those research, and we’ll try to reflected in our final recommendations.

Tom Temin And I guess we should summarize by asking what was the fundamental charge? Everyone has lots of vague notions about PPBE, but you can’t really have a commission of this magnitude based on vague notions. How would you state the real objective of this whole effort?

Bob Hale Well, I think Congress is clear. They said they wanted a comprehensive assessment of the efficiency and efficacy of all four phases of the planning program budgeting execution system. We translated that into five broad goals that you can see if you look at our report. But improving relationships between Congress and DoD and PPBE, promoting innovation and adaptability better, better aligning budgets to strategy. And then one we’ve talked about business system improvements and finally strengthening the workforce. So we tried to be comprehensive in our assessment, and I hope that many of these changes will find their way into our final report and eventually be implemented.

Tom Temin And just one final question. Many, many years ago, it was famously reported that Jimmy Carter as president, thought he would get a handle on the defense budget by taking off these big briefing books upstairs in the White House at night and going through them with a red pencil. That didn’t last very long, because it just becomes either you fall into a lake here. But how does it look externally, say, from your CBO days? I mean, is that a way that ultimately this can be made to be understandable to the layperson that wants to understand just where the six, $700 billion goes?

Bob Hale Well, I think there are some that when we do an overview book, each year the department does. That’s easier to understand. It’s not the great American novel, but I think it is easier and written at a higher level of aggregation. So there are some attempts. I will, because you reminded me of my my CBO and also DoD days. And so let me add a thought. When I first heard about this commission, Tom, I thought, well, gee, I mean, golly, substantive problems and going to spend time looking at the process. And then it occurred to me that I spent 12 years as a senior DoD manager, using PPBE generally successfully, I think, to meet the department’s financial needs. But I never had time to step back and ask whether the process could be improved. So busy with the substance that I just couldn’t do it. This commission gave me and other commissioners the time and the staff helped to look at potential changes and processes. And I think we’ve concluded there are clearly some that could improve the current system, maybe because I’m chair, but I’ve come away feeling that this is a useful exercise and I hope it results in some useful changes.

Tom Temin And pretty good reception so far from Congress?

Bob Hale I think so.

Tom Temin They haven’t been around really since issuance of the report.

Bob Hale No. We pre brief key defense committees on this report. So we got some immediate feedback. And now we’ve asked them for feedback. And they’re beginning to say, September is going to be a busy month, especially if the appropriators authorizers, too. But I hope that we can stick our noses in their offices again. And yeah, I think we’ve had good discussions. That is not to say they’re going to agree with everything we recommend, but I think we’ve had good discussions with Congress, and we’ve definitely talked to people at DoD as well and we’ll continue to talk to both groups. Because both have to be involved if any significant changes are going to be made.

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