Long-awaited report would replace DoD’s PPBE process with ‘Defense Resourcing System’

The rigid and sluggish system the Pentagon and Congress have been using to plan and allocate Defense funding since the early days of the Cold War would see a significant overhaul under a set of long-awaited recommendations a legislative commission announced Wednesday.

The restructured process the Commission on Planning, Programming Budgeting and Execution (PPBE) Reform developed after nearly two years of study wouldn’t be a wholesale elimination of the PPBE process. But commissioners argue the new Defense Resourcing System (DRS) they’re recommending to take its place would drastically streamline things while keeping the best parts of PPBE: its rigor and discipline.

Almost all of the key aspects of the PPBE system would still exist in some form. But the restructured process would eliminate or compress parts of the process that prevent the Defense Department from moving quickly to address emerging technology and threats, said Ellen Lord, a former undersecretary of Defense who now serves as the commission’s vice chairwoman.

“There are many workarounds [to PPBE] that are very creative, like the Rapid Capabilities Office or the Defense Innovation Unit — they’re great organizations, but they’re not easily scaled,” she told a gathering of reporters organized by the Defense Writers Group Wednesday. “I am a huge advocate of making big changes, and given the posture around the world right now, I’m not sure our current system is able to meet the current threats. So the DRS system is going to allow a much more streamlined set of processes to engage all of DoD earlier in the cycle. No longer will we have to wait two years because of our lack of flexibilities in the year of execution.”

Current year flexibilities

Those “year of execution” flexibilities would include, for instance, increasing the amount of money DoD can move around within its current-year budget without Congressional approval, and delegating some of those “reprogramming” decisions from the DoD comptroller to the military services so they can be made more quickly. Another recommendation would let DoD carry over up to 5% of its unspent personnel and operations and maintenance funding over from one year to another.

And to address the persistent problem of Congress funding the government via continuing resolutions instead of full-year appropriations, DoD would also be allowed to start new programs during CRs — something that’s currently prohibited by law.

“Our feeling was that we needed to pick some areas that would give the DoD some more flexibility, particularly as relates to innovation and speeding up the process,” said Bob Hale, the commission’s chairman and a former DoD comptroller. “We tried to maintain congressional oversight by saying that you still couldn’t do either a new start or and increase in the program size unless all four committees and subcommittees had passed the budget. We feel that balances congressional oversight against some needed flexibility. And it’s worth it, in the commission’s view, because it’s so important to not stop new starts for four to six months, which we’re doing right now.”

Structural reforms

But the panel’s recommendations would also make foundational, structural changes to the internal processes DoD uses to build its own budget requests. Under PPBE, those sequential processes begins more than two years before any money is spent. DRS would collapse the “programming” and “budgeting” phases into a new structure that would let the military services start building their budgets before they receive final “Defense Resourcing Guidance” from higher levels of the Pentagon. Under the DRS schedule, DoD components would get that guidance about a year before their final budget submissions are due to Congress.

And the final submissions DoD sends to Capitol Hill would contain fewer individual line items. Those “program elements” would be expanded into broader categories that would also give the department more flexibility to respond to changing circumstances.

“The level of specificity of those line items is a huge constraint to program executive officers and program managers in terms of executing their programs,” Lord said.

But she said in exchange for Congress giving up its fine-grained control over programs, DoD would need to provide lawmakers with more real-time transparency into its spending and program performance. Several of the commission’s recommendations deal with updating and consolidating DoD’s business systems, and with creating secure data enclaves that would give Congress and department officials more current insights than is possible under the current, largely paper-based budget process.

“We have to have data-driven transparency. If we have consistent budget justifications where there are fields to provide the descriptions and backup data, then the transparency would be there,” she said. “A lot of the skepticism over consolidating line items in the past has been around a fear of understanding what’s really there or not. It’s a trust but verify situation, and until we do all that it’s going to be hard to implement. But it should be very doable, and this should really serve us well, in terms of moving forward without being held up by artificial administrative burdens that can take an enormously long time.”

Less focus on ‘colors of money’

In another major structural change, the Pentagon would begin building its budgets with a focus on broad capability areas, rather than organizing its submissions around appropriations categories like procurement, operations and maintenance and research and development.

Under the revised DRS approach, those “colors of money” would still exist, but they would be a less prominent feature of how Defense dollars are planned and executed. Programs would get most or all of their funding in a single appropriations category, rather than having their budgets spread across multiple colors of money — an approach that’s common today, and that dramatically complicates both planning and program execution.

“If you transform the budget structure in the way we recommend, colors of money would still be there, but they would be well down the list,” Hale said. “It wouldn’t require, for example, reprogramming to move money from procurement to RDT&E. We didn’t get rid of them because they are useful in understanding, for example, the mix between operating costs and investment. That’s something you should worry about in the Department of Defense to be sure you’re buying enough stuff, and not just spending all your money operating it. So they’re useful, but they shouldn’t be, in our view, the lead item. Capabilities should be the lead item.”

Implementation likely to take years

In all, the commission made 28 recommendations, some of which the department can implement on its own, and some of which will need to be made by Congress.

In the first category, commissioners said they were encouraged by the fact that DoD has already agreed to take on the 13 recommendations the panel made in its interim report, and that the department is already in the process of drafting detailed implementation plan for those items.

But full implementation is expected to take three to five years. To make sure the recommendations don’t stall, the commission says DoD needs to create a dedicated implementation team that continually communicates with Congress about its progress, and what legislative changes need to happen next.

“There are actually pockets of great examples within the department where they have worked closely with Congress to do things like restructure line items,” said Lara Sayer, the commission’s executive director. “Special Operations Command, for example, spent a year communicating with all the committees, and then when the budget comes over with a new structure, it’s not a surprise. When something like this fails, it’s usually because Congress was surprised by what’s in the justification book.”

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