At DoD, glimmers of hope for budget reform

Federal Report

At DoD, glimmers of hope for budget reform

On Capitol Hill and inside the Pentagon, there are efforts underway to make sure the PPBE commission's report on budget reform doesn't get ignored.

Jared Serbu@jserbuWFED

July 29, 2024 6:49 pm

6 min read

It’s still far too early to tell how many of the suggestions of a legislative panel tasked with reforming the Pentagon’s budgeting process will become reality, but there are some definite signs that their work is not destined to gather dust in the ever-growing library of federal government reform recommendations.

One big reason for optimism came before the Planning, Programming, Budgeting and Execution (PPBE) reform commission even finished its work. Last August, Deputy Defense Secretary Kathleen Hicks ordered Defense officials to start implementing as many of the recommendations the panel made in its interim report as possible.

But more recent developments seem to show both DoD and Congress are interested in seriously tackling PPBE reform — a topic that’s mostly been ignored for decades, despite huge amounts of attention toward other reform subjects, like the acquisition system.

Russell Rumbaugh, the Department of the Navy’s comptroller, said DoD is still preparing a plan to deal with the 28 sweeping recommendations the PPBE commission made in its final report in March. In the meantime, the Navy has started to work on one key recommendation: rationalizing the huge number of rigid budget line items it develops and sends to Congress for approval each year.

“We’ve looking at each of those bins, and we’ve tasked three of our program executive officers — folks who have a fairly broad overarching responsibility — to look at their portfolios and ask whether all these items are at the right level,” he said during a webinar hosted by George Mason University’s Center for Government Contracting this month. “We’re hoping to get even beyond that, up to a higher strategic level, by asking the three PEOs who are running these pilots to think a little bit more deeply about it. It’s really promising work.”

Hundreds of billions of dollars in budget authority in very small slices

As of now, DoD’s nearly $800 billion budget pie is sliced paper-thin, in relative terms. As the commission noted in its report, there are more than 1,700 budget line items in the Defense budget each year, each making up, on average, just a few tens of millions of dollars. Working through the resource allocation process for each one of them is, to put it mildly, a management challenge.

Under the current PPBE structure, an elaborate planning and approval process determines how much DoD should request for each of those slices — but that process happens about two years before the money is actually spent. Things change a lot in two years, and the current process also makes it very cumbersome to move money from one budget line item to another once Congress has signed off on a budget.

And even if 1,700 is the right number of individual line items, there is work to do in determining exactly where the “seams” between them are, Rumbaugh said.

“We already delegate down a lot of authority to spend fairly large sums of money, but one of the difficulties is that those seams have been in place for a long time,” he said. “What if we go through and just reorder where the seams are, and then take all these bright people working down at the deck plate level, trying to make a difference, and watch how they move their efforts? It’s pretty easy for me to imagine that if we harness all of those levels of effort, we can get pretty fundamentally different outcomes at the highest levels.”

The Navy will need to proceed with caution — it’s tried to consolidate line items in its budget proposals before, and Congress has responded by breaking them back apart again during the appropriations process. It’s a key tightrope the commission tried to walk as it prepared the final report: balancing the need for more spending agility with Congress’ legitimate oversight role.

It may work better if DoD and Congress are continually communicating with each other about each coming year’s budget — both electronically with real-time spending data, and with human conversations about why DoD is proposing what it’s proposing.

“Improved communication sounds pretty simple, but it doesn’t always happen,” Susan Davis, a former Congresswoman and PPBE commission member said during the panel’s rollout event in March. “We first would encourage improved in-person communications, and we recommend that DoD, the services, and DoD components establish a process that engages with the appropriate Congressional committees on a more frequent basis to share relevant information with Congress. And of course, we’re also looking to Congress to perhaps be receptive in that way.”

Congress also pushing the budget reform ball forward

A provision in the Senate’s version of the 2025 defense authorization bill strongly suggests Congress is in fact receptive — or is at least willing to listen.

A more cynical view might be that lawmakers want to make sure DoD is implementing the difficult tasks the commission gave the department without serious examining their own role in the department’s budget agility constraints.

Either way, the Senate Armed Services Committee’s version of the NDAA would order the Pentagon to establish a cross-functional team to make sure the PPBE commission’s work isn’t ignored, and that implementation work continues to go on at the highest levels. The bill also requires the deputy secretary to speak directly with the Congressional defense committees and get their feedback on how to implement the final report.

“The committee encourages DoD to move expeditiously toward the more transformative recommendations of the commission with early involvement of the congressional defense committees,” Senators wrote in a report accompanying the Senate NDAA. “The committee agrees with the commission’s recommendation to improve communication with Congress, and urges the department to make rapid progress toward establishing secure and unclassified enclaves for data sharing with Congress … The committee believes that modernized financial management systems, workforce improvements, and a shared analytics platform will build the trust between the legislative and executive branches, which is necessary for systemic reform of the resource allocation process.”

Reform planning underway inside Pentagon

Another indication DoD is taking this process seriously: although the department is still working its way through the final report, it’s already published a rough outline of how it intends to deal with the PPBE commission’s interim recommendations, signed by Hicks. That plan also required the establishment of a cross-functional team.

The same plan also gave some hints as to what DoD might do with its voluminous number of budget lines, including by consolidating them into more sensible portfolios that deal with capabilities instead of specific platforms — another key commission recommendation.

Hicks’ personal involvement in the effort is essential, and may be a key differentiator from past blue-ribbon commissions whose reports never produced much steam, said Jerry McGinn, the director of GMU’s Center for Government Contracting. His organization also contributed research to the PPBE commission.

“Nothing will get things moving faster than that. If you’ve got a cross functional team empowered by the deputy, then you’re going to get action,” he said. “If it’s stood up under Cost Assessment and Program Evaluation or some other lower level official, is not going to do anything. So if you want effect, that’s how you get effect.”