Commission Calls for Major Overhaul of Defense Process

JUST IN: Commission Calls for Major Overhaul of Defense Process

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An independent commission focused on Defense Department resourcing reform released its final report March 6, calling for the Pentagon to establish a completely new budgeting system that the commission believes will more effectively “maintain the security of the American people.”

Established by the fiscal year 2022 National Defense Authorization Act, the Commission on Planning, Programming, Budgeting and Execution Reform was tasked with undertaking a “comprehensive examination” of the Defense Department’s resourcing processes known as PPBE.

Introduced in 1961, the PPBE process consists of the four distinct phases — planning, programming, budgeting and execution — with the first step of planning often beginning more than two years before the final step of budget execution.

The commission in its final report said the current system has “ably supported” U.S. national security for many years, but today’s “rapidly evolving” security environment — from the emergence of China as a strategic competitor to the accelerating pace of global technological innovation — has made it “increasingly clear” that the PPBE process “does not provide the department’s senior leadership with the ability to implement change at the scale and speed the DoD requires.”

Ellen Lord, vice chair of the commission, said: “We believe that there is enormous opportunity to change the PPBE system to be able to allow the warfighter to adapt much more readily, to have new warfighting systems — whether that be hardware, software, whether that be services — if we change fundamentally how this process works. … Given [the] strategic adversaries, given the posture around the world right now, I’m not sure our current system is able to meet the current threats.”

The commission put forth 28 recommendations spanning five critical areas for reform: improve the alignment of budgets to strategy; foster innovation and adaptability; strengthen relationships between the department and Congress; modernize business systems and data analytics; and strengthen the capability of the resourcing workforce.

The first and most significant of the 28 recommendations is replacing the PPBE process altogether with a new framework the commission called the Defense Resourcing System.

The Defense Resourcing System, or DRS, “builds on PPBE’s many strengths while also addressing the weaknesses that have emerged,” the report stated. The new system consists of three phases: strategy, resource allocation and execution.

The strategy phase — led by the undersecretary of defense for policy — will employ analytics “to determine priorities and direction for the forthcoming budget while establishing the overall guidance for key budget decisions.”

The resource allocation phase will involve the most significant changes and will occur over three steps — guidance, build, decision — the report said.

For the guidance step, “instead of the current process of circulating a lengthy document for coordination” like the current Defense Planning Guidance, “the new approach brings the results of wargaming and analytical efforts into established senior leadership forums to inform discussions that can lead to specific guidance or at least provide direction for budgetary debates,” the report said. Development of the new guidance document will conclude by February of the year before the budget submission and be led by the Analysis Working Group, the executive secretary of which is the Director, Office of Cost Assessment and Program Evaluation.

“The key document resulting from this process is the Defense Resourcing Guidance issued in February that now includes both the integrated program priorities and fiscal guidance,” the report said. “The effectiveness of the DRG is bolstered by continuous analysis including threat analyses, wargaming and cost-benefit assessments. Beginning these key analyses earlier, and holding leadership decision meetings that consider analytic results from November through February, will produce a timelier guidance document with a regular analytic cadence used to inform the build step and shape resourcing decisions.”

In the build step, the services and other Defense Department components will construct a “strategically informed” Resource Allocation Submission proposal, which will replace the current Program Objective Memorandum and Budget Estimate Submission proposals and become the “single submission to the [Office of the Secretary of Defense] for review,” the report said. While components will likely begin putting together their submission before the Defense Resourcing Guidance is finalized, they “will be guided by the actionable direction established during the guidance step.”

Finally, in the decision step the Office of the Secretary of Defense will review the Resource Allocation Submissions and issue its allocation decisions, resulting in the final Defense Department budget request. This step will be led by the undersecretary of defense (comptroller), who will also take the lead during the execution phase when funds are distributed to the services and components.

Overall, the DRS system is a “much more streamlined set of processes to engage all of DoD earlier in the cycle,” Lord said during a Defense Writers Group event March 6. The new framework will provide program managers and program executive offices more flexibility and discretion to “make changes in the year of execution, to be able to do reprogramming, to be able to carry over funds, to be able to … move quickly from [reseach, development, test and evaluation] into procurement and so forth.”

Lord and commission chair Bob Hale acknowledged some of the proposed recommended changes can be handled by the department internally, while others are more complicated to implement and will likely require congressional legislation.

For example, delegating more authority for reprogramming to the services — and in turn, to the program managers — is something that “could be done fairly quickly if the department decided do so,” Hale said. “The big problem in reprogramming is finding the sources — everybody’s willing to spend more money, not too many people are willing to give up any money. And our hope is that if they have more control, they’ll be more willing to do it, and they’ll do it faster.”

On the other end of the spectrum is the commission’s recommendation to transform the Defense Department’s budget structure. The current structure begins with the designated life cycle phases such as procurement, operation and maintenance and research, development, test and evaluation, which are then aligned to the services and components before presenting data for specific accounts and programs.

While this structure reflects the “phases of traditional industrial production … this is not how the department or Congress consider the budget when making decisions today,” with decision-makers primarily focused on capability, the report stated. Instead, the commission proposed the budget structure begin with the services and components, flowing then into Major Capability Activity Areas under their purview, followed by specific programs and systems and then finally into the “relevant life cycle phases.”

Hale said this would be a “high payoff” change for the Defense Department, “because it would make it easier to relate the budgets to strategy than is the case right now.” However, reforming the budget structure will take time, and the process of picking the major capability areas won’t be easy for the Pentagon, he said.

There will also be “transition issues” such as concerns that “you’re suddenly going to destroy all the historical data that you have for trend analysis,” he said. “So, DoD will have to figure out some way to go back and restate some of that data” and “make specific decisions about reprogramming.”

Congress will also have to get involved in transforming the budget structure, “and you probably have to show it to them before they’re going to be willing to accept it — we’re talking years to really make that happen,” he said.

Another prevalent issue in the budgeting process is the fact Congress continues to struggle to pass budgets on time, resulting in what the report described as “increasingly commonplace” continuing resolutions. The commission recommended mitigating problems caused by continuing resolutions “by allowing the department to proceed with new starts and increased program quantities under CRs in carefully delineated circumstances.”

“CRs, unfortunately, are our reality — I don’t think we can ignore that any longer given the threats our nation faces,” Lord said. “Frankly, our government is one of our largest deterrents in terms of modernizing our military’s capability — and that’s our mandate as a commission, to modernize the department.” 

Given the “reality” of continuing resolutions, “we tried to find the balance in the dynamic tension between DoD having its primary mission to deter and then to fight and overcome if that becomes the situation, and Congress’s oversight responsibility to be great custodians of the taxpayer dollar,” she said.

Other recommendations included: aligning colors of money “with the way in which programs are actually executed, enabling the Department to better meet mission needs through the funding of software programs, continuing improvements to hardware and program office accounts”; creating a common analytics platform to “make information readily available and provide streamlined access to best of breed analytic capabilities and authoritative data across functional sectors”; and training improvements for defense resourcing personnel.

To carry out its recommendations, the commission called for the Defense Department to set up an implementation team that would “provide staff support” for the next three to five years. The team would be made up of experts from “various functional areas” and would report directly to the Deputy Secretary of Defense, the report said.

Hale described the proposed implementation team as a “cross-functional” unit that must “integrally involve the Congress.” Whether members of Congress are actually on the team, “I’ll let DoD figure out,” but the team must meet regularly with both Defense Department and congressional leadership “to say where they’re headed and see if that’s going to be acceptable to Congress,” he said. “If we don’t do this jointly between Congress and DoD, a lot of it will never happen.”

Ahead of the March 6 release, the commission met with Deputy Secretary of Defense Kathleen Hicks on March 1 to go over the final report, and her reaction to the recommendations was “quite positive” and “suggested that [the Defense Department] would look toward implementation,” Hale said.

Lord added: “I think it speaks volumes that the [Deputy Secretary of Defense]’s office — and then she herself — called to push to get a copy of the report prior to the meeting … so that she could be prepared for it. So, I take that as a very positive sign that she was highly engaged.”

Lord went on to say she is “energized and excited about the potential” of the commission’s final report to transform the Defense Department.

“We have a moment in time to make a difference here for resourcing DoD, and never have we been at a moment where reform of our resourcing system is so badly needed,” she said. “We have many, many, many individuals and companies out there, along with academia and others, that want to work with DoD — it’s just really hard to work with DoD. So hopefully we will give everyone the opportunity to field capability to the warfighter much more quickly while providing the oversight that Congress is charged with having.”

Topics: Defense Department