Last year, the U.S. defense budget exceeded $700 billion. Most metrics would put it among the largest enterprises in the world. Nevertheless, the Defense Department’s planning, programming, budgeting, and execution (PPBE) process that governs how the department decides to allocate its resources is a relic of the past. It is a very slow process that relies on predictability when no such predictability exists. Further, to its critics among Washington policy wonks, the system represents the root cause of many ills: The slowness of the defense acquisition system, the lack of military agility in adopting new technologies compared to our own civil society, waste and bloat, and infighting leading to suboptimal decision-making.

This isn’t an academic problem. An unresponsive or slow defense resourcing process can lose lives and wars. If the Department of Defense fails to field a promising new technology while America’s adversaries succeed, it could be decisive. In perhaps the most recent example of a military that failed to adapt to changing circumstances, Azerbaijan methodically destroyed Armenian ground platforms using Turkish drones and Israeli loitering munitions in the 2020 Nagorno-Karabakh War. Failure to anticipate and adopt emerging technology cost Armenia dearly. It is hubris to think that something similar cannot happen to the United States.

For years, critics in and out of the Pentagon have pleaded for reform of the defense resourcing process. They’ve called for reducing the bureaucracy, increasing flexibility, and allowing for quicker responses to global events. The 2022 National Defense Authorization Act gives reason to hope that reform may become a reality.

The final version of the National Defense Authorization Act establishes a commission to “examine the effectiveness of the planning, programming, budgeting, and execution process and adjacent practices of the Department of Defense, particularly with respect to facilitating defense modernization.” The stage is set. Now the hard work begins.

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Reforming the PPBE process is a mammoth task—what design thinkers refer to as a “wicked problem”: It’s difficult to frame, it’s described differently by differing stakeholders, and what constitutes success is challenging to define. These are problems for which there is no one optimal solution.

The clock is already running for the commission. It is required to submit an interim report on Feb. 6, 2023, and its final report on Sept. 1, 2023. Given the magnitude of the task, time is short. If the commission hopes to produce meaningful reform recommendations within its short lifespan, it should approach the challenge with a clear definition of the problem that it is trying to address, specific targets, a focus on the end state of an agile and accountable military, and realize that you cannot stop the defense budget process while you fix it.

Trying to Control a Gigantic Organization

Three core processes drive the Defense Department: the Joint Capabilities Integration and Development System, the acquisition system, and the PPBE process. The latter is arguably the most important as it directly controls the resources that make everything else happen.

As it stands, the process is geared toward facilitating and centralizing the decision-making process of senior Pentagon leaders. It offers a department built over time from different military services with their own processes and cultures a unified set of rules and formats for budgeting. Charles J. Hitch, the Pentagon’s comptroller who created the process, described the goal as giving “the secretary of defense the necessary tools for exercising his authority to unify the activities of the military services.”

Air Force budget analyst Abigail Zofchak describes PPBE as

four distinct stages that progress sequentially: planning outlines the future security environment, programming proposes programs for investment, budgeting develops a detailed budget request according to fiscal guidance, and execution constantly reviews and realigns funds as the [d]epartment spends the resources eventually appropriated by Congress.

Created in the 1960s, the PPBE system is based on the rational design model, then a state-of-the-art technique for organizational management. That model relies on predictability and consistency of outputs. The approach works just fine for a mid-century automotive factory producing a narrow number of car models with limited color choices. However, in defense matters, predictability and consistency were barely a thing in the past, let alone in the contemporary world. Game-changing technological advances come rapidly nowadays. Witness China’s recent unanticipated test of a fractional orbit bombardment system—or how the military is struggling with its adoption of cloud computing even though it is commonplace in civil society.

To be fair, the 1960s PPBE process has seen changes through time. In the 1970s, Melvin Laird instituted the Program Objective Memorandum, which served to bring service-level resource guidance and materials further in line with the Office of the Secretary of Defense-level process. The services detailed all their plans in the new Program Objective Memorandum document, which was required to fit under a previously directed budget ceiling. This brought a balance of centralized guidance and decentralized execution. In the early 2000s, Donald Rumsfeld stressed execution, which resulted in the “E” being added to the process and brought a new focus on allocating appropriated funds.

The PPBE system is not established by law, per se. While it responds to statutory requirements governing the defense budget, it consists largely of internal regulation and processes set by the Office of the Secretary of Defense and its supporting organizations. As currently constructed, the system is essentially a set of cascading internally driven processes that flow from one phase into the next.

Main Criticisms of the Process

PPBE deserves some criticism for being a linear and sequential process with phases that are dependent on one another. Due to the sequential nature of the system, if changes are made to the assumptions made early in the planning phase, all the subsequent phases will be impacted. Similarly, if Congress appropriates at a different level from which the Department of Defense had budgeted, the Pentagon must revise all the previous phases of the ongoing cycle to reconcile the process for future cycles.

One consistent criticism of the process is that it substantially increases the timeline needed to acquire any capability. A recent Hudson Institute study found that following the regular acquisition process can take between nine and 26 years for a needed capability to progress from an identified capability gap into an actual capability at the hands of the warfighter. The initial four to six years are directly attributed to the rigidity of the requirement and resourcing systems. This lethargic pace is unacceptable in the current technological environment.

Another major criticism concerns the lack of agility in being able to resource emergent needs during the year of execution, especially when it comes to reprogramming funds. Moving funds from one appropriated account to another often consumes between three and six months of a 12-month fiscal year. This makes it challenging to move funds to higher priorities and to make the best use of these resources. When the Army needed $27 million to continue development of an offensive cyber capability for Cyber Mission Forces, it had to wait months for approval as part of the huge 97-page summer 2021 omnibus reprogramming request.

Principles for the Commission

For maximum efficiency, the congressionally established PPBE Reform Commission should guide its work using five principles: properly scope the problem before jumping to fixes, recognize they are working on a system that undergirds the daily defense of the country, establish specific targets, select the right commissioners and staff, and focus on the end goal—a capable, agile military with adequate oversight.

Scope the Problem

The PPBE process has many functions and serves many differing needs, from planning hardware procurement quantities in 2025 to tracking fiscal execution rates for the current fiscal year. Given its relatively short lifespan, the commission will be tempted to jump right in and start developing recommendations before arriving at an understanding of all the diverse purposes that the process serves.

However, optimizing one aspect of PPBE could easily undermine another. For example, the commercial shipyards that support the Navy pour-over out-year shipbuilding plans to understand where to apply their capital expenditures. Reducing the fidelity of those plans would frustrate investment. At the risk of sounding overly bureaucratic, the commission needs to map the functions and stakeholders that PPBE services so it can understand challenges and the impact of changes. Simply put, it is essential to properly understand the issues that the commission is going to tackle, because misunderstandings or omissions can lead to very different answers.

Creating a proper and quick feedback loop that integrates congressional budgetary changes into the planning and programming processes requires a different solution than the problem of accelerating the programming and budgeting phases. The commission should outline the different shortcomings of the system and decide which problems can be solved and, of those, which would lead to the most substantial improvements if fixed.

Work Within the System in Place

The commission’s recommendations should apply to the existing system. It cannot—nor should it try to—develop a “clean-sheet” design supported by an ideal financial management system. If the commission organizes itself around the idea that it should completely abandon the current system and rebuild from the ground up, it will immediately consign its final report to the graveyard where blue-ribbon commission reports go to die.

For example, many have advocated that the Defense Department shift to a system of activity-based accounting, where costs are better aligned with the desired outputs. Such a system would, for example, bundle all the planned and spent recruiting funds (e.g., recruiting stations, recruiter pay, information technology, marketing and advertising) and manage them as one pot. It’s a wonderful idea but likely impossible to achieve in the short term, since it would require Congress to completely overhaul how it does oversight and change thousands of careers inside the Pentagon. It could be done, but it would take a long time and require a great amount of change from many entrenched interests and actors.

The commission should avoid recommendations that require a total overhaul or a fundamental change in the behavior of an interested party (e.g., asking Congress to abandon its oversight role). The deadlines and time pressures of the fiscal calendar require a functioning process at all times—while you can make changes to a plane in flight, it still needs to take off and land.

Be Specific and Realistic with Its Targets

The legislation creating the commission is perhaps necessarily vague about which problem(s) it is supposed to solve. How the commission defines the problem(s) will define its results. For instance, if one of the identified problems concerns the lack of funding flexibility in the year of execution, the commission will be driven to focus on how funds are allocated and disbursed and how reprogramming requests are processed. Within that tedious process, there are multiple organizations that derive considerable institutional power and are vested in the current system.

On the other hand, if the goal is to increase the speed of the programming process, an entirely different cadre of institutions and professionals would be affected. They would have to be convinced to change their processes to account for a vastly shorter period (or to be completely omitted from the process) to exercise their part of the system. The commission needs to define these actors and goals so there is specificity and responsibility on who and what needs to change its processes and inputs into the budgetary system.

A fundamental question revolves around whether Congress is willing to tolerate additional flexibility in the defense budget. After all, Congress is the main customer and evaluator of what is enough accountability and transparency to satisfy its oversight mission. There is a perennial balance between oversight and autonomy that needs to be negotiated among the different players involved, mainly Congressional overseers. Many have advocated the idea of portfolio versus specific program funding. The concept involves funding for a category of systems (e.g., Army rotary-wing aircraft) managed as a whole rather than by specific program. That way, during the year of execution, the Army would be able to shift money from the Black Hawk to the Apache program without going back to Congress. Such an idea is attractive but would require Congress to relinquish a measure of its current authority.

In the name of reform and predictability, the Pentagon and Congress have also tried submitting biennial budgets, one budget for two years. However, the small off-year budget revision that was to replace the budget in one of the years become too big and too laborious due to both the demands of the Pentagon and Congress. In essence, the exception “ate the rule.” The off-year budgets came to resemble the on-year budget because leadership proved unable to enforce the discipline necessary to minimize changes in off-years. This example proves that any solutions recommended by the commission need to be evaluated to be sure they are actually implementable.

Right Commission Members and Staff

Picking the right members will, to a great extent, dictate how successful the commission will be. The legislation requires that commission members have knowledge of the Defense Department PPBE process, innovative private sector budgeting and resource allocation, iterative design and acquisition processes, or budget or program execution data analysis. These are indeed useful backgrounds for commission members, but the key to success lies in achieving the right mix. Add too many people invested in the current system, and it becomes a recipe for perpetuating the status quo. Pour in an overabundance of people with innovative private sector experience, and the solutions will turn out to be wholly unworkable in the Pentagon.

It will be crucial that the commissioners are free enough of political constraints to be able to discuss the real issues and obstacles that plague the system. Frankly, it would be fruitful to have a mix of individuals who no longer have any ambition of working inside the department with some who still have that desire. Optimally, members will be appointed with experience in different portions of PPBE and different parts of the defense enterprise. Someone who worked with budget execution at the service level will have a substantially different perspective from someone who worked with planning at the secretary of defense level.

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The supporting staff will be equally important. They will do much of the work of distilling the commissioners’ ideas and insights into the reports. To be able to hit the ground running, the commission’s executive director will need to be someone already knowledgeable about the public discussion on how to reform the defense budget process. Further, he or she should have enough knowledge of the defense community to be able to call upon external and internal experts who can contribute to the work and who would be invested in implementing the commission’s recommendations.

Proper End State

At the end of the day, America requires a capable military that operates with the necessary agility under sufficient oversight. The commission’s focus needs to be on injecting agility and responsiveness into the system. Gen. John Hyten, the recently retired vice chairman of the Joint Chiefs of Staff, consistently spoke about the need to increase the speed in which the Department of Defense develops and adopts new technologies. He bluntly stated that “[t]he answer to every question on how long it’s going to take to get a follow on capability is 10 years or 15 years.” Any technology that is 10 years old is simply obsolete.

To get to an end state of increased speed and responsiveness, the commission will have Congress’ attention twice in 2023—once when it presents its interim report and then when it presents its final report. On both these occasions, it should present actionable recommendations which can be directly incorporated in versions of the National Defense Authorization Act. These will be the windows of opportunity for action that need to be taken full advantage of.

Further, Congress and the commission should be willing to try out pilot programs and learn from previous experiments, such as the experiences of the Defense Innovation Unit and the different software factories. In determining best practices, it would be useful for there to be variance in the processes used by the different services or defense agencies. Similarly, PPBE processes do not need to be the same for all fiscal accounts. For example, military construction and personnel could use different processes. The important element is to keep the common reporting threads that tie it all to the Office of Secretary of Defense and Congressional overseers.

Conclusion

The Department of Defense cannot change its ways overnight, no matter how artful the recommendations developed by the commission. However, done correctly, the PPBE Reform Commission can place the department on the road to necessary changes to the underlying resource management culture and the oversight relationship between Congress and the department. The commission represents the best opportunity in a decade for the Pentagon to improve its resourcing processes and regain the agility needed to compete effectively on the world stage.