In the 1960s the Department of Defense put in place the Planning, Programming, and Budgeting system as its mechanism for allocating scarce resources. In 2003 DoD added "execution" to the name of the system, making it the Planning, Programming, Budgeting and Execution (PPBE) system. Despite the new name, critics have asserted that the "E" in PPBE is essentially silent. DoD, they argue, does not systematically manage the execution of its funds.
The truth is more complicated, at least based on my 12 years of experience running Air Force and later DoD-wide finances. In my view the "E" in PPBE is not silent, but sometimes it only whispers.
There will soon be an opportunity to do better. In February 2017 current law requires that DoD establish a new under secretary for business management and information. Improving execution management should be one focus for the new office.
In some cases, the new under secretary will find that DoD manages financial execution well. The department carefully manages its funds to ensure that they are spent as Congress directs in law. Many parts of the DoD establishment, especially those performing business-related activities, maintain quantitative performance measures that can be compared to dollars spent. For example, personnel managers establish numerical targets for recruiting and retention and routinely measure their success in meeting goals. The acquisition community maintains a wide range of quantitative measures relating to the success of weapons programs. Many defense agencies also collect performance information.
Sometimes DoD uses cost and performance measures in deciding how to formulate budgets. In recent years, for example, the department slowed the growth in military compensation to free up funds for training and modernization. Decisions relied in part on benchmarks and analyses that suggest how much military personnel must be paid in order to meet recruiting and retention goals. Similarly, many budgetary decisions about weapons systems are made, at least in part, based on comparisons of costs and quantitative measures of performance.
But often DoD does not allocate resources based on comparison of quantitative performance measures and costs, and the department does not systematically review spending to determine value received for dollars spent. This occurs in part because of measurement problems. Ultimately DoD's mission is to deter wars and, if necessary, fight and win them. Progress toward this broad goal, and many other defense goals, cannot be credibly measured in numerical terms.
But DoD can do better. Specifically, the new Under Secretary can take several steps to improve execution management:
- Introduce a cost allocation system to facilitate comparisons across organizations
Today DoD manages based on budgets, as it must because that is how Congress makes funds available. But the department often does not collect and then use data on actual spending. Working closely with the comptroller community and other stakeholders, the new under secretary should help DoD collect and compare cost data across its bases, installations, and agencies with a focus on business-type activities such as warehousing and supplying parts, maintaining buildings, carrying out administrative functions, and accomplishing grounds maintenance. Sometimes comparisons will be hard to interpret because of differing missions, but other comparisons will identify opportunities to improve efficiency.
The new under secretary should avoid creating a large new cost-accounting system that will take years and billions of dollars to install. Instead, the office should focus on activities where the information already exists or can be created through allocations of existing cost data. The fidelity of those data should be improved by ongoing audit efforts. The current DoD management office, which will be transferred under the new under secretary's purview, has begun working to design a cost-allocation system.
The new under secretary should also:
- Begin comparing costs to performance measures across organizations, starting with those business-type activities where cost and performance can be credibly measured.
- Help DoD increase its knowledge about how performance measures are affected by spending more or less. For example, the department knows a lot about how military personnel react to pay changes but very little about how civilian employees react.
The new under secretary can succeed in improving financial execution only if DoD's most senior leaders support the effort. Congress also needs to help. Congress should start by ending the budgetary turmoil that has gripped the federal government in recent years and siphoned away senior-management time needed to achieve long-term improvements such as better financial execution.
With senior support and a focus by the new under secretary, the "E" in PPBE can gain a stronger and more helpful voice.
The Honorable Robert Hale is currently a Fellow at Booz Allen Hamilton. He served as the DoD comptroller from 2009 to 2014 and as Air Force comptroller from 1994 to 2001.