JUST IN: Pentagon Needs Budget Flexibility to Acquire New Tech, Commission Says

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An independent commission charged with evaluating and recommending improvements to the process of funding the Defense Department said the system has strengths that should be preserved, but significant improvements can be made to gain efficiencies, particularly when it comes to adopting innovative technology.

The Commission on Planning, Programming, Budgeting and Execution, or PPBE, released its interim report Aug. 15, which included recommendations to address five main goals: improving PPBE coordination between the Defense Department and Congress; increasing adaptability and adoption of innovative technology; aligning budgets to strategy; upgrading business systems and data analytics; and improving the programming and budgeting workforce.

“What we're trying to do is take what works and streamline it, so that we have a relevant timeframe,” Ellen Lord, vice chair of the commission and former undersecretary of defense for acquisition and sustainment, said during a media roundtable Aug. 15. “We are trying to make sure individuals are trained, that budget structures are easy to understand, that both within DoD decisions are made quickly and then that information is presented to Congress, and we have more iterations.”

Lord emphasized the need for better data and communication as critical to improving the PPBE process.

“We need a cadence of communications that’s much more data driven between DoD and the Hill,” she said. “The frequency of the dialogue, if you will, could be enabled by electronic transmission of data that is consistent across the military services as well as the agencies. And then the ability to communicate back and forth in secure enclaves, with consistent budget information — for instance … justification books are one of the areas that we've looked at.”

Bob Hale, commission chair and former Defense Department comptroller, said the commission’s approach has been to identify changes that the department and Congress can start to implement now and then identify possible longer-term reforms and solicit feedback that will inform the final report due March 2024.

One immediate initiative would be to review and consolidate budget line items, he said, adding that in the research, development, test and evaluation account alone there are about 1,000 line items.

“You’ve got to wonder whether that is so many that [it] is difficult for DoD to manage, let alone perhaps for Congress to execute oversight,” he said. “And so, we recommended that DoD — and they've got to work with Congress on this one — look at a potential consolidation of budget line items throughout the budget.”

However, this has been tried before without success, “because managers and DOD — and certainly people in Congress — want to be able to manage at the detail level [and] they want to see that information,” he said. “Question is, can you restructure to be a little more flexible for the department but still maintain oversight?”

Regarding quicker adoption of innovative technology, Lord said the commission recommends easing the process for small companies to go from a Small Business Innovation Research contract to a program of record.

“What we're trying to do is make the system more flexible, to move money more quickly when a new technology comes along and it is applied to a warfighting gap in capability,” she said. “What we're talking about is raising the threshold for below-threshold reprogramming, so that you, essentially, are delegating more authority to the building to do that. Then we also are strongly considering whether or not more authority should be delegated to the [program executive offices] and the [program managers] so that they could move more quickly.”

The department can move quickly through the Joint Rapid Acquisition Cell, rapid capabilities offices or the Defense Innovation Unit, she said. “The issue is we have not been able to scale those to really make a difference across the department.”

The challenge is to find mechanisms to move more quickly in a department that is inherently risk averse, she said.

Hale noted a related challenge in rapid acquisition of technology is the “color of money” limitation — the department needs to spend in categories such as acquisitions, operations and maintenance and research, development, test and evaluation.

“One of our potential recommendations … would be to allow selected organizations that do a particular type of function to pay for all of their expenses using one color of money,” he said. “So, for example, if it was an acquisition organization, it might be allowed to pay for all of its expenses using procurement, even if some of it would normally have been research or operating money.

“That will make it less common that programs are slowed because the program manager hasn't been able to foresee exactly how much money they needed in a procurement pot versus the research pot,” he continued. “This would have to be accompanied, I think, by a set of rules that provided for congressional oversight, or it's not going to be acceptable.”

One of the larger recommendations the commission wants feedback to refine involves restructuring the budget “so the dollars are expressed in a more mission-oriented fashion,” Hale said. “It would show the budget by agency and something called ‘mission capability’ or ‘major capability area.’ And then we need help from the department … figuring out what that would be, but the goal is to be more mission-oriented and so make it easier to relate strategy to budget.”

The commission needs to ensure that recommendations to improve the speed of acquisitions or improve flexibility by allowing new starts during a continuing resolution include congressional oversight mechanisms, or they will not be acceptable, he added.

Lord reiterated that better quality and transparency of data is essential to allow for better flexibility and oversight.

“I go back to the idea of secure enclaves to provide not only the initial data on the budget, but then updates on that,” she said. “I think we have a great analogy in the public sector where you take publicly traded companies, and they have secure enclaves, if you will, to be able to transmit the most sensitive data between the company and their board of directors.”

There is no reason the department could not transmit the budget justification books electronically and then provide regular updates, she added.

“And I believe if the Hill saw that execution data, both in terms of where the budget is and where the degree of completion as to the key requirements are, then if you had that type of actionable intelligence, you could really have this flexibility and be funding the programs that are moving along, and perhaps stopping the ones that aren't and make more time-relevant decisions and also build the trust between the two groups,” she said.

Hale said the commission commends the department for having success in deploying the Next Generation Resource Management System, which was in “gestation” when he was in the department.

“We'll finally have one system that has data for both the programming and the budgeting process,” he said. Previously, “you had to switch the data between systems as you move from programming to budgeting, which really doesn't make a lot of sense, introduces errors [and] takes time.

“And I think the department has hopes that this new system or one similar to it will be adopted by the services,” he continued. “So, we may get some common systems, or at least systems that can talk to each other electronically.”

Ideally, it will involve more adoption of commercially available products and data analytics capabilities, he said. “There's progress being made. It's painfully slow at times on this particular one, but at least I think they're moving in the right direction.”

While the House and Senate have each passed 2024 defense authorization and appropriation bills, they need to be reconciled, and one House NDAA provision is particularly controversial, the elimination of the Pentagon’s Cost Assessment and Program Evaluation, or CAPE, office.

“If they just abolished it and didn't provide those functions, it would be a disaster,” Hale said. “The process couldn't work without it.”

While the commission argues the CAPE functions need to continue, it is agnostic on whether the CAPE office is abolished, and the functions moved elsewhere in the department.

“CAPE and comptroller have done some good work in terms of trying to use the same business systems,” Lord noted. “And one of the things we talked about in the report is we believe that should continue — in fact, it should be accelerated, and commercially available sort of cost systems should be used wherever possible.

“I think a lot of the concern comes down to data transparency, and the Hill understanding the work CAPE is doing and what it means for the overall budget and how you link that budget to strategy,” she added.

Lord noted that the release of the interim report is just the beginning. “It's between now and the end of the year that I think our most substantive work will happen.

“The big work begins in terms of how do we get this implemented? How do we make sure that what we have produced actually has a meaningful outcome?” she said.

Topics: Budget, Defense Department