Defense Beat

ince its introduction in 1961, the Pentagon's Planning, Programming and Budgeting System (PPBS) has been a target of constant criticism. For many, the process is too complex, too centrally directed and too bureaucratically contentious. In the 1998 Defense authorization bill, Congress directed the Pentagon to study ways the system might be changed to better support procurement and acquisition reform, suggesting that lawmakers view PPBS as an obstacle in making procurement decisions.

Despite its general unpopularity, PPBS has endured as the Pentagon's fundamental management process for nearly 40 years. Why? Because it is a logical, structured process by which the Defense Department justifies its annual budget submission to Congress. PPBS isn't a fundamentally flawed system, but many of its essential structures-most notably the Future Years Defense Program (FYDP), the process for projecting defense costs five years into the future-are not well-managed.

The widely held perception that PPBS is a failure reflects the controversial legacy of Defense Secretary Robert S. McNamara, who brought the planning concept to the Pentagon. Judgments about McNamara's efforts to produce a better-integrated Defense budget reflecting detailed objectives drawn from a national military strategy became inextricably commingled with criticism about his management of the Vietnam War. The success of McNamara's PPBS in managing the budget was overwhelmed by his failure in managing the war.

It is a lingering confusion. In The Rise and Fall of Strategic Planning (The Free Press, 1994), Harvard Professor Henry Mintzberg concludes that PPBS "proved to be an impediment to effective strategic thinking and action, whether one favored hawkish military strategies or dovish political ones." McNamara's staff tried to apply (and often misapplied) operations research techniques to certain operations of the Vietnam conflict, frequently using them to supplant military judgment from the field, but this hardly means PPBS lost the war.

Making such broad assertions ignores
positive outcomes of the PPBS process during McNamara's tenure and those of his 10 successors. PPBS was used to identify options for creating a balanced, cost-effective nuclear retaliatory force, for eliminating duplications among the services' intermediate-range missiles, for retooling the armed forces as they shifted from Eisenhower's massive retaliation strategy to Kennedy's flexible response concept, and for charting Reagan's defense buildup.

Original Vision Lost

This is not to say PPBS is flawless. The use and misuse of the FYDP best illustrates PPBS' shortcomings. Originally intended to provide an alternative method for developing planning and programming objectives and to serve as a basis for analyzing and comparing service programs, the FYDP has become merely a database, more useful to accountants than decision-makers. This deterioration reflects a general drift in PPBS toward a management process more focused on marginal adjustments than substantive policy direction, force structure changes and technological choice. To understand how far the FYDP has drifted from its original purpose, one must understand its role in the initial PPBS concept, its current role and the fundamental steps necessary to return it to the center of defense planning and programming.

Prior to PPBS, the services developed separate budgets with little regard for the joint effort required to execute military missions. The tenuous connection between national security objectives and the Defense budget, and the absence of an accounting system that captured the full range of costs associated with forces and weapons systems, made resource decision-making a dicey undertaking. Accounting categories were not uniform among the services. Research and procurement costs for weapons systems were available, but cost data for operating, manning, maintaining and training on them were not. Nor was there a structure for comparing effectiveness and cost among weapons used by different services to perform the same or similar missions.

The intent of McNamara's Five-Year Defense Program, later renamed the Future Years Defense Program, was to provide a mechanism for identifying key Defense missions and developing goals and objectives within each, while simultaneously capturing cost data for analytical and comparative purposes. The original FYDP structure was built to support 10 major force programs reflecting the military's principal Cold War missions. Within those programs, specific units or systems performing each mission were identified as program elements. Funds required for each program element, such as manpower, construction, operations, development and procurement, were identified and extended five years into the future.

As the services submitted their detailed programs, McNamara's staff analyzed and evaluated them based on which objectives for each mission area were satisfied. Officials also identified duplications, used cost data to compare competing systems and recommended tradeoffs. Alternatives were presented to the Defense Secretary and the FYDP was adjusted accordingly.

By using the FYDP to identify major missions and place every Defense dollar in the context of those missions, McNamara achieved two important goals. First, the process required military planners to determine the missions to be accomplished in executing the national strategy during the coming five years. The FYDP forced planners to translate future requirements into viable, measurable goals and objectives. Traditional budget approaches make marginal adjustments from the existing base. By contrast, program budgeting, as envisioned by PPBS, seeks to establish a clear set of future objectives and assign resources to achieve them. Under PPBS, planning lays out the vision and establishes the objectives that must be achieved both to get there and to measure progress along the way.

Second, the FYDP ensured that planning took place across the services and not just within them. It thus became the key tool for identifying near- and mid-term bjectives, capturing complete budget data, identifying programmatic issues requiring leadership decisions, allocating resources and balancing the program. In this way, the FYDP connected the strategy to the budget while integrating the services' programs. At least, that was the idea.

Fixing the Process

Today, the FYDP performs only one of the functions originally envisioned. According to Defense Department instructions, "The FYDP is the official database that summarizes resources ([dollars], personnel, forces) associated, by fiscal year, with Department of Defense programs, as approved by the Secretary or the Deputy Secretary of Defense." Essentially, the FYDP has become a bookkeeping device rather than an analytical tool for senior Pentagon officials. There are numerous indications of this degeneration, but two are quite revealing.

First, the 10 major force programs that make up the basic structure of the FYDP are essentially unchanged since McNamara first created them in 1961. An 11th program, Special Operations Forces, was added in 1986 as part of the Goldwater-Nichols Act. Based on the original premise that major force programs reflect the major missions implied by the military strategy, it would seem that those managing the FYDP believe there has been no significant change in the strategic environment for 37 years.

Second, the FYDP is not used as the analytical basis of the Defense Secretary's review of service programs. Although this difficult review occurs, its usefulness has greatly diminished. During the fiscal 1999 to fiscal 2003 program review following the 1997 Quadrennial Defense Review (QDR), the total dollar changes directed by the Defense Secretary's staff amounted to a minuscule 0.58 percent of overall program resources. No one discussed whether the objectives of the FYDP major force programs had been satisfied because they were not used to identify major issues for Pentagon leaders regarding force balance and integration across the services.

The major force programs need to be reviewed and redefined so that they more closely reflect the current national security strategy. The QDR retained a strategic direction built around the need to fight two major theater wars nearly simultaneously. It expanded the existing strategy by acknowledging the unique demands of small-scale contingencies. The approach was described as the "shape, respond, prepare" strategy, in which American forces would be used to:

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• Shape the international environment through their presence and engagement around the globe.
• Respond to regional crises.
• Prepare for the demands of an uncertain future by pursuing a modernization program that captures the tenets of the revolution in military affairs and the operational concepts described in "Joint Vision 2010" by former Chairman of the Joint Chiefs of Staff Gen. John Shalikashvili.

The FYDP needs to be restructured with new major force programs reflecting this strategic approach.

In addition, the Office of the Secretary of Defense needs to be reorganized to create clear staff ownership of individual major force programs. This is particularly true of the Office of Program Analysis and Evaluation (PA&E), the successor to McNamara's Office of Systems Analysis. From its initial small size, PA&E has grown to an office of nearly 150 analysts and administrative personnel supported by numerous contractors. Because PA&E's analytical divisions are not clearly aligned with the FYDP, the major force programs are bureaucratically orphaned. PA&E should be substantially slimmed down and reorganized so that specific divisions are responsible for each major force program. PA&E would become a small organization identifying large issues for senior leaders, rather than a large organization developing small issues that don't merit leaders' interest.

In a harsh critique of the QDR last June, the General Accounting Office said: "The Modernization Panel's stovepipe approach to analyzing the service's procurement plans did not provide an integrated look at how the options or final decisions impact joint-warfighting missions." (NSIAD-98-155)

Were the FYDP being used as intended, it would have cut across the stovepipes. It also would have been program-based rather than budget-based and mission-oriented.

The steps necessary to fix the FYDP are straightforward: Leaders must understand the problem and be willing to enforce a solution.

Col. M. Thomas Davis retired as the Army Chief of Staff's chief of program development in 1997. He is the author of Managing Defense After the Cold War, (Center for Strategic and Budgetary Assessments, 1997) and is now directing a study of PPBS for Business Executives for National Security.