By Matthew Beinart, Defense Daily / August 16, 2023

The commission tasked with reforming the Pentagon’s budget planning process has issued its interim report, which includes recommendations aimed at improving the department’s ability to foster innovation, providing greater funding flexibility and bolstering engagement with Congress.

Deputy Defense Secretary Kathleen Hicks said on Tuesday she’s directing the Pentagon to adopt the actions recommended in the Planning, Programming, Budget and Execution (PPBE) Reform Commission’s report that can be implemented in the near-term.

“It’s no secret that DoD’s resource allocation process was born in the industrial age, and the department has undertaken significant reforms to improve it. The recommendations made in the Commission on [PPBE] Reform’s interim report released today will further these efforts,” Hicks said in a statement. “The [commission’s] work is immensely important to assisting Congress and DoD in the nation’s efforts to stay ahead of the pacing challenge, ensuring our agility in fielding combat credible forces at speed and scale. I stand ready to provide continued DoD cooperation with the Commission and to receive its final report in March 2024.”

Former DoD Comptroller Bob Hale, chair of the commission, and Ellen Lord, the vice chair who was previously the Pentagon’s top acquisition chief, detailed the interim report during a discussion with reporters on Tuesday, noting it includes recommendations that can be acted on now along with suggested proposals where the group is soliciting feedback to inform next year’s final report. 

“I think it would be irresponsible to throw everything out, as appealing as that might sound to people. So what we’re trying to do is take what works and streamline it so that we have a relevant timeframe,” Lord said during a Defense Writers Group discussion. “We are trying to make sure…that budget structures are easy to understand, that within DoD decisions are made quickly and then that information is presented to Congress and we have more iterations. So we want to take the current structure and streamline it and bring modern techniques to the building, particularly, as well as Congress.”

The 14-member commission was mandated by the fiscal year 2022 National Defense Authorization Act, with Senate Armed Services Committee Chair Jack Reed (D-R.I.) having led the call for PPBE reform (Defense Daily, Feb. 1 2022). 

Reed has previously said the Pentagon’s budget planning process has been largely unchanged since the 1960s and it’s “likely too slow and cumbersome to meet many of DoD’s requirements to adopt new technologies in a rapid, agile manner” (Defense Daily, May 14 2021).

The commissioners’ initial report notes the group found “that while the current PPBE system has its strengths, significant improvements can be made.”

Hale said the commission spent the last year and a half on a “listening and learning tour,” which included more than 560 interviews to date, to inform the interim report.

The process included analyzing other U.S. federal agencies’ approach to budget planning, which Hale said “have flexibility that DoD badly needs,” as well as those of partner nations such as Australia, the U.K. and Canada, that feature “vastly less legislative oversight” but still face similar challenges, and those of China and Russia.

Lord highlighted the ability to “link budgets to strategy” and improve engagement between the Pentagon and Congress as key priorities when formulating the recommendations in the report.

“We need a cadence of communication that’s much more data-driven between DoD and the Hill. 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, [it’s having] the ability to communicate back and forth in secure enclaves with consistent budget information,” Lord said.

Recommendations in the report the commissions deems actionable now include accelerating the DoD Comptroller and Cost Assessment and Program Evaluation (CAPE) Offices IT system consolidations and establishing classified and unclassified enclaves for information sharing between the Pentagon and lawmakers.

Hale also highlighted a near-term recommendation that the Pentagon work on consolidating its budget line items, noting research and development accounts across the department can have a thousand individual line items in their budget documents.

“You’ve got to wonder whether that is so many that it’s difficult for DoD to manage, let alone for Congress to execute oversight,” Hale said.

The report also recommends having DoD provide a mid-year budget update briefing to Congress, which would focus on budget execution and reprogramming opportunities as well as touching base on updates following the rollout of budget requests earlier in the year. 

“We believe, perhaps, if the mid-year [budget] update was presented that might get of some of those questions [between DoD and Congress] and, again, be more effective and efficient for both sides,” Lord said.

Hale and Lord said the commission will now look to solicit feedback on the mid- and long-term suggested proposals to inform its final report.

Those recommendations include providing more flexibility to the “color of money” and budget structure for how DoD entities can use their funds, additional agility around “year of execution” for budgeted funds and “strengthening the defense planning guidance with analytics for big decisions,” according to the report. 

“That is an attempt to restructure the budget so the dollars are expressed in a more mission-oriented fashion and perhaps Congress eventually even appropriates in a more mission-oriented fashion,” Hale said.

Hale cautioned that he does not expect “real quick action” on what’s proposed in the interim report, while adding he sees “some appetite or willingness to consider some changes to PPBE.”

“I think it will take time. The [Pentagon] is also going to have to review and accept these. And frankly, there’s going to be a bandwidth problem for the Department of Defense. They’ve got so much going on,” Hale said. “I don’t expect to see a lot, frankly, in the legislation this year. [The NDAA and appropriations bills] are well along. They’re in conference in most cases. But I do hope to see comments and we’re seeing some already.”

Lord, however, said she has “very high expectations” that some of the actions that can be implemented sooner will be taken up by the department and inform legislative discussions in the near-term.

“We hope there will be a dynamic discussion going into conference and that we’ll see some of those [near-term actions] and that are potential recommendations, which are more mid and long-term, will foster discussions during conference as well but also will be informed by the engagements that we plan to have. We see this as a multi-step process,” Lord said.