A U.S. defense budget reform commission has called for sweeping changes to the Pentagon’s budget process to allow the Department of Defense to respond more rapidly to dynamic national security challenges. The review was mandated by the FY22 National Defense Authorization Act.
Defense budgets are currently drafted under a cumbersome 1960s-era Planning, Programming, Budgeting and Execution (PPBE) process, which the commission says is not capable of responding quickly to the needs of the warfighter. It takes two years for funding to go from the initial planning stage to being signed into law and available to spend by the military, and this timeline doesn’t provide the agility to rapidly adopt the latest technologies. The report specifically cites commercial technologies that develop at lightning speed, such as artificial intelligence or cyber capabilities. The goal of reforming the budget process is to “provide the agility required to adopt technological advances at the speed of relevance,” according to the report.
The commission offered a series of 28 recommendations, half of which are deemed priorities. The first item on the list is replacing the existing PPBE process with a new Defense Resourcing System, which would link defense strategy and resource allocation. The new DRS would consist of three processes: strategy, resource allocation, and execution. Strategic documents like the National Defense Strategy are often criticized because they are disconnected from the investments needed to meet the stated goals. The DRS would aim to help bridge that gap.
The report calls for a continuous planning and analysis cycle to help inform those strategic goals. Threat analysis, wargaming, and cost benefit assessments would begin earlier in the planning cycle to help establish a regular cadence of information to help military leaders make decisions on both strategy and investment.
A common theme in the report is flexibility for the Pentagon. The commission wants military leaders and program managers to have more leeway in making budgeting decisions throughout the year. One way to accomplish this is to increase reprogramming limits. Once Congress has enacted a budget, the Pentagon has certain allowances for shifting money around because of revised priorities or changing circumstances, but congressional approval is required for larger transfers. The commission recommended increasing the reprogramming threshold to keep pace with historical spending increases, meaning the Pentagon would be able to make more adjustments on its own without needing approval from Congress.
Another recommendation is to review and consolidate budget line items. In any given year, there are roughly 2,000 budget line items split between research and procurement accounts. Reducing this number by consolidating programs into fewer budget lines could streamline the resourcing and execution processes, according to the commission. By consolidating programs into fewer line items, the Pentagon would have more flexibility to move funding around within each of those lines, thereby reducing the number of reprogramming requests sent to Congress. Another recommendation would reduce barriers for the development, procurement, and sustainment of software by allowing that work to be funded via accounts for procurement, research & development, or operation & maintenance.
The flexibility theme continues in the panel’s recommendation to minimize the impact of continuing resolutions. When Congress fails to pass a budget on time, stopgap spending bills (aka continuing resolutions) are needed to prevent the government from grinding to a halt. These CRs keep agencies running at the previous year’s spending levels, and they prevent the launch of new start programs and result in many programs being underfunded. The commission recommends allowing the Pentagon, under certain circumstances, to initiate new start programs and increase procurement quantities while under a CR. The FY24 defense authorization bill included a provision a provision that provides the Pentagon with the ability to spend up to $100 million, shared among the services, on new start programs even if a final budget hasn’t been passed. The commission’s recommendation would expand on this authority.
The reform commission has also recommended modifying the very structure of the budget itself. Currently, the defense budget is organized with color of money at the top (research and development, procurement, operations, etc.). From there, you drill into service/component, appropriation account (ex. Aircraft Procurement, Air Force), budget line item, and project. The proposed layout would start with the service/component at the top, followed by major capability activity area, system/program, and finally color of money. This change is intended to provide increased transparency by allowing full lifecycle costs for programs to be displayed all in one place, rather than having to piece together disparate line items from various appropriation accounts. The structural changes would require several years to implement. The report outlined a notional timeline that would seek congressional approval on a new structure in FY25, with the FY28 request representing the first budget to use the revised structure.
The commission’s findings will be reviewed by the Pentagon, lawmakers, and other administration officials to determine how to move forward. Some changes could be implemented quickly, while others will take years.
As editor of International Military Markets, North America, Shaun has cultivated a deep understanding of the vast defense markets in the United States and Canada. Shaun's perspective on defense procurement and budget issues has been cited in a variety of defense periodicals, including Defense News and National Defense Magazine. Further, Shaun played an integral role in the development of Forecast International's U.S. Defense Budget Forecast product, which offers an unprecedented level of insight into the Pentagon's acquisition budget. In addition to providing original analytical content for the U.S. Defense Budget Forecast, Shaun oversees an internal defense budget forecasting process involving Forecast International's team of skilled systems analysts following release of the DoD's annual budget request. Shaun is also in charge of managing Forecast International's Weapons Inventory database.
