Defense

McNamara had other objectives in developing this management

tool. He sought to establish output metrics to measure the fulfillment of defense requirements. This proved difficult to do. In most

cases, he had to settle for increased visibility of input measures—in

particular, how much money was going into a program. Even achieving this proved challenging. Too often, he found that only the initial

costs of a program were reported, and a bow wave of future costs was

masked. To address this problem, he required that the full life-cycle

cost of a major program be calculated and displayed.

Finally, McNamara intended to link force programming decisions to strategic assessments. The Five-Year Defense Program

(FYDP) was established with 10 major force program (MFP) spending categories that cut across service competencies. The aim was to

allow the Secretary of Defense and his staff to give strategic guidance to the military services and then have a tool to measure the

service responses in programmatic terms. The program review

process would table alternative ways of fulfilling requirements.

These would be developed, analyzed, and costed to allow the Secretary of Defense to make high-impact choices that cut across individual service programs.

The PPBS has undergone a number of changes over the past

four decades, but the core elements and basic flow of the process

endure. It has served DOD and the Federal Government well.

Indeed, few other Cabinet departments have a process in place that

provides a systematic and relatively visible review of programs and

resource allocations.

That said, the PPBS was designed in a much different security

context than faces the United States today. In the early 1960s and

for nearly three decades beyond, the Nation faced global competition from a large, well-armed, military power, the Soviet Union. Stability depended on an uneasy military equilibrium and the knowledge on both sides that conflict could result in catastrophic damage.

This environment created an imperative to avoid mistakes. High

priority was placed on a steady, evolutionary improvement in military forces to keep pace with a relatively well understood, steadily

evolving adversary.

Overview

The Office of the Secretary of Defense has released its first

Transformational Planning Guidance to steer the Armed Forces

through a joint process of transformation. This is a strong step in

the direction of making transformation and innovation visible

parts of the defense planning process, but more is needed. The

planning, programming, and budgeting system (PPBS) through

which the Department of Defense (DOD) prioritizes its programs

and resources has to be restructured to facilitate transformation

and innovation, not to obstruct them. DOD has begun a trial

resource allocation process that will reduce the burden of repetitive report generation that has drained time and energy away

from innovative, strategic change. This process gives senior leadership an opportunity to shift its attention from wrestling with

budget detail to developing initiatives to transform U.S. forces.

However, this change will not happen of its own accord. A set of

proposals that would enable senior leadership to move its focus

from the back end (budgeting) of the resource allocation process

to the front end (planning and idea generation) is presented

below. A review of how the PPBS has evolved is presented to highlight the need to target specific parts for restructuring.

Introduction

The planning, programming, and budgeting system (PPBS) was

developed by Secretary of Defense Robert McNamara in the early

1960s to manage Department of Defense (DOD) programs and

resources. A key purpose was to rationalize investments in strategic

nuclear delivery systems and to answer the pressing question, “How

much is enough”? McNamara also used the PPBS to integrate the

force plans of the three services. He held that, in the absence of such

a system, each service developed its force program with only incidental attention to the other services. Consequently, the three programs were suboptimized—the resultant capabilities being less than

the sum of the three parts.

A New PPBS Process to Advance

Transformation

by Stuart E. Johnson

A publication of the

Center for Technology and National Security Policy

National Defense University

SEPTEMBER 2003

Number 32

Horizons

September 2003 Defense Horizons 1
The PPBS was well suited to such a challenge. It forced defense

planners in the military services and in the Office of the Secretary of

Defense (OSD) to make choices and prioritize programs. Decisionmakers could get a fair degree of insight into the military capabilities that would be fielded in the near future. The risk of making a

serious mistake and suffering its dangerous consequences was minimized. Moreover, this predictability allowed DOD to provide guidance in arms control negotiations in the 1970s and 1980s that was

coupled to relative strengths and weaknesses of U.S. forces in relation to Soviet forces.

Today, the United States faces a different set of challenges. No

country can confront the awesome military power of the United

States head on. If a peer military competitor begins to emerge, there

will be plenty of warning. Even the problem of defeating a regional

aggressor in a classical cross-border invasion of a friend or ally continues to recede in likelihood and seriousness.

Threats to our security and to that of our allies have taken on a

different character. The threats are more diffuse, harder to identify

with certainty, and less tied to nation-states with powerful standing

military forces. Threats for the foreseeable future are far more likely

to arise from terrorists or rogue nations with access to weapons of

mass destruction.

These threats are not “lesser included cases” that can be taken

care of handily by large military formations configured for highintensity conflict with a hostile nation-state or alliance. They are

“different cases” that require a different response from forces organized and employed differently. Our forces, or a good part of them,

need to transform, to find new ways of bringing highly focused military power to the battlefield promptly, from a long distance and with

limited risk to themselves.

Managing transformation presents a challenge to a Secretary of

Defense, whose primary management tool is the PPBS. The system

was designed for a different time, security environment, and set of

military challenges. The system is well suited to managing continuity, not change. It tends to impede transformation rather than

encourage it.

Discarding the PPBS altogether is not feasible; DOD depends

on it to administer the budget of a large and complex organization.

That said, new elements can be incorporated into it to facilitate

transformation. It is instructive to review obstacles to change, some

of which already are under serious consideration by OSD. 

The PPBS Cycle

The PPBS comprises several major stages.

■ Quadrennial Defense Review (QDR), a strategic review of the security environment that reflects the defense priorities of the administration, is

prepared during the first year of each administration (including returning

administrations).

■ Defense planning guidance is prepared by OSD and issued to the

military departments. This reflects the priorities of the Secretary of Defense

and guides the military departments in preparing their proposed programs

and budgets. It is targeted for submission in late spring.

■ Program objective memoranda (POM), statements of the proposed

program and activities of the military departments, are submitted in the

summer.

■ Budget estimate submissions (BES), detailed estimates of the funding required to implement the program proposed in the POM submissions,

are delivered concurrently with them.

■ Program and budget review. OSD staff and the Joint Staff review

the POM and determine whether they conform to the Secretary’s guidance

as expressed in the Defense Planning Guidance (DPG). If there appears to

be a disconnect, the staff will prepare an issue paper for review by senior

DOD leadership. Their decisions are captured in program decision memoranda that may dictate a change in the department’s program and budget.

■ Budget submission. The draft budget to the Office of Management

and Budget (OMB) by mid-fall; it is incorporated into the budget submissions of other cabinet departments, sent to Congress in late January.

At this point, Congress holds hearings and reviews the budget,

making its own revisions and finally sends it to the President for his

signature before the start of the new fiscal year (October 1).

The PPBS has a number of strengths, chief among them that it

keeps track of a very large program and budget, and decisions involving large sums of money are relatively transparent. With determined

leadership by senior DOD leaders, some change can be accommodated within the existing system. But the PPBS has shortcomings that

transcend the capability or good will of the participants to overcome.

Industrial Age Management Tool

The PPBS is an industrial age management tool that is ill suited

to the information age. McNamara developed it to centralize control

of DOD planning in OSD, despite the “Title 10” Congressional

requirement that the Secretary of Defense manage the department

through the separate services. McNamara configured the PPBS

based on the best management practices of a modern, large, industrial corporation that was in competition with similar corporations

similarly operated based on experience accumulated in the 1940s

and 1950s. This led to a focus on three elements that provided savings and, presumably, a competitive edge: cost effectiveness, elimination of redundancy, and process management.

Cost effectiveness was chosen as a key (often the only) measure

of merit in choosing among alternatives in the defense program. If

there were a way to trim the cost of producing an end item or to substitute another less expensive system to do the same job, the change

would be adopted. Savings were also found by eliminating redundancy, most notably in several strategic nuclear force programs.

Finally, best practices of a large industrial corporation of the 1960s

dictated a process to manage the development of a new product from

engineering through getting the product to market. Likewise, DOD

instituted a largely linear PPBS process to track the development of

a weapon system from research and development through test and

evaluation and initial production to full-scale production.

This process of centralized control came under considerable criticism from the armed services. In response, during the Nixon administration, Secretary of Defense Melvin Laird turned the process into

more of a dialogue between OSD and the services. To decentralize the

2 Defense Horizons September 2003

Stuart Johnson was Director of International Security and Defense Policy

programs at the RAND Corporation, where he supervised a program of

policy and strategy research for OSD, the Joint Staff, and the regional

commanders. In 2002 he joined the Center for Technology and National

Security Policy as a Distinguished Research Professor. He may be contacted

at johnsons@ndu.edu or (202) 685–2534.
acquisition process while keeping it coherent, Deputy Secretary of

Defense David Packard developed detailed guidelines for service procurement called the “5000 Series” of documents.

All these processes served the Department of Defense well during the Cold War, when deliberate, evolutionary improvement of

forces sufficed. But forces today must react more quickly to a broad

range of challenges that can change suddenly. Moreover, the military

is being called on to execute types of missions it has never faced

before. Evolutionary improvement of forces no longer suffices. The

appropriate model for the services is a successful, information age

management style.

Information age management, in contrast to industrial age

management, looks for and cultivates the breakthrough concept.

Instead of simply improving the existing product or service line, the

successful corporation seeks whole new ways of meeting market

needs with emerging and existing technologies. This can mean a

sharp departure from a company’s customary way of doing business.

A good example of a breakthrough concept occurred in the cable television industry. It invested heavily in fiber optics to achieve veryhigh-speed data transmission. When the market for cable television

had largely become saturated, some companies recognized that a

fiber optic network also could provide high-speed Internet service.

For a modest investment on the margin, they began to offer a bundled package of cable television and high-speed Internet service at a

price below what competitors could offer separately.

In the same way, our PPBS process needs to have some capability to brainstorm and cultivate breakthrough concepts. Some of

this can be done in the field. A good example was the use of special

operations forces attached to Northern Alliance ground forces during Operation Enduring Freedom in Afghanistan. The Northern

Alliance forces forced the Taliban and al Qaeda troops to concentrate, then special operations forces using a global positioning system locator transmitted coordinates of enemy positions to attack aircraft that struck those targets accurately and with devastating

effect. This unique combination of close-up pressure on the enemy

with precision, standoff firepower was a new way to employ proven

technology and hastened the precipitous collapse of the Taliban government. The search for such breakthrough concepts must become

part of the PPBS process.

PPBS Suited to Stable Strategic Environment

The PPBS process was designed to involve many players. This

is a virtue for a system that aims at steady evolutionary improvement in forces; the multitude of participants maximizes continuity

and minimizes risk. The problem is that such a system cannot

respond to a dynamic strategic environment of the type that we

have faced for a decade. The length of the cycle from concept to

capability is simply too long.

A related issue is the focus of the PPBS process on major

weapon systems. Although the procurement portion of the defense

budget makes up only about 20 percent of the total, this part of the

program gets the most scrutiny. This is to be expected. It is the part

that is most visible and most amenable to analysis. Unfortunately,

this focus on major weapon systems encourages evolutionary

improvement of existing systems. This steady, low-risk improvement

of the arsenal is out of place in a volatile strategic environment.

The Burden of Redundancy

As the PPBS has evolved, DOD and Congress have imposed

reporting requirements on participants. In all cases, there is a

rationale for doing so, and in some cases, the process cannot run

without them. In other cases, the reports are redundant, arrive out

of phase with other activities in the PPBS cycle, and consume considerable staff time. 

Consider an OSD analyst’s role. The PPBS documents must be

coordinated with multiple organizations within and sometimes outside the Pentagon—with unified and specified commands and

defense agencies, to name two. The analyst also must keep an eye on

overlapping reports that are being prepared by other divisions of

OSD, by the Joint Staff, or by a service staff. Preparation and tracking of reports and meeting deadlines become confused with analysis

and diminish the contribution staff can make to the important work

of developing new options and strategic changes in direction.

A related problem is that preparing reports drains time and

attention away from true planning. In most years, the planning phase

has been thin or has been completed too late to serve as a useful

framework for service programmers. The result has been that most

of the attention is paid to the budgeting phase of the PPBS at the

expense of the planning and, to a lesser extent, the programming

phases. DOD has instituted changes to the process to ameliorate this

problem. In particular, a full DPG will be produced, and the services

will be required to submit a full POM only biennially. The time freed

up could be used to develop and put on the table innovative and

transformational proposals.

The DPG Lacks Leverage on Service Plans

The key tool available to the Secretary of Defense in giving

guidance to the services on priorities to be reflected in their programs is the DPG. Ideally, the service programmers should be able to

find in the DPG a planning framework to guide them as they build

their POM. It has seldom worked. The DPG is usually too late and

mostly too broad to provide a framework for service programmers or

a metric against which service POM can be evaluated.

The service POMs are due to OSD in the summer. Naturally, the

process of building the POM begins much sooner; it is at full throttle

by the preceding fall. To provide an unambiguous framework for

service programmers, the DPG would have to be signed out around

the same time, and no later than October or November. This is seldom the case. Much more typical is a DPG that is issued half a year

later—that is, only a month or two before the POMs are due to OSD. 

The new process, which dictates a full DPG only every other

year, will solve this problem on the off years and provide breathing

room for OSD staff to complete the full DPG in good time during the

years of the full PPBS cycle.

Ideally, the DPG should express the Secretary’s intent in output

terms to give service POM builders clear direction to follow in their

programming. In fact, much of the DPG is too broad in scope to be

useful, in part because of the tyranny of consensus that rounds off

September 2003 Defense Horizons 3
the edges as the document is coordinated among multiple DOD

offices with a stake in the document. Also, senior leaders do not

focus on the front end of the PPBS process. Their energy, attention,

and time typically (and understandably) are concentrated at the

back end, when the deadline for submission of the DOD budget to

OMB is pressing. This is not the optimum time allocation for senior

leadership. Indeed, in the commercial world such late engagement

is a sign of a sick corporation: At the beginning and middle of a business process, the senior management gives scant time and attention.

Only after a process or product has matured and is ready for production or marketing, and perhaps has run into trouble, does the senior

leadership engage heavily. Hence, the bulk of their time is spent

managing crises, trying to fix a program in the late stages, when their

ability to influence the process is least.

Actionable Recommendations

The PPBS process serves an important administrative purpose

in keeping an audit trail of a large and complex organization. But the

Secretary of Defense needs that tool for an additional purpose: to

manage the urgent process of transforming our Armed Forces to

cope with a challenging, fluid strategic environment. The new

resource allocation plan being implemented on a trial basis in DOD

beginning this fiscal year (FY) provides important breathing room

from the burden (and distraction) of repetitive report generation.

How much these reforms lead to more innovation and transformation in U.S. forces depends on how they are implemented and how

the time freed up is used. A way ahead is outlined below. It builds on

the restructured PPBS process for FY05–FY09 outlined below.

Year 1:

■ POM and BES submissions are limited to change proposals that

reflect specific Secretary of Defense guidance

■ OSD staff works on the QDR and DPG

Year 2:

■ QDR is issued

■ DPG is issued

■ POMs are submitted

■ BESs are delivered

■ The program and budget are reviewed

Year 3:

■ The previous year’s DPG is operative

■ POM and BES submissions are limited to Program Change Proposals as directed by the Secretary of Defense

■ OSD staff works on the next DPG

Year 4:

■ DPG is issued

■ POMs are submitted

■ BESs are delivered

■ The program and budget are reviewed

Shift Senior-level Attention to Planning

Secretary of Defense Donald Rumsfeld has said, “I want to be

around to watch the trains being loaded up at the beginning of this

process, not wait till they finish their trip and are unloading.” DOD

leaders need not spend more time on the PPBS as a whole; they

need to reallocate their time and to place proportionately more

effort on the front end—the planning phase—and avoid the sickcorporation syndrome.

One way to shift leadership attention toward the front end of

the process is for a few (perhaps three) small teams of half a dozen

or so senior decisionmakers to meet early in the planning phase to

enrich their input to the planning of the PPBS. Each group could

develop one or two transformational issues that could become an

integral part of the DPG. Groups should meet for a limited time,

which would encourage focus on high-impact transformational initiatives and avoid entanglement with details better handled by

staffs. With leadership intent clear, staff could monitor execution of

initiatives in the intervening months of that year’s PPBS cycle.

Where would these initiatives come from? Transformation is

the subject of a broad debate in the national security community,

and there are plenty of ideas in circulation. Senior decisionmakers

could select a high-leverage initiative from this pool, refine it, and

articulate it in output terms. Since the leaders themselves are

immersed in the critical issues facing DOD, they would have their

own ideas of which initiatives could yield a high impact.

The key would be to ensure that each issue is high-leverage and

expressed in output terms. An example might be: “Ensure that a team

of up to 300 Special Operations Forces troops can have an offshore

platform in place within 30 days to conduct operations in hostile territory for at least 30 days.” It would then be the job of the service staffs

to include this requirement in their POMs and the job of OSD and the

Joint Staff to monitor the process to ensure it is implemented.

Reflecting the Secretary’s Intent

The DPG should express Secretary of Defense intent through a

clear statement of his priorities in output terms. Portions of the DPG

do this, though not systematically. When the DPG does this, it gives

service POM builders a framework to program against and OSD staff

a clear standard for reviewing and evaluating the POMs. The two key

words are clear and output.

This is not a simple process. OSD staff would need guidance

from the Secretary to prepare the document with a precision that

will resist the tyranny of consensus that too often comes from coordinating a document through myriad stakeholders. Once this intricate and difficult process has been completed, little is to be gained

by repeating it the following year. Indeed, if written at the strategic

level, the DPG should require only targeted changes in the following

year.

The proposed cycle for an administration is outlined below.

Many of the suggested changes track the procedures that the administration is instituting during the FY05–FY09 programming and

budget cycle.

First year. Make modest adjustments to the budget to be submitted to Congress. This is typical. Indeed, the press of time for Congress to conduct hearings and to mark up the budget prevents much

more than this. The staff can use this year to conduct a QDR, as

required by law. The DPG for the following year could be derived

4 Defense Horizons September 2003
from the QDR almost concurrently, because most of the same decisionmakers are involved in preparing both reports. The DPG would

have maximum utility if, as proposed by OSD, it were delivered by fall

of the first year rather than late spring of the second year. This would

give the services plenty of lead time, which is critical if they are to

adapt their second year program to the new DPG. In addition, by fall

of the first year, the new team has been in place for a while, and a

group of senior leaders could meet to develop a handful of transformation initiatives that would become part of the programming for

the second year POM.

Second year. The QDR and DPG developed during the first year

remain the operative guidance documents to the services as they

build their POMs. The OSD staff could use the year to explore and

analyze strategic issues with emphasis on transformation as directed

by the senior OSD officials.

Third year. The DPG remains operative, though amended by

OSD leadership. The OSD staff uses the year to work on the next

DPG that will be operative for the following year. A group of senior

leaders could meet to develop a handful of transformation initiatives

that would become part of the programming for the fourth year POM.

Fourth year. The third year DPG is the operative guidance document for service POM building. Again, the staff can use the time

freed up to explore and analyze strategic transformational issues as

directed by OSD leadership.

In sum, the service POM builders would have time to focus

their programs in accordance with Secretary of Defense intent,

rather than scrambling around each year to make their programs

conform to yet another (typically late-arriving) DPG.

Recast the FYDP

The Future Years Defense Program was originally conceived in

the 1960s to give the Secretary of Defense insight into how money

was being allocated in major program areas across military departments. Ten MFPs were defined that expressed the principal missions

the military needed to perform, and the departments were

instructed to report their programs in these categories. This allowed

the Secretary to see how the objectives for each mission area were

being funded, to identify duplications in effort among the services, or

even to shift money among services if one service had a more costeffective way of meeting an objective. It also allowed the Secretary

to make strategic choices (for example, shift money from one major

program area to another—perhaps from strategic forces to general

purpose forces) if the overall program were out of balance with the

strategy. The FYDP was organized into the MFPs as shown below.

Initial FYDP Structure

MFP 1. Strategic Forces

MFP 2. General Purpose Forces

MFP 3. Command, Control, Communications, and Space

MFP 4. Airlift and Sealift

MFP 5. Guard and Reserve Forces

MFP 6. Research and Development

MFP 7. Central Supply and Maintenance

MFP 8. Training, Medical, General Personnel Account

MFP 9. Administration and Associated Activities

MFP 10. Support to Other Nations

In the meantime, the strategic environment the Nation faces

has changed dramatically, but the structure of the FYDP has not kept

pace. In 1986, MFP 11—“Special Operations Forces”—was added at

the direction of Congress as part of the Goldwater-Nichols Act. Other

than that, the structure has changed little. With some change of categories, however, the FYDP can be made more amenable to focusing

service programs on transformational initiatives. A candidate reconfiguring of the FYDP to reflect the current and emerging strategic

environment is illustrated below.

Candidate MFP Reconfiguration

MFP 1. Joint Expeditionary Forces

MFP 2. Major Theater War Forces

MFP 3. Special Operations Forces

MFP 4. Mobility Forces

MFP 5. Forward Presence and International Activities

MFP 6. Strategic Nuclear Forces and Missile Defense

MFP 7. Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance (C4ISR) Programs

MFP 8. Research and Development

MFP 9. Medical Programs

MFP 10. Central Supply, Maintenance, and Installations

MFP 11. Personnel, Training, and Development

The key change is to acknowledge that our forces are being

called on increasingly to execute demanding joint expeditionary

operations. These operations differ from a major theater war. They

require prompt application of powerful military force in a highly precise, focused manner. This is a tall order, and getting it right will

require a portion of our forces to be transformed. Separating those

forces out of the present “General Purpose Forces” into the “Joint

Expeditionary Forces” category would give the supporting programs

extra visibility and a management tool for the Secretary of Defense

to accelerate the transformation of these forces.

The Strategic Nuclear Forces MFP could be expanded to

include missile defense to underline the transformation of our strategy. This would emphasize the prominence of missile defense in our

defense strategy and the decline in the centrality of strategic

nuclear offensive forces.

More generally, warfighting functions are separated from general support functions to provide insight into the cost of support functions, which have grown disproportionately over the past decade.

Medical programs are separated to give them particular attention,

because their costs are growing rapidly with no end in sight.

This configuration of MFPs could also serve as a template for

writing the DPG. Providing policy guidance in a format that allowed

the services to program against it in a straightforward manner

would make their work and the program review process more efficient and effective.

Integrate Jointness into POM Submissions

One of McNamara’s aims in developing the PPBS was to ensure

that the capabilities of the services were mutually enabling and synergistic. Every Secretary of Defense since has pursued this goal.

While progress has been made, there still is a long way to go. More

importantly, the nature of war now and for years to come demands

forces that can bring firepower to bear on the battlefield from every

September 2003 Defense Horizons 5
medium in a coordinated, seamless fashion. A seamlessly operating

joint force cannot be assembled just before an operation; it must be

equipped and trained to operate jointly months or years in advance.

Building such a force is the aim of transformation.

Starting at the planning and programming phase, at least some

elements of the PPBS, especially the programming, must be done

jointly. This would be a painful process, but it would force close

coordination among the service programmers. At the very least, it

would make services aware of the details of each other’s programs.

At the very best, the resultant programs would incorporate interoperable design from the beginning. This would be a substantial step

toward transforming the force.

The first step could be to direct an integrated, joint POM submission in the area of C4ISR programs. An interoperable C4ISR suite

is critical to seamless operation of forces that will depend on strong

information dominance over the enemy, a shared common operational picture, and targeting data. Chairman of the Joint Chiefs of

Staff General Richard Myers has already proposed taking this step,

acknowledging that it will be difficult but will yield a high payoff.

The next MFP that could be prepared jointly is the Mobility

Forces MFP. This should be far less difficult than preparing a joint

C4ISR MFP submission. Following that, programs for Forward Presence and International Activities (which would include peacekeeping operations) could be prepared jointly. Finally—and critically—

joint program preparation could be extended to the Joint

Expeditionary Forces MFP.

Review Operations and Maintenance

Operations and maintenance (O&M) has grown faster in

absolute dollars and in percentage than the other major budget categories. Table 1 below illustrates this growth.

The absolute dollar increase in O&M is greater by 50 percent

than that of investment spending (procurement and RDT&E combined). While there is not a one-to-one correspondence between

investment spending and force transformation, the process is supported by targeted investment in those technologies that enable

force transformation: command, control, and communications;

reconnaissance; surveillance; and precision strike, to name four. The

causes of O&M growth are complex and need careful analysis, but

the fact remains that growth can choke off investment needed to

enable transformation.

Incentives need to be provided to put the brakes on the growth

of the O&M budget. At present, there is very little incentive to save

O&M costs; in fact, there are disincentives. As a unit approaches the

end of a fiscal year, it often feels an imperative to accelerate O&M

spending, lest it lose the surplus and receive a reduced allocation

the following year. The most promising incentive is to allow a service

or an installation to keep whatever O&M they can save and plow it

back into improving the quality of its program. While this would not

roll back O&M spending substantially, it would provide a strong

incentive to flatten off its growth.

Incentives for Transformation

While most senior DOD leaders believe that transformation is

important, there are many competing priorities for resources, and

there will never be enough money left over from core programs to

fund transformation priorities. The problem is not a lack of good

ideas; it is the lack of a budget incentive to make these programs a

priority for the services. Some progress was made in the past budget

cycle, when the services were asked to identify programs that were

transformational, and those programs received extra support in the

program review.

This is a good start, but more can be done. One impediment to

these initiatives is the difficulty of breaking into the programmatic

priorities of the services. The key is to target funding incentives to

the services to transition new equipment or processes with the

understanding that, after a short time, the transformation programs

would be integrated into the core service program. The Office of

Force Transformation would be the appropriate OSD element for this

function, and Joint Forces Command could be the cognizant military

organization to review the candidates for this transition funding.

Conclusion

The PPBS is widely recognized as a barrier to transformation.

Moving to a full PPBS cycle every other year will enable senior DOD

leaders to shift their attention from the end of the process, where

budgeting details dominate, to the beginning, where transformational

initiatives can be introduced. This modest reform will give OSD and

the services some breathing space that will enable them to innovate

further. In a few years, the budget process might be sufficiently

reformed that DOD can engage in wholesale transformation

6 Defense Horizons September 2003

Table 1: Budget Growth by Category

(billions of FY03 dollars)

Increase Increase

FY99 FY03 (dollars) (percentage)

Military Personnel 83.2 94.3 11.1 13.3

Operations and 114.2 150.2 41.2 37.8

Maintenance

Procurement 54.2 68.7 14.5 26.8

Research and Development, 40.9 53.8 12.9 31.5

Testing and Evaluation

Defense Horizons is published by the Center for Technology and National Security Policy through the

Publication Directorate of the Institute for National Strategic Studies, National Defense University.

Defense Horizons and other National Defense University publications are available online at

http://www.ndu.edu/inss/press/nduphp.html.

The opinions, conclusions, and recommendations expressed or implied within are those of the

contributors and do not necessarily reflect the views of the Department of Defense or any other

department or agency of the Federal Government.

Center for Technology and National Security Policy

Hans Binnendijk

Director