After conducting research over the past year, the Pentagon’s new acquisition and budgeting reform panel reports that the Department of Defense urgently needs “strategy-driven budgets and capabilities.”
POGO couldn’t agree more. We’ve been saying so for years.
In 2021, Congress established the Commission on Planning, Programming, Budgeting, and Execution (PPBE) Reform to evaluate and improve acquisition and budgeting processes at the Pentagon — a worthwhile task. Unfortunately, lawmakers proceeded to undercut the effort before it even began, abandoning all pretense of thought diversity by filling most of the commission with revolving door regulars who could potentially financially benefit from recommendations they make on the commission. I outlined members’ conflicts of interest in serving on the panel last March.
A year later, the commission published a status update on its research to improve how the Pentagon does business. The update contains a synopsis of inputs from Congress, the Pentagon, private industry, academic institutions, and federally funded research and development centers. The general consensus is that the Pentagon’s current budgeting and acquisition processes aren’t working, but the commission will “systematically evaluate” inputs and conduct its own research to “propose lasting changes in the way in which the DoD builds arms, allocates resources, and maintains itself.”
The commission is crystal clear that nothing in this status update is a recommendation. In fact, the commission won’t make any recommendations until August because, in the Fiscal Year 2023 defense bill, Congress extended the deadlines for the commission’s interim and final reports by six months each. The commission won’t publish its final report until March 2024, despite ongoing challenges for the defense industrial base to keep pace with growing acquisition demand. Time spent waiting for the commission’s recommendations means more time and taxpayer dollars being spent inefficiently.
But Congress doesn’t need to wait for the commission’s final report to improve acquisition and budgeting at the Pentagon. Congress can act now by implementing legislative solutions to many of the suggestions the commission included in the status update’s sampling of external inputs.
Repeal the Requirements for Pentagon Wish Lists
Eliminating Pentagon wish lists would address several concerns about poor prioritization at the Pentagon. Currently, Congress requires the Pentagon to produce wish lists outlining itemized funding requests outside the formal budgeting process. These lists (also known as unfunded priority lists) threaten national security by forcing the military services, combatant commands, and other military components to muddy their strategies and develop weapons that aren’t big enough priorities to fit into their base budget requests. This undermines the budget process and puts more pressure on an acquisition system already mired in cost overruns and delivery delays.
“Given that taxpayers foot the bill, Congress can’t wait for the commission’s formal recommendations to repeal the statutory requirements for Pentagon wish lists.”
Unclear strategic guidance makes these longstanding acquisition problems worse. Commissioners reported that external inputs highlighted a need for “more top-down guidance on priorities” and “clearer direction in facing the operational challenges and needs of COCOMs” (combatant commands). They also expressed need for a “more detailed vision” than provided in the National Defense Strategy and Defense Planning Guidance. The report even includes a suggestion to reinvent “the entire defense resource allocation system” instead of reforming the current PPBE process.
It’s clear that the Pentagon’s acquisition and budgeting processes aren’t working for anyone. The Pentagon doesn’t have the information it needs to make smart investment decisions, so it delivers new capabilities to warfighters late and over budget. Given that taxpayers foot the bill, Congress can’t wait for the commission’s formal recommendations to repeal the statutory requirements for Pentagon wish lists. Even the Pentagon agrees, as demonstrated by Defense Secretary Lloyd Austin publicly endorsing the repeal of wish list requirements just last week, marking the most significant Pentagon pushback on wish lists since 2009, when former Secretary of Defense Robert Gates helped pare back the requests by about 90% from one year to the next.
Thoroughly Test and Evaluate Acquisition Programs Before Funding Them
On a program level, lawmakers must withhold funding for large-scale production of any weapon system until its design has been completed and thoroughly tested. There is no reason to sink taxpayer dollars into systems that may not even work. Doing so only risks trapping Congress in a sunk cost fallacy and wasting money on systems that provide little if any additional capability to warfighters. In just the past 20 years, the Pentagon has wasted billions purchasing weapons like the littoral combat ship, F-35 fighter jet, and the Zumwalt-class destroyer before many of their critical technologies had been proven effective.
In the case of the F-35, the Pentagon has already spent nearly $200 billion on the program, which will cost about $1.7 trillion in its lifetime. And the Pentagon hasn’t even authorized the F-35 for full-rate production. But as my colleague, Senior Defense Policy Fellow Dan Grazier, notes, F-35 production has continued as if the Pentagon already greenlit the program. It has not, and isn’t expected to until next year — over 22 years after the fighter jet began development. The main reason the department hasn’t made a decision regarding full-rate production of the F-35 is that the software necessary to test it isn’t complete.
“There is no reason to sink taxpayer dollars in systems that may not even work.”
But Congress can easily avoid wasteful acquisition disasters like the F-35 program. The consultants to the commission appear to feel the same, sharing that “software needs a firm focus at the beginning of requirements generation” for new acquisition programs. Furthermore, external inputs told the commission that the best PPBE process would “empower decision-makers at critical levels of the process” with expert advice to make consistently “smarter and more timely decisions.” In other words, Pentagon decisionmakers need reality checks, not more money to waste on unproven capabilities. Congress must wield its power of the purse to ground Pentagon decisionmakers by limiting funding for programs before their designs are complete and they’ve been thoroughly tested.
Beware of More Wish List Items Disguised as Suggestions
Finally, it bears mentioning that, in addition to many well-known acquisition problems, the commission’s status update contains several red flags. To the commission’s credit, they point out that several of the suggestions sampled in the update may contradict each other. And Congress did not require them to publish this status update on their research, so the report is a welcome glimpse into their work over the past year.
However, the defense industry’s voice is loud and clear in the commission’s report on its research so far. Among the most concerning suggestions made to the commission were statements that the Pentagon needs a “more fluid budget process” as well as “higher innovation risk tolerance.” There’s also mention of a defense resource allocation system that provides “flexible money when needed, with limited oversight when appropriate.”
Congress added $45 billion more than the president and the Pentagon requested for the national security budget last year. That’s more than enough fluidity and flexibility as far as funding goes, especially since the Pentagon is notoriously irresponsible about financial management. And the Pentagon already tolerates plenty of risk. To take just one example, the Pentagon risked $32 billion on the Army’s Future Combat System and received little more than fancy PowerPoint slides in return.
Additionally, over half of defense dollars have gone to military contractors in recent years. Even with significant federal support and consistently strong revenues, contractors’ incentive to innovate only diminishes as the industry grows smaller and smaller — in part because those same companies have gobbled up so much of their competition. Military contractors constantly ask Congress for more money to innovate and meet urgent acquisition needs, but nothing is stopping them from innovating besides themselves.
When the commission’s upcoming interim and final reports are published, Congress should be wary of any recommendations to increase agility in the budgeting and acquisition processes by compromising on oversight. Specifically, Congress must maintain and expand the requirements for companies to provide the Pentagon with cost and pricing data, the department’s best tool to ensure it’s getting fair deals. The Pentagon certainly needs to deliver capabilities to warfighters on time, but reducing oversight by giving up negotiation tools like cost and pricing data is not the answer — and throwing more money at acquisition won’t make the process faster or cheaper, either.
Acquisition and budgeting reform at the Pentagon is sorely needed. And while POGO wishes the reform commission included budgeting experts from academia, non-defense industries, and civil society, we anxiously await the reform commission’s interim report in August.
In the meantime, we implore Congress to take clear steps to improve acquisition now. Lawmakers must repeal the requirements for Pentagon wish lists and exercise some fiscal restraint on untested acquisition programs. There’s no need for Congress to wait for the commission’s recommendations. Lawmakers can take meaningful action that improves acquisition and saves taxpayer dollars right now.