Planning, Programming, Budgeting, and Execution (PPBE)

1. Planning, Programming, Budgeting, and Execution (PPBE) Roberta Tomasini Professor of Financial Management Defense Acquisition University roberta.tomasini@dau.mil 703-805-3764

2. FM Scope: From Requirement to Capability Planning, Programming, Budgeting and Execution Life Cycle Cost Annual Funding Estimate Cost Analysis FYDP DPG POM RMD Funding Policies ICE Full Funding (Exceptions) MFP PE BES SPR CCA CAIV Fiscal Environment Incremental Funding POE AoA Congressional Enactment HAC HASC HBC President’s Budget SAC SASC SBC Budget Resolution Authorization & Appropriation Laws Acquisition Program Baseline Operational Concept Force Structure Modernization Operational Capability Readiness Sustainability Feedback Commitment Reprogramming Capability Docs Capabilities-Based Assessment Budget Authority Obligation Expenditure Outlay Budget Execution

3. PPBE Outline • Overview • Better Buying Power Initiatives • Building Blocks • FYDP, MFP, Program Elements • PPBE Process and Schedule • Resource Allocation Process

4. Three Major DoD Management Systems Planning, Programming, Budgeting and Execution QDR Joint Capabilities Integration and Development System (JCIDS) Defense Acquisition System What’s a “Program of Record”? Where is it officially defined?

5. Resource Management System • PPBE is the Primary Resource Management System for DoD: • Articulates strategy • Identifies size, structure and equipment for military forces • Sets programming priorities • Allocates resources • Evaluates actual output against planned performance and adjusts resourcesas appropriate

6. PPBE Phases • Planning (OSD Policy) • Assess capabilities / review threat • Develop guidance • Programming (OSD CAPE) • Turn guidance into achievable, affordable packages • Five-year program (Future Years Defense Program) • Budgeting (OSD Comptroller) • Test for efficient funds execution • Scrub budget year • Prepare defensible budget • Execution Review (concurrent with program/budget review) • Develop performance metrics • Assess actual output against planned performance • Adjust resources to achieve desired performance goals

7. Better Buying Power InitiativesUSD(AT&L) 14 Sep 10 Memo • Target Affordability and Control Cost Growth • Mandate affordability as a requirement • Drive productivity growth through Will Cost/Should Cost management • Eliminate redundancy within warfighter portfolios • Make production rates economical and hold them stable • Set shorter program timelines and manage to them • Incentivize Productivity and Innovation in Industry • Reward contractors for successful supply chain and indirect expense management • Increase use of FPIF, where appropriate • Use 50/50 share and 120% ceiling as point of departure • Adjust progress payments to incentivize performance • Extend the Navy’s preferred supplier program to a DoD-wide pilot • Reinvigorate industry’s IRAD and protect the defense technology base • Promote Real Competition • Present a competitive strategy at each program milestone • Remove obstacles to competition • Require open systems architecture and set rules for acquisition of technical data rights • Increase dynamic small business role in defense marketplace competition

8. Better Buying Power Initiatives(cont.)USD(AT&L) 14 Sep 10 Memo • Improve Tradecraft in Services Acquisition • Create a senior manager for acquisition of services in each component, following the Air Force’s example • Adopt uniform taxonomy for different types of services • Address causes of poor tradecraft in service acquisition • Increase small business participation in providing services • Reduce Non-Productive Processes and Bureaucracy • Reduce number of OSD level reviews… • Eliminate low-value added statutory processes • Reduce by half, the volume and cost of internal and congressional reports • Reduce non-value-added overhead imposed on industry • Align DCMA and DCAA processes to ensure work is complimentary • Increase use of Forward Pricing Rate Recommendations to reduce admin costs

9. “Will Cost” vs “Should Cost”USD (AT&L) and USD(C) 22 Apr 11 Memo • Will Cost • Used for programming and budgeting • Used for acquisition program baselines (APBs) • Used for all reporting requirements external to DoD • Should Cost • Scrutinize every element of govt and contractor costs • 3 ways to develop should cost estimates: • Bottoms –Up estimate • Determine specific discrete and measurable items • Use competitive contracting and contract negotiations to identify should cost savings (old FAR definition) • Model Programs • Air Force : JSF, Global Hawk, SBIRS, EELV, AEHF • Army: Joint Air Ground Missile, UH-60M, GCV, Paladin Product Improvement (PIP), NETT Warrior • Navy: JSF, E-2D, Presidential Helo, LCS, Ohio Replacement Program What Does Your Service Policy Memo Say?

10. Future Years Defense Program (FYDP) • Computer database maintained by CAPE • Contains approved force structure and resources for all Defense Programs • Updated two times per annual PPBE cycle: • Program Objectives Memorandum/Budget Estimate Submission (POM/BES) – July • President’s Budget (PB) - February • Reflects PY, CY, BY, + 4 Out-Years 3 additional years for force structure only What’s Your Latest Approved Numbers? 1617 18 14 15 13 12

11. Future Years Defense Program (FYDP) DOD APPROPRIATIONS Military Personnel Military Construction Ops & Maintenance Procurement D Other RDT&E E F O A (1) T Strategic Forces A I H G General Purpose Forces (2) R E E Command, Control, Comm, Intell & Space (3) N R N F A A MAJOR FORCE PROGRAMS C Mobility Forces (4) O V R I R Guard & Reserve Forces (5) Y M E C Research and Development (6) Y S E Central Supply & Maintenance (7) Training, Medical, & Other Personnel Activities (8) Administration and Associated Activities (9) DOD COMPONENTS Support of Other Nations (10) Special Operations Forces (11)

12. Program Elements A - ARMY N - NAVY M - MARINE F - AF D - OSD C - MDA E - DARPA J - JCS S - DLA BB - SOCOM DBD - DFAS • PROGRAM ELEMENT (PE): Smallest aggregation of resources normally controlled by OSD • - PE NUMBER: Used to track and identify resources; seven digit number followed by an alphabetic suffix • PROGRAM 2 ( GENERAL PURPOSE FORCES ) • 0203752A - Aircraft Engine CIP • 0204136N - F/A-18 Squadrons • 0207163F - AMRAAM • PROGRAM 3 ( C3, INTEL & Space) • 0303158A - Joint Command and Control Program (JC2) • 0307207N - Aerial Common Sensor (ACS) • 0305164F - NAVSTAR GPS (User Equipment) Ref: DoD 7045.7 - H

13. President National Security Council CIA/DIA/JCS/OSD PPBE – Planning Phase APR/SEP FEB/MAR CIA – Central Intelligence Agency COCOM – Combatant Commander CPR – Chairman’s Program Recommendation D, CAPE – Director, Cost Assessment & Program Eval DIA – Defense Intelligence Agency DPG – Defense Planning Guidance JCS– Joint Chiefs of Staff NDS – National Defense Strategy NMS – National Military Strategy NSS – National Security Strategy OSD – Office of the Secretary of Defense QDR – Quadrennial Defense Review SPR – Strategic Portfolio Review USD(P) – Undersecretary of Defense (Policy) VCJCS – Vice Chairman, Joint Chiefs of Staff • Planning Phase focus: • Threat vs. Capabilities • Update strategy • Guidance for programming & • budgeting NSS To DoD “Large Group”/Integrated Program/Budget Submission & Review SPR D, CAPE/VCJCS/ USD(P) Every 4 Years NDS QDR DPG * OSD Level Guidance for POM/BES submission and Integrated Program/Budget Review * Note: DPG is the current name of this document but is subject to change from one cycle to the next. Other names used previously include Defense Planning & Programming Guidance (DPPG) and Joint Programming Guidance (JPG). JCS NMS CPR Level (JCS, COCOMs, SERVICES)

14. PPBE – Integrated Program/Budget Review DEC NOV JAN/FEB JUL OCT DoD “Large Group” BES – Budget Estimate Submission CAPE – Cost Assessment & Prgm Evaluation COCOM – Combatant Commander CPA – Chairman’s Program Assessment CPM – Capability Portfolio Manager DMAG – Deputy’s Management Action Group FYDP – Future Years Defense Program MBI – Major Budget Issues OMB – Office of Management and Budget PB – President’s Budget POM – Program Objectives Memorandum RMD – Resource Management Decision SLRG –Senior Leader Review Group SPR 3-Star Group OSD/ CAPE Issue Resolution POM SECDEF/DEPSECDEF SLRG & DMAG CPMs CPA JCS Components/ Defense Agencies • Program Review focus: • Compliance with DPG RMDs USD(C) & OMB BES Adv Questions/ OSD/OMB Budget Hearings MBI PB FYDP Update FYDP Update Budget Review focus: - Pricing - Phasing - Funding policies - Budget execution Services / PEO / PM Answer / Reclama

15. FY 14–18 Program/Budget Review Schedule Mar 12 Defense Planning Guidance (DPG) Issued Mar 12 Fiscal Guidance Issued May-Aug 12 Strategic Portfolio Review (SPR) Results 3 Aug 12 Component Program/Budget Submissions Due 30 Jul-10 Aug 12 Component POM Briefs to 3-Star/DMAG 31 Aug 12 Issue Nominations Due 4 Sep 12 Budget Justification Material Due to OSD/OMB 14 Sep 12 Issue Nomination Disposition Sep-Oct 12 SPR Re-engagement Sep - Nov 12 Program/Budget Review and Issue Team Analysis 21 Dec 12 Budget Lock 4 Feb 13 President’s Budget Submitted to Congress

16. Resource Allocation Process Overlap CY12 CY13 CY14 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D FY 12 Cycle Execution 2nd Yr 3rd Yr FY 12 and prior FY 13 Cycle 2nd Yr Enactment Execution 3rd Yr FY 13 FY 13 and prior PB FY 14 Cycle Program/Budgeting 2nd Execution Planning Enactment FY 14-18 DPG FY 14 FY 14 and prior FY 14-18 POM FY 14 BES PB FY 15 Cycle Program/Budgeting Enactment Exec Planning FY 15-19 POM FY 15 BES FY 15-19 DPG FY15 & prior FY 15 PB FY 16 Cycle Program/Budgeting Planning FY 16-20 DPG FY 16-20 POM FY 16 BES DPG – Defense Planning Guidance PB – President’s Budget POM – Program Objectives Memorandum BES – Budget Estimate Submission

17. BACKUP Charts

18. Most Probable Cost (MPC) • AKA Most Likely Cost • 50% chance of overrunning/underrunning on a normal curve • The Fin Mgt Reg (DoD 7000.14R) says budget to MPC • 2006 DAPA Rpt: 80% confidence level (CL) recommended • Air Force SAE (Mr. Van Buren) memo dated 17 Mar 10 says NLT mean (typically 55-65% CL) or “expected value” • OSD CAIG using 50% CL • WSARA 2009 Section 101 • DCAPE must issue guidance on confidence levels for cost estimates for MDAP and MAIS programs • FY11 Defense Authorization Bill revision • MDAP and MAIS programs must disclose confidence level, and • “ensure that such confidence level provides a high degree of confidence that the program can be completed without the need for significant adjustment to program budgets”

19. Capability Portfolio Managers(CPMs) • 9 Portfolios are Based on Existing Joint Capability Area (JCA) Structure • Civilian/Military Co-Leads Designated by DEPSECDEF • Have No Independent Decision Making Authority • Afforded Access to JROC, DAB & Other Established Component Forums • Shall Establish or Identify Existing Portfolio-Level Governance for Each Portfolio

20. Capability Portfolio Managers(CPMs) Leadership * As designated by the Chairman of the Joint Chiefs of Staff (CJCS)

21. Senior Leader Review Group • Chief or Vice Chief of Staff of the Army • Chief or Vice Chief of Naval Operations • Chief of Staff or Vice Chief of the Air • Force • General Counsel • ASD (Legislative Affairs) • ASD (Networks & Information • Integration/Chief Information Officer • ASD for Public Affairs • Director, Cost Assessment and Program • Evaluation • Director, Joint Staff • Deputy Chief Management Officer • Chief, National Guard Bureau • Secretary of Defense • Deputy Secretary of Defense • Secretary or Under Secretary of the Army • Secretary or Under Secretary of the Navy • Secretary or Under Secretary of Air Force • Chairman Joint Chiefs of Staff • Vice Chairman Joint Chiefs of Staff • Under Secretary of Defense (AT&L)* • Under Secretary of Defense (Policy)* • Under Secretary of Defense (Comptroller) • /Chief Financial Officer* • Under Secretary of Defense (Intelligence)* • Under Secretary of Defense (P&R)* • Commandant or Assistant Commandant • of the Marine Corps • Director of Administration and Management * Or Principal Deputy

22. Defense Appropriations“Colors of Money” MILPERS O&M PROC RDT&E MILCON Research, Development, Test & Evaluation (RDT&E) Basic Research Applied Research Advanced Technology Development Advanced Component Development & Prototypes System Development & Demonstration RDT&E Management Support Operational Systems Development Military Construction (MILCON) Facilities Family Housing Base Realignment & Closure (BRAC) Other Defense Health Program Chemical Agents & Munitions Destruction Drug Interdiction & Counter-Drug Activities Joint Improvised Explosive Device Defeat Fund Rapid Acquisition Fund Office of the Inspector General Military Personnel (MILPERS) Active & Reserve Forces Operation & Maintenance (O&M) Active & Reserve Forces (civilian Salaries, supplies, spares, fuels, travel, etc…) Environmental Restoration Former Soviet Union Threat Reduction Overseas Humanitarian, Disaster, & Civic Aid Procurement Aircraft Missiles Weapons Weapons & Tracked Combat Vehicles Ammunition Other Procurement Shipbuilding & Conversion Marine Corps Defense wide procurement National Guard & Reserves