Pentagon Needs to Reform Budget Process to Confront Chinese Military Threat: Report

February 26, 2021 Updated: February 26, 2021

The Pentagon needs to reform its defense budgeting process in order to better compete against China, given the rapid evolvement of emerging technologies, according to a new report.

“To gain an advantage in a military competition with China, the U.S. will likely need to revise its resource allocation processes to permit faster decisions and more adaptability in selecting how to best pursue its operational objectives,” the report stated.

The report was written by William Greenwalt, a visiting fellow at the Washington-based think tank American Enterprise Institute (AEI) and former deputy undersecretary of defense for industrial policy; and Dan Patt, an adjunct fellow of the Center for Defense Concepts and Technology at the Washington-based think tank Hudson Institute.

Currently, the defense budgeting process is a four-stage process involving planning, programming, budgeting, and execution (PPBE). The process (pdf) was created by former Pentagon chief Robert McNamara in 1961 when John F. Kennedy was the U.S. president.

The report criticized the current process as inflexible, as any new programs typically take more than two years to move from the planning stage to the execution stage.

The PPBE process slowed down innovation time cycles—the period from a new concept to actual operational use. According to the report, before PPBE was adopted, the cycles were shorter with an average time of about five years to field military ships and aircraft.

For example, the development of the B-47 bomber lasted about five years before the first production plane was delivered in 1950, according to the report. The B-47 bombers have since been retired from the U.S. military force.

“Emerging technologies, especially information technologies, are central to future conflict and are largely commercial and globalized,” the report stated.

The report added: “The defense acquisition process and legacy defense industrial base approach struggle to accommodate timely adoption of these technologies, as evidenced by lengthy modern time cycles (more than ten years) for development and fielding of new-start weapon systems.”

The report’s concerns about PPBE were shared by former Google CEO Eric Schmidt, who spoke at a Senate hearing about artificial intelligence on Feb. 23.

“[Department of Defense’s] problem is not innovation, but innovation adoption,” he said according to his prepared testimony (pdf).

He added: “Its outdated, industrial-age budgeting process creates a valley of death for new technology, allowing basic research funding and also procurement of weapons systems, but preventing the flexible investment needed in prototypes, concepts, and experimentation of new concepts and technologies like AI [artificial intelligence].

“Congress and the Defense Department need to work together to immediately authorize and fund pilots, and set the stage for more sweeping reform,” he concluded, in reference to the PPBE process.

The report has several recommendations, including the need for the Pentagon to sponsor a commission to study “holistic changes” to PPBE and the appropriations process.

“The policy and research community should conduct comparative analyses of the bureaucratic research allocation processes between the U.S. and China, especially focusing on the early decision-making processes associated with starting investments in new military capability and strategic priority setting,” the report stated in another recommendation.

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