Following in the steps of the Army, which did a “night court” deep-dive look at its budget to identify about $25 billion in savings to apply towards emerging warfighting priorities, the Navy plans to move to a “Zero-Based Budget” approach starting in the next budget cycle.
Whereas many budget lines are based on the previous year’s allocation plus inflation, or the previous year’s allocation plus additional funds to meet new spending needs, zero-based budgeting starts from scratch each year and forces the owners of each spending line to justify every penny they ask for.
Navy Secretary Richard V. Spencer told the Senate Armed Services Committee in an April 9 hearing that previous efforts, including in the Fiscal Year 2020 budget request, took a critical look at the budget to find savings. But starting next year, he said, “we’re actually calling it zero-based budgeting, where we are zeroing everybody out and everyone has to come in and sing for their dinner as to their requirements.”
That was from USNI News. It is unfortunate to see the return of the zero-based budget, which was first used under Jimmy Carter and has occasionally seen resurgences. Because the budget reflects organizational power, the zero-based budget is a means of reorganizing power. The two winners in the Navy Department are inevitably the biggest programs, and the military staffs who want to start new pet projects.
Consider the selection process of a zero-based budget. You have program managers and their staffs dealing with highly complex technical programs. They face severe cuts and possible failure if they can’t justify the funding. They cannot afford not to spend all their time justifying the budget. And in anticipation of cuts, they will try to inflate the figures.
Many may suspect that there must be some method for prioritizing and deciding on funding allocations. But there’s no real science behind any of it. The biggest programs, like the CVN-78 carrier, are the biggest priority and thus have first access to funding (even if they have been the most ineffective spenders). Selective cuts can be made to look disastrous. They will be whole.
The next priority, as always, is modernization. The staff has a backlog of programs they want to start, such as hypersonics, because cost growth on the priority programs like CVN-78 have continually eaten into the funding space expected to be there.
And then the scraps will be fought over by the remaining programs, and one might expect operations & maintenance to suffer the most.
The budget is nothing short of a reflection of organizational power. The zero-based budget has a facade of science, promising to reallocate funding from “low” priorities to “high” priorities, yet it really is a power grab. This problem of organizational size and power has long been recognized in the “requirements pull” program budget. As Mr. Roback realized in a 1962 hearing on McNamara’s new management structure:
Mr. Roback. To some extent, the strength and the authority of the project officer is related to the importance and urgency of the program; is it not?
Mr. Morris: This would be the case.
Mr. Roback. Is there any ranking of programs? You have finite identifiable programs. Have you ranked them to determine which would be upgraded from the standpoint of project office?
Mr. Morris. We have not; no, sir.
The zero-based budget actually goes back to Charles Hitch and others at RAND in various forms. It is exactly in line with all aspects of the program budget (PPBS) concept, but re-justified on an annual cycle. It therefore forces program managers to spend even more time on briefings and justifications, if that is imaginable.
Another major issue is that the military staff is not always in the correct place to judge resource allocations on a diverse set of technically challenging projects. Certainly they may think one project is higher priority than another (though really, how could they know?), and certainly program manager on the losing end will disagree. Is that disagreeable program manager wrong? Does he not have the nation’s interest at heart? Is he less qualified to judge technical priorities than a staff officer with no line operating experience?
Here is Rickover defending parochialism in The Rickover Effect (pp. 120) when he was asked to relinquish high-quality materials for the first nuclear submarine development to a “higher priority” Air Force program:
… you want me to take the statesmanlike position, to rise above my parochial viewpoint, to consider the good of the national as a whole, and perhaps the good of all humanity, is that it? Well, I’m not going to do it. You’re not in a position to judge just how urgent or important their need really is. Neither am I. What I do know is that I have been ordered by the president of the United States to have a ship ready to go to sea by January 1955, and I intend to do my damnedest to make that happen.
Ultimately, the zero-based budget is the logical conclusion of the program budget, which assumes that all relevant information about program choice can be articulated objectively by the program offices and centralized in one or a few minds which have the supreme preference scale for prioritizing funding among the programs. This is not the world we live in. Maybe it was a genius scheme during the industrial era when known goods were produced by known methods. But as economic activity becomes more complex, knowledge becomes more localized. We cannot wish away specialized knowledge associated with technical excellence, or pretend that aggregated statistical data is the only information relevant for making decision.
Leave a Reply