Here are excerpts from Allen Schick’s excellent study on the performance budget (PB), also known as the program budget or the Planning-Programming-Budgeting (PPB) system. Remember, the crucial aspect is that budget classifications are based on program outputs, like specifications of ships, tanks, and aircraft. It does not provide funding for inputs like organizations, contracts, and personnel, which is the traditional method of financial management.
Given large investments in measuring performance and collecting relevant data, why hasn’t the expectation that better informed governments will make more effective use of public money been realised? Why is evidence on results often shunted aside in allocating scarce resources? The simple answer to these questions is summed up in the aphorism, “information is not transformation.”
Without exception, performance-based reforms can be effective only in well-managed governments which have low corruption, elevated levels of public trust, highly-skilled and well-motivated public employees, reasonably efficient and accessible public services, attentive media and groups, and the freedom of citizens to communicate their concerns to government.
The reason program budgeting is extremely difficult budgeting, and requires elevated levels of competence and trust, is that in order to be successful, budgeteers must make accurate predictions of social or technological needs years – even decades – into the future.
Unfortunately, as we are becoming aware, such detailed predictions are not only time consuming, but fraught with errors. Executing these premature plans is a sure recipe for slowing progress. These realities were not so clear in the 1940-1960 period.
Some have been confused about how the program budget affects administration. It is not the case that scientific managers, implementing the program budget, caused US defense acquisition to become well managed. In fact, it is the other way around. The US acquisition workforce was already well managed with high levels of trust. That made it possible for pseudo-scientists to impose program budgeting upon the bureaucracy without total disaster.
Most workforces would collapse under the rigidities and burden of the program budget (which is exactly what happened to all other US government departments when LBJ forced the PPBS upon them in 1965). But the defense acquisition workforce has been able to muddy through the quagmire for about 70 years. The fact they have persisted so long, and have indeed been able to churn out functional weapon systems, is a testament to the dedication of the workforce. Here is Schick again:
Governments performed well during the pre-PPB era not despite line item, control fixated budgeting, but because of it. Input budgeting established the rules and routines of financial control, the notion that money should be spent only as authorised in law, and should be accurately accounted for. These norms are essential building blocks for PB. Without them, budgets risk being unreliable statements of government finance; with them, governments can produce substantial results, regardless of the form of budgeting they have….
This is why early adopters of performance-type budgeting were among the best managed countries in the world. They were ready for PB; others were not.
Schick argued that only well managed workforces can shoulder the program budget. It is not the case that the program budget causes workforces to become well managed.
The line of argument reminds me of what Adam Smith said about government. Many have noted over the centuries that the more prosperous countries tend to have bigger governments. They therefore assumed that larger governments caused higher prosperity. Smith understood that was exactly the wrong way around. Only prosperous and liberal societies can successfully burden the encroachment of increasingly large government interventions. And so it is with the program budgeting concept.
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