DoD’s FY21 President’s Budget Request organizes major weapon systems via nine Mission Area Categories (MACs), which can also be viewed as Strategic Capabilities (Figure 4). These provide a sound enterprise structure for better capability portfolio management.
In some areas, DoD breaks these MACs into sub-groups… Examining where the bulk of investments are made in each portfolio and Service can be the basis of breaking a newly reimagined Strategic Capability Budget (SCB), roughly aligned with the MACs, into a set of roughly 40 Mission Area Portfolios (MAPs) for investment budget line items.
As an example, DoD could organize aircraft acquisition in 10 Aircraft MAPs that align to an existing Program Executive Officer (PEO) who oversees the specific acquisition efforts.
That a most excellent recommendation from Pete Modigliani, Dan Ward, and Matt MacGregor over at MITRE from their newly released paper, Five by Five: Five Disciplines and Five Strategic Initiatives for the Pentagon in the Digital Age. Read the whole thing. I can’t stress enough how important this is. Moving from program stovepipes to portfolio management in DoD is a lot like saying “we need to shift from Soviet-style central planning to American-style dynamic innovation.” That’s a huge paradigm shift, but rather than motivate you I’ll spend the rest of this post nerding out on some budget structure concepts.
So far as I can tell from the two charts, the nine Mission Area Capabilities provided by DoD in Figure 4 map one-for-one with the Strategic Capability Budgets MITRE recommends in Figure 5. You’ll notice, however, that the proportions are different. Figure 5 is a representational breakout and doesn’t reflect dollar size. Unfortunately, I’ve never seen a magic key that allows us to know what budget accounts go to which administrative unit (e.g., Laboratories or Program Executive Offices). That should be a red flag in itself, that the whole mechanism of who gets what funding is obscured.
Notice that some Mission Area Portfolios represent basically a single weapon platform. The F-35’s Joint Program Office would be its own budget portfolio, as would the Ford-class carriers represented by PEO Carriers. PEO Bomber is somewhat interesting because there is only one major program under development, the B-21. While PEO Bomber wouldn’t have flexibility to start another competing bomber, it would have flexibility to shift some funds between that and modification efforts on the B-2, B-1B, or B-52.
I presume that there will be a lot of interesting discussions on how this plays out in practice. For example, the Space SCB identifies portfolios for each of the Space Force’s Development, Production, and Enterprise PEOs. And then PEO Space would also be its own classified portfolio I presume. But what about Space Development Agency and the Space Rapid Capabilities Office, which have a PEO-like status? Perhaps these entities share a portfolio with Space Force’s PEO Development or PEO Space? That could work so long as a higher authority dictates a budget ceiling for each PEO within the portfolio to stop them from bickering for a higher share of funds. It’s better to maximize within your budget ceiling rather than politicking to maximize your budget.
Anyway, questions like these will abound throughout the DoD organization, as evidenced by my accounting for over 60 PEOs in Army, Navy, Air Force, and SOCOM. It is important to remember, when restructuring the budget, do not upset organizational design. That allows the current workforce to continue along with current program plans without disruption — but it gives them flexibility to improve the plans as information becomes available. Some of these issues are eased by nesting each Lab and PEO within their natural command structure, and then budgeting to commands and subcommands (e.g., NAVSEA, TACOM, SMC). But I understand why the MITRE folks recommended Mission Areas as the primary structure instead — it more aligns with people’s expectations as to what is feasible.
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