Jerry McGinn: [00:00:36] Good afternoon, everyone. I’m Jerry McGinn, the executive director for the center for government contracting in the school of business at George Mason university. It’s my pleasure to welcome you here for today’s webinar on increasing speed and flexibility and department of defense budgeting from going from ideas to implementation, we’re pleased to co have our co-sponsors for this being.
The wharton aerospace and Ellen Chang, the co-founder will be speaking later to you all. I’m just going to welcome everyone to this event. As many of you all know the secretary McNamara that came from Ford in 1961, where he was the president, he brought the best of industrial planning to the department of defense.
And totally changed how we do the planning, programming and budgeting in the department of defense, moving from organizational budgets to program budgets. And that venerable system is what we use today that has great strengths. It has clear reporting, clear oversight mechanisms. And clear blood budget, preparation, planning processes.
However, there’s been some challenges with it as threats of a change in facing us today. And that’s been a big focus of the testimony of of Eric Schmidt, former Google CEO. Former deputy secretary of work in the last several weeks before the HASC and the SASC. So we’re very excited to have you all today for this conversation, we’re going to have two panels.
The first panel will be a good summation of the actual ideas that have been put forward on how to do budgeting differently. We’re pleased to have my newly elevated senior fellow Eric Lofgren. Actually started this ball rolling with a paper he did last year for the acquisition research symposium at the number of post graduate school that we’ve done as a white paper and done a previous event on.
And he’s got a great panelists, which I’ll let him introduce. And then I will follow with a panel of grizzled veterans of the Hill and the DOD budget process. And how could this actually be Effect put into effect in a way which will allow the system to adapt and be effective going forward.
So without further ado, I’ll pass it over to Eric.
Eric Lofgren: [00:02:35] Great. Thanks Jerry. So I want to just start out here with a video introducing the three reports and we have contributors from those three reports here with us today, and then we’ll get right into the discussion.
We’ve had three excellent reports addressing the Pentagon’s resourcing process come out all within a couple of weeks. As we each other. We’re fortunate to have representatives from each of the reports here with us today. Let’s start with a quick overview of competing in time by Dan Patt and bill Greenwalt. The authors motivate us by showing how cycle times for the development of military aircraft has dramatically increased since the 1960s.
And the same thing is going on in missiles as in aircraft and the same story for ships. Meanwhile, in the commercial sector, time from incorporation to an operational product remains under five years in the 1960s. And before defense systems were developed in roughly five years, decision time today is much longer in the best case using middle tier and other transactions cycle time is seven years.
For business as usual cycle time is anywhere from nine to 26 years. The problem is that China is following rapid and iterative development strategies. It can to the commercial sector, the U S used to use development strategies in a similar way as exemplified by the , which had rapid early design iterations, evolving performance and quick production sequences.
The author’s point to the planning, programming, budgeting, execution process. As a key factor, they write to address lengthy decision timelines that fundamentally limited adaptability, the PBB E must be revisited put simply we need a more flexible programming and budgeting model that prioritizes delivery of operational capability and permits, hedging and learning.
The key concept is that of a portfolio. Which takes similar program line items and groups them together. The authors discuss logical methods for grouping elements. First by capability area like ships or aircraft. Second by organization like program executive office. This is, and third by mission area like ensuring freedom of navigation in the Taiwan straits, the authors don’t see a one size fits all answer.
And view the mission area budgeting as perhaps a combatant command responsibility to address the seams left behind by capability, organizational and other types of portfolios.
So now take a look at the final report of the national security commission on artificial intelligence. While the report is wide ranging, it touches on a number of important aspects of the budget process. The report recommends the secretary of defense establish a dedicated AI fund as a pilot under the management of USD, R ne of about $200 million.
It also recommends that the DEP sec death accelerate efforts to implement portfolio management, to requirements and budget, including a test pilot for joint capability areas such as command and control, and even seeks to align those portfolios with a program executive office. Or other organizational entity, but that’s not it.
The report asked the DEP sec Def to propose another pilot to test mission, focus, budgeting, and appropriations in coordination with the combatant commands that considers more flexible funding mechanisms and new metrics for oversight. It also supports the continuation of budget activity eight for software and digital technologies.
Here’s chairman of the NSCA AI, Eric Smith’s testimony to the Senate armed services committee in February, 2021. Although we’ve had 50 years of acquisition reform, we have not meaningfully changed the PBB II process developed in the 1960s Congress and the defense department needs to work together to immediately authorize and fund pilots and set the stage for more sweeping reform.
Number of problems with
- One is, has to do with its design cycle. If there’s something called the Palm or
program of record there is a two
year planning cycle ahead of actually approving anything. If you want to do something new you have to plan it and
then it starts two years from the time you get, because that’s when you get the money for it.
We have to come together also to reform the planning, programming, budgeting, and execution process. Congress has
now take a look at miters five, five, five report authored by Matt McGregor, Dan ward, and Pete Modigliani, the authors present five disciplines and five strategic initiatives. And two of the initiatives are most relevant to our discussion. To introduce portfolio management, start with a graphic from the FYI 21 budget requests that presents strategic capabilities.
They find it a good starting point for portfolios. They show how the strategic capability budgets shown on the interior can be broken down into roughly 40 mission area portfolios. Let’s dig deeper into the aircraft set of capabilities. The authors show that the basic elements of the aircraft portfolios correspond to major organizational units like program executive offices, each mission area portfolio, like air force, combat aircraft.
Would be owned by an organization like P E O fighters in advanced aircraft, which currently manages a set of programs. The PEO would have flexibility to reallocate funds without congressional prior approval, but we’ll still provide regular updates on movements. Budgets and execution will still be tracked at the program budget activity, code level, providing insight to stakeholders and oversight.
To summarize the authors recommend that we align DOD and Congress on military strategy, deliver capabilities. Using portfolio budgeting, increased flexibility to shift resources between efforts, avoid budget lock-in mechanisms, such as new starts and full funding requirements. Improve oversight by focusing on value rather than acquisition program baselines use budget activity eight to remove arbitrary investment and expense categories for software efforts and reduce process by moving to biennial budget cycles.
For more background on PBB II and budget reform, visit acquisition talk.com/budget reform. Okay thanks for entertaining that video that just introduced our three panelists again, we’re just going to jump right into the discussion. The outline here is really, we’re going to first talk about the structure of the budget.
Then interoperability and the joint force, and then finally criteria for oversight. I want to start with you Dan, and, talk about the structure of the budget itself because you talk a lot about, time and the time penalty of the PBB II. But a lot of that is of course, a consequence of the structure of the budget and its fixation on weapons line items.
So first, can you talk about that dynamic and then under what logic do you actually think that. Budget line items should be consolidated.
Dan Patt: [00:09:59] Thanks, Eric. And what a great question. But first, thanks for having me and what a honor to be up here with you Eric and Courtney and admire at all of your work and certainly encourage everyone to look through that.
There’s a lot of rich information and perspectives there to answer that question, I think I would probably step back first and say, what’s our objective. And I think there’s two key objectives that we have, right. We have this objective of providing for the common defense, right. That the words of the constitution. And we also have this responsibility of well making responsible use of taxpayer funds and those, those are the things that we’re after here and everything else should be serving that.
And. And to get to your question, what should it look like? Let’s talk a little bit about what it is today, as we know. Primarily pursue military capability through developing weapon systems. And we grip those weapon systems under program elements. We put the management associated with that. We tend to also conduct oversight there. And you can conduct a lot of useful oversight in that, right?
It is my program system progressing on time. How are things going as I expected them to do this is the design intent of PPB. But the net effect of that is it’s. Pushing this huge decision burden into, should I get started with that? It makes it very high friction. It makes it a lot of effort to decide.
Is it really worthwhile to start something new? So by zoom, back out to those objectives, right? Providing for the common defense, if I expect that the means of providing for that defense to be changing, for example, because technology is changing or because the geopolitical situation is changing, then it’s quite possible. That my emphasis on supporting our responsible use of taxpayer funds. And this model is
getting in the way. So to your question, what’s the right building block. I think the right building blocks of the budget structure need to be able to support smart decisions about re-investment reallocation. So it isn’t just this weapon system that we started. Is this going, according to schedule, we ask those questions regularly. Now it is this still the right weapons system between a set of different options, some of which are weapons systems and some might not be weapons systems might be other forms of military capability. How should we balanced that investment and how do they work together?
I think. Th the right structure the portfolio approaches that we talked to, what Matt, in his report he starts out, I think is a perfectly reasonable approach to structuring the budget, right? Those are what I would call capability portfolios. You take similar things and you put them in together in portfolios and you allow an organization to reallocate between those similar things. I do want to point out that whatever basic building block structure you have. You will always end up with seams and those seams will be points of aggravation.
For example I still have, if I have capability portfolios around, around aircraft, and around other systems, I still care about electronic warfare, right? Should electronic warfare be its own thing? Should it be split up across those? There’s no obvious answer. And because of that, I actually think that you want a couple of different mechanisms that might be able to overlap. I’ll pause.
Eric Lofgren: [00:13:06] Yeah, definitely. And back in the day, when you used to have bureaus that were like the Bureau of engineering and they would be like this multifunctional support to weapon systems platforms.
And so you had this kind of matrix approach back then. But actually I want to move onto Courtney because, AIML actually seems like one of these things that’s. At the seams, but also everywhere. It’s not like it’s. Potentially a single objective in its own kind of platform, but maybe it is, but I was just interested to see that in your report, when you were talking about capability areas to pilot portfolios, you didn’t say AIML, you did say we’ll have a bridge fund for AI, but when you’re talking about the portfolios, you actually brought up command and control. So can you talk a little bit about that decision process of. AI and whether it should be its own portfolio or how it actually works. Across the structure.
Courtney Barno: [00:14:01] Yeah. Thanks, Eric. Let me just say that it’s a pleasure to be here with all of you, grateful for the opportunity and really fantastic to be here with Dan and Matt, who were just phenomenal partners as the commission finished its report.
So yeah. So again, just grateful to be with all of you, it’s a really good question. I think how we approach this from the commissions perspective is that AI will be a ubiquitous and cross-cutting technology. If you look at what the commission actually put forward, as the most aggressive recommendation for the department of defense is to lay those foundations for integration of AI technologies by 2025.
And that’s integration of AI technologies across all mission areas, right from the back office, all the way to the tactical edge. And so what that means is that AI is going to be a cross cutting enabling technology. And I think what we’ve seen in that each of these reports highlights is that the program centric nature of the budget as it is today presents a real obstacle for funding, in getting resources to those cross-cutting technologies.
In our final report, what we make clear is that we think the program centric nature of the budget really causes costly and redundant full-stack development. We want to get away from that. As an enterprise, as I said it prevents that funding of cross cutting enablers like AI, like the building blocks of AI, like platform services right. Cloud compute data storage infrastructure. We think that jointness, and in particular, I think the seamless flow of data between systems and platforms and composability is really going to be critical in maintaining the advantage in AI warfare. And so how we really thought about.
The structure of the budget is how do we respond with the ability to out innovate in outpace the adversary? So along that thinking, we approached our recommendations around portfolio management, that capability areas, C2 that you mentioned through that lens of dryness. And try to balance it against the need for some level of predictability justice in terms of what we’re investing in.
We know we’re going to have to make investments in C2, right? And so that’s how we landed on joint capability areas is the organizing concept. But I think, to Dan’s point about, about seems some of the things that are most powerful go out, this organizing construct are also going to be the most challenging.
We use T2 as an example, because it’s fairly well contained with an existing PEOs. But the reality is that a lot of these will span different services, different organizations, different agencies, and it may require a different organization to actually manage them. And so what we intended to do here is really provide a bold recommendation to get the department and get the Congress coming together, to think about what needs
to occur.
Eric Lofgren: [00:16:35] Great. So I want to move on to Matt and we have a question here from Robert Bradford. And he asked, what would be the objective of each portfolio? Is it capability provides to the force? How do we measure whether decision about capabilities are smart? So you had a very, you and your team had a very specific kind of structure that you actually put out, which was much more detailed than the other.
So how’d you get there and then, how would you think about the objective of the portfolios and measuring decision-making in that construct?
Matt MacGregor: [00:17:05] Yes. Thanks, Eric. And also great to be on the panel with the coordinator, Dan, in your self.
One of the things though, is that the, you’ll see in our recommendations in the paper is that, we don’t pretend to have all the answers. So I think there are a lot of ways to tackle this. And I think a budget reform commission, where you bring a lot of these stakeholders together, you look at, how do you pull AI and L in there? How do you maybe close some of the seams that you might have? So I think there’s a lot of smart ways of doing this.
I think we settled on capabilities. Primarily, because from my perspective, when we have the discussion with the Hill you can get deep down into the programmatics and start talking about, I’m going to put this EWpod on this aircraft. And how many of those EWs not going to put on. And I think that conversation needs to be brought up five or six levels.
So that was part of the discussion is let’s agree at the, with the Hill, with the different, concerned committees on the strategic capabilities that the DOD needs to provide. And if we can get agreement there, then I think there’s an inherent level of flexibility for the department to say, here’s how I’m going to provide those strategic capabilities and to have more flexibility to do that.
Yeah. So getting to the question, if I understand the question correctly how to do that smart and how would it, how does it relate to the field? Yes, I would. I would say that if you have the example that you use like combat aircraft, or unmanned say the unmanned piece of the combat aircraft.
So if we’re going after a sky borg and some of those things, when we say this is one of the efforts that we are getting after to provide that strategic unmanned combat aircraft capability. Then we should be judged on how quickly we get that capability met. So I think this goes to maybe a future question that can have on oversight.
But it needs to be the value that effort is providing to the war fighter. And I think you’d have to make that connection. And I think that’s one of the things that we have not done a great job with these APBs, we’re focusing so much on these baselines and cost estimates and all this kind of bureaucracy behind the scenes that we often lose sight of how many, how much it actually was delivered to the warfighter?
Was that what the warfighter wanted? Was it useful? So I would say the strategic capability thing, if we have the flexibility that we’re talking about on paper, I think that gives DOD a lot of room to to maneuver, pulling commercial technology and ultimately hopefully deliver value to the war fighter rapidly.
Eric Lofgren: [00:19:14] Yeah. It’s interesting what you said there, and I want to, go right back to you and think about, and Dan brought this subject up that usually it seems like all the value questions are in the requirement stage they’re way up front. And it’s okay, once we. Have requirements that go through the Pentagon gauntlet, like what emerges on the other side, we assume is like the proper value statement given its cost outlays and that decision making is there.
And then all we need to do is just measure back to that, right? Like cost growth and schedule growth to that plan is the ideal of what value is. And the closer you are to hitting the plan, then the more value is being generated. But. In this portfolio construct, if it’s not execution to a plan, then what is it
Matt MacGregor: [00:20:00] right. I think you have to have a plan and this is, we do not intend to think that you should start a program with, just pull stuff together and slap it together. That is, there needs to be disciplined rigor in this process. And I think if you do engineering right.
You’re going to have that rigor. But I think the thing that we pretend with, the way that we do programs today is that we pretend as if there’s requirements are the value that, that the user needs when that platform is delivered. And right. That is just not a static thing, that I think Dan brought the point up about, there is change happening all the time, so it’s dynamic.
And so yeah, value, what value might be one year might not be the next, because the threat changes significantly and it’s Oh, that aircraft was great for that mission or for that threat. The Chinese just invented a brand new radar, a brand new, something, and now we need something else to counter that.
So I think the value proposition is also going to change and that’s where the flexibility I think comes into play. And why that idea of The requirements being established 10 years before. And then did you satisfy those requirements? And if you did, then that’s the end of the value statement.
Like you’ve done your job and you can go home now. Yeah.
Eric Lofgren: [00:21:00] Matt. I want to just stick with you for a second, because when I look at your budget structure, you on the inside, you had these capability areas and then on the outside you had, each service is PEO that is connected with that capability.
But in reality is the budget, is it actually flipped because ultimately it’s going to come from like an army appropriation and then down to something. So what does that actually look like?
Matt MacGregor: [00:21:24] Yeah I struggle with that too. And I also I’ve always liked your ideas on organizational budgeting because I believe the PEOs are the fundamental executor’s at the connectors between the strategy and the actual delivery that the execution of the program.
So I love the PEOs as being, the arbitrators have a lot of that and having the control at their level. But at the same time, yes, we do have these appropriations. So you’re going to have to break it down to that level. And I think to Dan’s point about the seams, I think the appropriations are going to create some seams.
I think the key came, some of the capabilities are going to cross multiple PEOs. So there’s going to be some cross stuff there. That’s going to have to be worked out. So that’s where I say, I don’t think we have all the answers there. I think you’re going to have to be really smart about how we establish those capabilities.
And I’m hoping that, when we start a commission, there’ll be a lot of smart ideas that maybe not people will say, yeah, you guys are, you guys were wrong in this. It should actually be this way and we’ll go, Oh, great. That’s yeah. That’s exactly what we wanted to get input on. Yes, I think you can start with what we have there as the capabilities.
They’re going to be broken down into you. Yeah. The army RDT, and E the army procurement is going to be broken down on all those appropriations until that fundamentally changes. But I think just that first step would be, I’ll send a memo, fundamental shifts, but maybe not the final answer.
Eric Lofgren: [00:22:35] Great. So Courtney, I wanted to ask about that kind of difference between the bridge fund and then you’re like pilots for prototypes and what kind of problems are each of those trying to solve and in what kind of timeframe.
Courtney Barno: [00:22:47] Yeah that’s a great question. So I think the commission really approach our recommendations around PPBE reform in general over to real time horizon.
So the first is we understand, I think we have broad consensus, at least among this group. But then I think the nature of the conversation going on right now would say that the broader audience agrees that there’s some challenges here, but in the near term, what can we do to accelerate capability delivery relative to the budget.
And in particular, through our AI lens, we were very concerned about how do we accelerate the delivery of AI enabled technologies and capability. And so in the near term, what we’ve proposed is this idea of a dedicated AI fund that would as you said, Eric function as really a bridge.
Sometimes you hear these calls scaling funds, but the idea is really to ensure that we don’t have promising AI technology that’s either developed out in the DOD labs, maybe it’s brought in for a silver and STTR program, that either doesn’t have a requirement. On the other end. So it was a pure tech push type situation, and we don’t have a requirement pulling for it.
Or frankly the money’s just not available because of the programming cycle. We have to have the ability as an enterprise to make bigger bets on some of these technology areas that we know are going to generate or could generate game-changing operational capability. And so that was really where the idea for this bridge fund came in.
And that’s particularly why we said that we’d like to see this stood up under R&E as the department’s chief technology officer. Really it is within their purview and part of the original congressional vision for them to make these bigger bets on technology areas and buy down some of that risk for the service.
So that’s a very concrete near term step we would like to see taken. But I think, I’d be remiss if I said, if I didn’t say that the commission certainly does not see a bridge fund as a panacea, it’s not a silver bullet when it comes to budget reform and it’s really a near term solution over the longer term.
I think. Exactly what Matt was just saying. We have to get to some of these pilots around portfolio management, and that really should be in the next year to two years. Let’s get some data from those. See what works. We need to get to a place from an oversight perspective with Congress where we’re sharing the right information.
We’re beginning to adjust metrics that are getting a little bit closer to measuring value. And we’re starting to build trust there in a way that we can nudge towards the bigger muscle movements like mission funding that, that Dan and bill talk about in their paper.
Eric Lofgren: [00:25:13] Yeah. So Dan, Courtney brought up the idea of these kinds of new sets of metrics that relay value.
So, we’re rethinking, that kind of conversation with oversight and with Congress about what constitutes success and gaining that trust. So can you get a little bit into if it’s not cost growth to APB or that’s one metric now in our bag, what does that bag look like?
Dan Patt: [00:25:34] Yeah, that’s a good question. It’s a tough question. I, I do think that PPB was born in a simpler time. And if we look at this neglected category of the budget, these major force programs, which if you read the NDAA reports, right? They talk about it’s a useless category that provides no analytic value. And that’s their take on it?
I think that was a, that was a view of what are our big picture challenges. If we zoom out and say, w what, what does what’s the American people care about?
Okay. W we care about is, do we have a solid national security enterprise? Are we postured for the common defense in the face of our current threats?
That’s the question that we should be focused on. And this question, these are hard questions, right? These are questions of how do we avoid war? How do we avoid the horrors of heart and how can we maintain a strong security in many of these, then become these questions of well.
Are we able to provided conventional deterrent effects? To say, stop a fait accompli and stop to roll back in time. But what could you have done to stop Russia from annex in part of the Ukraine, but how were you able to do that? That is an operational question. That you know, unfortunately so much congressional oversight is focused on program the equivalent of these APB questions and not on these larger geopolitical questions, which is arguably a place where we want the vibrant debate, which gets between our values, our investments, our institutional structure.
I do believe that you can look at these larger operational strategic challenges as a lens for thinking about value. There’s something that we want to do. We want to stop this invasion and prevent a fait accompli. What are our means of doing that? Abs you know, tactical aircraft have something to do with that.
Absolutely. That’s a part of your mechanism, but it’s more than that, right? Especially in the information age, a lot of it’s. What about your information processing enterprise? Am I able to pull together the ISR picture that gives me indications and warning? This is a question that has to do with AI and it has to do with data fusion and it has to do with conductivity and it has to do with networks.
And whose problem is that today? It’s nobody’s problem. It’s everyone’s problem. And it’s no one’s problem. And those lenses of those operational talents. I do think you can start to look at. What is the relative value of these pieces? So that’s not a building block structure of the budget because we would expect these to change and evolve. We expect to make progress on operational challenges, but I think it’s a useful way to think about oversight and how you can think about metrics for that. How do you support that? You have to do you use tools like analysis and war games, but we’re doing those already. And we should be more of them because this is about how we’re prepared for defense and deterrence.
So that’s. That’s one view of an alternative set of metrics, which could compliment the portfolio of measures that we have to look at value.
Eric Lofgren: [00:28:22] Yeah. I always find it interesting that one of the logic and the background of the PPBE was to create this kind of joint force structure. So I have these logical elements I can remove duplication overlap and I can optimize that and a linear programming way. But then the fixation on each weapon system leased these stove pipes, and it, you like optimize that stove pipe, and then it kind of moves, independent of the rest.
And now we have all these interoperability problems. So like the construct was, I can look at these programs and then from the top, pretty well think about how they all fit together. But if we move to portfolios, then how do we reach the joint force interoperability and where we want to be.
And I’ll just say, not all discipline has to come through the budget, but we still need to have that discipline somewhere. I’ll stick with Dan Pat for now. You can do a follow up.
Dan Patt: [00:29:16] Yeah, absolutely. Look, I think let’s get back to the the structure of the budget for a minute. There’s three seams in the budget, right? The first theme is in the planning process that the two
years that it takes to build a plan for the future years. That window of time is he seen the second window? The, excuse me, the second seam is between program elements. And really when we say program elements, but boils up to ultimately services because money’s appropriated services.
And then finally, the third seam is the appropriations categories, right? It’s the colors of money.
Those three seams are the things that get aggravated by various activities, right? When people
complain about the budgeting process, they’re talking about one or more of those seams. Any system will have seams and that this is the nature of the way things evolve. You develop more capability within your lane and then you develop less capability across the same, your adversaries attack, your seams. So it’s natural that you run into these kinds of problems.
So specifically to get that question, let’s look at these joints, like what would be the most aggravated problem that you could possibly have? It would be some joint problem. It would be go across colors of money. So you might be mixing both development and sustainment and operations. And it would probably something where I need a fast time cycle, right? Actually, those are a lot of our information technology problems in the joint context.
Our system interoperability, this isn’t a thing where I can go back and I can, Change the software on an M one Abrams and add the data length, which is going to take 10 years. Cause it got to be a new requirement and new funding and push that all the way through. This is about here now.
What is the thing that I can do to change tomorrow? Aggravates all three seams of the budget and that is, arguably our biggest challenge. I think that there’s a role for the construct of something like a mission manager, just which is a role which could. Cape in the service budget focuses a lot on this big picture, forced design about what are the weapon systems that will come down the pike in, seven to 10 years.
But there’s this, what about the gap in between that? What about this faster time cycle? What about the capability for the combatant commands tomorrow? That’s probably our biggest gap. So one means getting a more. Joint force is to, create a mission managers within some existing organization or within a COCOM or within scope, for example, and a lot them, an amount of funding.
Not to replicate programs, not to create a new program, not to compete with the services, but to bring things together around that timeframe. That’s one means that you might be able to use the budgetary structure and an appropriation around, around that idea to help drive to that outcome.
Eric Lofgren: [00:31:48] think the mission element as at tacking the seams leftover and actually bringing, these elements back together and ensuring inter-operability is an interesting concept. I think back in the past, we used to have, research and development boards and munition boards, and, the leaders of organizations with simultaneously sit on this board and they would discuss and know what each other are doing and make decisions in that way.
Matt I’ve talked with you about this quite a bit. I’d like to get your, and you push back on the kind of construct of like a board and committee structure. So I just liked you to riff on that. And what do you think about the mission elements in kind of concert with the capability portfolios?
Matt MacGregor: [00:32:26] Yeah, I thought it was a really intriguing part of Dan and Bill’s paper actually was the mission piece and. I like it as a perspective for metrics, especially in terms of, okay, you’re developing all these capabilities, going back to the capability, core portfolios, you’re developing all these capabilities and that’s good.
You’re meeting the intent of all the things you said you would do, but you do need to make them work together. And so I think this is where like ABMS with some of the on-ramps that they’re doing is they’re, they’re testing. We have these capabilities, how do we make them work together to do XX.
And so I really like, I don’t know how, I don’t know how the mission budgeting. I hadn’t going to get my head quite around how you would budget for those things, given that they might span multiple missions, give those the same multiple issues, but I love it as a metric for, okay. We have a specific mission.
We have, X X as in the Pacific, we have XXX in the Atlantic XXX and the Arctic. Can you do those with the capabilities that you have developed and if not, what things are you not able to do? Because that’s what we need to get after. So I think in terms of the in terms of the mission portfolios, I like that going back to the boards, I think you, you could probably get some value out of it.
I just am always worried about any kind of thing that is at a high level that has multiple levels between it and the execution executor’s of the program or the excuse or the capability. I just always worry about that because that oftentimes creates a drag. And so time is one of those things that we need to give back to the program managers.
And this is where I think the budget process steals a lot of time and a lot of probably capability deliver. I think you can almost translate it. So I’m skeptical of the boards just because of that. But but I would support any structure that if we get more flexibility into the department and then, eventually push that down to the program managers, I think that would be evaluated.
Eric Lofgren: [00:34:07] Yeah. I’ll just a note that hopefully there’s not the time penalty just because The way that they had, it was the members of the boards were actually like, a program manager and they would have several levels in it. Anyway, I want to move off of that point and go to Courtney here. I would just like you to talk a little bit about, you guys have a bunch of stuff in your report that was on like the technical workforce, and bringing that back in house.
And how important is that kind of Shift and focus on the workforce. If we’re thinking about portfolios is potentially not correct it’s just think that we can roll it out to everybody and everyone in the departments on like the kind of the same page. So how do you think about piloting that in concert with, having the right kinds of people and processes in place so that they can own the technical baseline and actually execute well on that?
Courtney Barno: [00:34:55] Yeah it’s a really great question. I think two main things here, one we are, I think certainly of the position as a commission, that there has to be a sufficient amount of digital literacy across the force and within our civilian workforce. And we don’t achieve that by outsourcing everything that is not to say that the commission is in favor of bringing everything in-house right.
We will need. To compete in AI enabled warfare. We will need partnerships with both traditional and non-traditional defense suppliers and the expertise they bring to the table. But what is critical? And one of the things that we touch on in the report is ensuring that the right technical talent is in the right place.
And one of the places we assess the right place to be is at the combatant command headquarters and forward deployed with operational units from those combat and command headquarters. And to come back to some of Dan points on mission funding, the reason you see that show up in the commission’s report as well is because when we were thinking about, okay, how do we accelerate adoption of AI?
Enabled technology is one. It’s about getting those right people in the right place. And so when you have technologists at the combat and command sitting side by side with operators, you’re able to develop solutions, even if you’re just ideating on them much more quickly, we need an ability to get after.
There was solutions, both in terms of the technical infrastructure to actually do the development, but also that we have the funding in place to do that development. And that’s going to require more flexible acquisition program baselines, right? It’s going to require the funding construct that allows continuous iterative development that is not bound by time or color of money. And so that’s really how we landed on mission funding within our report, as well as how else are you going to get the capability you need downrange at the speed you need.
Eric Lofgren: [00:36:51] Yeah, one thing I want to stick with you and ask about, we’ve been hearing a little bit about the challenges of funding, these enterprise tools like cloud one and platform one, but then like for AI, you guys, and in the Jake, they have the joint common foundations.
So can you just talk a little bit about what are those challenges of, securing funding in the current construct and how portfolio budgets or a different type of structure. Would help, get these kinds of enterprise tools off the ground and help, Each of this, each of the different organizations at different programs leverage that rather than reinventing the whole tech stack every single time.
Courtney Barno: [00:37:27] Yeah. Yeah. So I think any muscle movement we make that shifts us more to a position where we’re focused on inputs, rather. So overly focused on outputs is going to help us get at some of those horizontal capabilities. And so that might be. Portfolio management type constructs with capability areas, you would be able to fund infrastructure for your digital technology, for example within that command and control portfolio that we put forward in our report.
But additionally, you would also have this ability with mission funding, it would just be an enduring requirement that you need to fund. And I think what’s challenging about the type of technical infrastructure that, that platform one represents that the joint common foundation will represent with the Jake as they continue that development.
And additionally, the digital ecosystem, which builds upon both the JCF and the platform one is Pathfinders that the commission puts forward in our final report is that we’re not going to be able to determine a full life cycle cost for these things. They’re going to be comprised of different service layers that need to be consumable and you should only have to pay for what you’re using.
And so we’re very, really rapidly moving towards a model where the entire department is going to have to embrace some sort of consumption-based solution for pricing technical infrastructure. And so that’s something we’re going to have to contend with as well.
Eric Lofgren: [00:38:49] Oh, that’s a, I feel like the consumption based solutions, which came out in the FYI 22 or the 21 NDA that’s a whole nother topic and that’s I think it would be great to see that kind of moving forward.
I have a question here from Joe Leddy and he’s asking about the United States space force, which last year in may, they quickly came out with a report and their number one recommendation was consolidation of budget line items into these portfolios. And then it was quickly retracted. We know that, I think those are, those discussions are still behind closed doors.
I don’t know if anybody has any kind of information, but I guess if the, the space force came out and didn’t really take, oversights equity and their interests into account, what you’d like the kind of like those sub bullets have been under like we want budget line item consolidation that would have said, Hey, we’re really gonna still give you insights, still give you visibility.
What are those information systems and what are the important, streams of information that Congress. And oversight really needs to make decisions on whether something starts or whether to kill something or where do they come in that system. And Dan, would you like to take that long-winded question?
Dan Patt: [00:39:57] Yeah. There’s, there’s a lot to that. I guess the first thing I’ll start with is as empathy for the appropriators, right? They have this really important role, right? That this president’s budget actually the president’s budget request. And it’s the appropriators who create the budget and assign that. And the question of, but the structure of that budget refresher has a lot to do with how they think about it. If you were to revisit that, I think look revisiting a lot of the base basic mechanisms, but what does the budget justification look like? What does interim reporting look like?
What did the brace that accompany that look like? For sure. A lot of the real progress that gets made, because it happens because of great relationships with people. But if you think about this. No, where we’re a society that that prizes free flowing information. Why is it that we have these
clumsy paper reporting systems for this, right? It’s because of tradition. It’s because this is the way we’ve done this for a long time. There’s a lot that we, I think there’s a lot of potential both within the department and across there, but to modernize how we do reporting To, to get back to your question about, what does the
structure, I think there’s a couple of pieces.
Yeah. If we’re going to change the structure of the budget, we need to have a strong set of objectives. What is it that we’re trying to achieve? And I think the things that we’ve been talking about, which is agility responsibility for program, not just to the performance of the program, but it’s still the right program, which is why rolling up to some sort of portfolio measure looks like the right thing. Those are important questions. And then you need to be able to have the oversight conversations around that this point that Matt made and Eric you’ve made before, which is about.
There’s an organization which gets this budget line. And then they’re responsible for the outcomes of that of that budget line, that the ownership, you do need most of the building blocks of the budget.
I think, to align the funds with the people who are going to own the outcomes of the fund. I do think there’s a lot of logic around that
we talked about. There still may be some seems about joining force integration, but so I think if the space force had a structure, I think. Proposing, what radical transparency of their progress of their expenditures of their results looks should go along with a structure where yeah, it’s really logically oriented. But recognizing there may be some diversity in that logic about various parts of their enterprise.
Eric Lofgren: [00:42:12] Yeah, I want to go over to Matt and we’ve talked about this a lot, when I look at the space for us it’s organizations now where like they reorganize the SMC 2.0, so they have, the development corps, that production core enterprise core.
So they’re, recognizing that enterprise interoperability requirement, but that means like a program like GPS, for example, will flow through all three of those potentially. So if you have a portfolio based on like development Corp or production Corp, then everyone’s responsible for every program as well.
And we get into this many to many relationship between who owns a budget and then who’s executing on that. That could potentially draw in some issues in terms of just. Having to put that decision level one layer higher as to who adjudicates what and where the budget goes in terms of trade-offs and flexibility.
So can you just talk about, what is your view in this space force construct of, how would you, how would those portfolios might look.
Matt MacGregor: [00:43:12] I think there’s different ways that you could probably tackle it. I’m not sure SMC 2.0, completely solved it. But they also don’t benefit from having the portfolio.
If they had a portfolio, yes, there would probably need to be some coordination across it because if you’re providing enterprise services that’s going affect multiple space systems. This kind of goes to Courtney’s point about the infrastructure piece is you’re. I think you’re always going to have an organization that is responsible for the infrastructure, whether that is the people that own the capability or some separate entity.
I think we’ve tried to separate entities and maybe it needs to be the people that don’t have the ability, but there’s going to be cross. There’s gonna be cross cutting things. That have to be addressed. And so I don’t think it will ever get to a point unless you just have one space PO, which I think is probably too much.
So you’re going to have some breakdown of that and there’s going to be cross-cutting things. I think this goes to the relationship piece about. Try and get as much of the accountability into the one PO. So I think that should always be the goal. You should have that PO be accountable for the maximum amount of things that can fit within that capability portfolio.
But the cross cutting things, there’s going to have to be relationships and it may have to be elevated at times. And I think that can still be an efficient process. I don’t think it has to be burdensome, but the Yeah, the goal should be to right now they’re dealing with many PEs and having to cross step them.
See how so it’s like magnified problem. Now I think we could get it down to a more manageable level.
Eric Lofgren: [00:44:31] So I want to take an open question for any of you guys who want to jump on it. This is from Matthew Murphy. What’s the proposed offset in the political dimension for the perception that Congress is actually gonna lose political power . So if the Congress, or if the DOD gets portfolios, Congress is going to lose some oversight is going to lose some, insight. Where’s the give. And what does that look like?
Anyone, Dan.
Dan Patt: [00:44:53] Yeah, sure. Look i, fundamentally the power of the purse is Congress’s power. And, and I think this question really just gets at asking ourselves collectively as a nation. What are the questions that we care more about? Are the questions we care more about program progress and whether, your rate of expenditure of funds is the right thing. I think that in this moment in time, those aren’t, right. So I think it’s. Flipping the picture and saying, yeah, what is the relative importance of this capability portfolio or that capability and portfolio? What is the relative importance of investing in the foundational infrastructure of AI? What is the relative importance of looking at preventing a fait accompli scenario?
It is, this is a question about giving Congress the power to serve the interest of the American people about the right questions. And I see the budget. Budget is this Congress’s power to power. The purse is about helping Congress serve its role as this oversight board in prioritizing the right questions.
And that’s not something that, their disagreement with the department on those questions, I think would be a really healthy thing for our democracy.
Eric Lofgren: [00:45:57] Yeah, definitely. Matt, did you want to jump in there?
Matt MacGregor: [00:45:59] Yeah. The only thing I’d add to that is I think, I think we’re going to have to accept the appropriation committee.
Appropriations committee is a powerful committee in Congress. People, Congress, people want to be on that because there is some control there, unfortunately within thin Congress, I think. You’ve reported on this to Eric is there’s not a lot of discretionary funding for congressional members.
A lot of it is in mandatory spending. And so defense is one of the biggest pots. And so it is attractive to, to get money to districts, to do to do things that you think are important. There’s a lot of reasons, but so I think we’re going to have to accept that there’s going to be some level of control that is always going to have to be kept that Congress, I think I would just like to flip the script a little bit in that instead of every single thing needing to be approved.
That there is some veto power. If they if the, probation committee authorization committees feel like UT is going down a wrong track pursuing things that are just not gonna work out for whatever reason, they believe that they do need to have the power to say, no, I don’t want you to do that.
So I would just like to flip the script and make it more, give them some veto power, but not have to approve every single thing.
Eric Lofgren: [00:46:58] I think it’s a little bit more in line with this idea of permissionless innovation, but a strong filter. Um, Courtney, you guys started with the congressional commission.
What’s your view here?
Courtney Barno: [00:47:07] Yeah I’ll say, I think I’m the fortunate one here. I get to carry the AI torch in and really bring it back to, I think the competition that we’re facing. We were, we face a competitor in China, that’s organized, they’re committed and their resource to challenge us on the global stage and potentially upset our military technical superiority.
And I think where that puts us is there’s an imperative to move fast here. We need to be deliberate, but we need to move fast. And so I think, I think my closing comments, Eric would just be that. Partnership between the department and Congress is going to be essential here. Both are going to need to give a little and come to the table.
That means, I think first and foremost, defining better metrics that get to that, get to value. And they’re not going to be perfect, but the thing is we need to start now and we need to deliberately measure. And if we don’t feel like we are getting the insight we need to adapt. We need to embrace an iterative approach to trying to make reform happen.
Just like we have with software in modern technology development. But it is going to be that commitment to an ongoing dialogue and knowing that we may get things wrong in the near term, that’s really going to, I think, push us forward. And so I think the two key takeaways are measure deliberately and start now.
Eric Lofgren: [00:48:24] Great. I think that was an amazing place to end there. We got another great panel coming up at one, we’ll have Jerry who’s going to host a panel with Dove Zackheim former comptroller, Jamie Moren, former a D Cape, and John Young, former USD AT&L.
And they’re going to talk about, Hey, portfolio management these three guys that we have here put out some really good ideas, but what’s the path to implementation. What’s the realism. And how do we get from here to there? So be sure to join us at one. And we’ll give you a couple of minutes break here.
But thanks for joining us and looking forward to more discussions on this topic.
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