First DoD Comptroller slams naive reformers who invented PPBS

Here’s DoD’s third Comptroller Charles Hitch testifying to Congress about the need for the new management system he was implementing in DoD: the Planning, Programming, Budgeting System (PPBS).

The culling out of programs, obviously, should be done in the research and development stage, before heavy investments are made in committing the system to production. That is one of the reasons why we have separated the R&D from the investment category — so that we can plainly see the costs involved in a decision to produce and deploy a weapon system as contrasted with the cost of its development.

 

We also believe the operating costs should be clearly identified and estimates years in advance. All too often, these costs are overlooked when decisions are made on weapon systems; and they can be substantial. For example, the cost of operating a B-52 wing for 5 years is equivalent to its investment cost — about $500 million in each case. The ratio of operating to investment costs varies widely from system to system.

The criticism was that defense officials didn’t know what any program, like a B-52, cost and did not know the implication of its choices. Nowhere in the budget structure did the B-52 show up. But Hitch did have the information available to him. He thought those exact figures should have been available before development, before the DoD got itself into the whole thing.

Wilfred McNeil, who was DoD’s first ASD Comptroller (1949-1959), disagreed with the basic premises. He fired back in his testimony to Congress:

In reading some of the material presenting the plan, however, I would be forced to conclude there is some lack of knowledge of what has been the general practice for years.

 

… Although I am sure that there are better and more formal ways to get comparisons of systems than has been true in the past, certainly the “new look” of 1953 was not decided in a budgetary vacuum, nor on the basis of a single year. Certainly the successful B-52 program of some 500 or more aircraft, planned for execution over a number of years, was not undertaken without some knowledge of the long range budgetary considerations.

 

In the late forties and early fifties the decision was made to limit shipbuilding because, at that time, the fleet was relatively new and because there had been but limited technical advances since the war. This decision was certainly made with the knowledge that in the late fifties and early sixties a substantial increase in the shipbuilding program would be required and could be justified as having high priority. From a budgetary standpoint, I believe that every major program undertaken in the last decade has been so considered.

McNeil pointed out that the Department had data on all the weapon system in the inventory. “Anybody in his position can read the force statement. Certainly he had information available to him, to the last item in inventory, as to every conceivable type and size of weapon we had.” The fact these figures were not available in the budget does not mean that they did not inform budgetary decisions. In fact, I’m quite impressed with the program analyses presented in the 1940s and 1950s appropriations hearings and often presents more relevant data than we see today.

Actually, it is often better for budgets not to be tied with specific projects because that requires long-range prediction of technology and concepts of operations. It doesn’t leave room for adaptability when confronted by an innovating enemy. McNeil clearly understood how the PPBS would negatively impact defense innovation if implemented:

The determination of the forces required for national security and their level of readiness at any particular time is a complicated and by no means exact process. Decision as to the course of research and development and weapons themselves, if rapid advances are to be made are, in part, a matter of judgment. There is a good deal of room for honest differences of judgment among equally competent persons. As mentioned earlier the package plan, as contemplated, seems to cover but one phase of the budgetary process, and is but one method of evaluating its contents. It seems to contemplate a very high degree of preciseness and ability to perceive successful weapons development and suitability.

I hope those serving on the new Congressional commission on PPBE reform take time to understand the history and context of the problem.